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Suggested Priorities for Polycom CEO Kevin Parker

Kevin Parker, the chairman and now CEO of Polycom, came to the board in 2005 from PeopleSoft, where he served as CFO. That may prove to be highly relevant experience; during his term at PeopleSoft, the company improved margins, increased cash flow, reduced expenses, and got acquired by Oracle.

Polycom is a leader in video, and video usage is growing faster than ever before. The problem is that the increased usage isn't equating to increased sales. Polycom needs to make some changes to become relevant again in an industry it helped create.

Since Parker is new in the job, I thought I would take the liberty to offer some suggestions to help him shape his executive agenda. What follows are my suggestions for what Polycom needs to do to reclaim its place in an industry undergoing significant transition:

Focus on UC: Video is out, at least in terms of spend--yet video usage is skyrocketing. Polycom is perceived as a provider of video equipment, so it needs to broaden this perception. UC--not video--is driving collaboration, productivity, and distributed communications. Former CEO Andrew Miller seemed to understand this with Microsoft, yet Polycom and its channel remain focused on video. Polycom needs to leverage its deep knowledge of video standards, codecs, and frame rates into a broader UC conversation.

The good news is Polycom has a full line of audio endpoints; the bad news is the telephony and video solutions target different customers. Polycom's SIP IP phones are mostly associated with softswitch makers (such as Digium, Genband, and BroadSoft) and service providers. Polycom's video-enabled solutions are enterprise plays independent of telephony. Meanwhile, Cisco, Avaya, and Mitel (as well as Microsoft) offer integrated voice- and video-enabled UC solutions.

Seamless Integration: Market leaders have little incentive to interoperate, but Polycom needs to reconsider its position. Yes, all the vendors support basic interoperability, but the market wants a seamless rich experience, not a compromise. Look at the success of Vidtel and Blue Jeans, and now newborns Pexip and Acano--all committed to resolving interoperability headaches. Neither the standards bodies nor Polycom's non-standards attempts (UCI Forum and OVCC) have made meaningful contributions to seamless multi-vendor experiences. Why leave the opportunity to startups?

The situation is likely to get worse with Microsoft simultaneously integrating and closing-up Skype (the world's dominant video solution). So far, Polycom's "cloud solution," RealPresence, is aimed at enterprises. That's the path of least resistance. Yet products are rapidly becoming services, so Polycom needs to determine if it's selling equipment to service providers or selling services to enterprises.

Stop the Brain Drain: For various reasons, Polycom has been losing lots of great talent. There's so much turnover happening that its HR function has about 65 people (for a firm with about 4,000 employees). Under the previous CEO, Polycom experienced significant turnover with some big losses including Sudhakar Ramakrishna, President of Products and Services; Manny Kostas, SVP WW Product and Program Management; Alex Doyle, Director of Service Provider Marketing; Joe Burton, CTO; Kate Hutchinson, CMO; Mark Roberts, VP Product Marketing; Glenn Noga, CIO; Mike Swade, SVP; and VPs of Sales Tracey Newell and Brad Johnston.

Stopping the turnover will require refocussing on customer satisfaction and product innovation. Polycom has become a fearful place to work with a steady flow of restructuring and office closures (it even closed the Vancouver office just before the TEAM 2013 event in Vancouver). Polycom needs to assure employees that they are at least as vital to the company's success as are customers and shareholders. Motivated and empowered employees make for happier customers, which results in improved sales and shareholder value.

Fix SIP Endpoints: The industry needs a vendor like Polycom to push SIP endpoint capabilities further. Polycom practically created the SIP phone industry. To date, little progress has been made on SIP endpoint interoperability; most enterprise vendors support SIP, but deploy proprietary solutions for advanced functionality.

SIP is effectively the new analog. There is opportunity for Polycom, as the industry needs an open, interoperable endpoint complete with specifications for displayed content, provisioning, security, and advanced feature signaling. Also, as softphones increase in popularity, some vendors may be open to an endpoint alliance with Polycom (like Microsoft and Adtran have done).

Polycom could do this with brute force, like aligning with BroadSoft or other major softswitch vendor, and publishing the new feature protocols. Or, Polycom could do this through efforts with standards bodies. However, that will require Polycom to renew its commitment to and participation in standards bodies.

Don't be Afraid of Hardware: For some reason, many companies want to be "software companies." Hardware is perceived as outdated and obsolete in terms of a business model. Apple demonstrated otherwise with tightly integrated hardware and software--so effectively that Microsoft and Google abandoned their software-only models in hopeful imitation. Software-only has few barriers to entry, but stunning hardware and software that delivers powerful experiences provides a defensible long-term business. Polycom needs to stop pretending it is a software company.

Video conferencing really is about hardware; it requires cameras, processors, and screens tightly integrated into an intuitive application. Video has crossed-over into the mainstream, and there's a huge opportunity in mass market seamless solutions. Polycom is currently selling about 20k units per quarter when it should be 2 million at a sub-$1,000 price. Vidyo, Tely, AVer, and Logitech are pushing low-cost room systems. There is a tremendous opportunity for simplified three-screen HD video for the mass market.

Microsoft: The Microsoft relationship is complex, and Polycom is not benefiting from either marriage or independence. From a pure Lync perspective, Microsoft sees video conferencing as a peripheral, and many will find this limited approach to be acceptable. Polycom serves this sector with its CX5000 table camera. Unfortunately, Polycom is the only Microsoft Lync Room System partner (of 4) that has not delivered its solution yet. For audio, it offers both Microsoft-designed IP phones (CX phones) and now its own SoundPoint IP phones (following Snom's model of Lync Qualified endpoints).

Polycom positioned itself as the Lync partner for video room systems, but hasn't extended partnership benefits to the majority of its product line. The Polycom CX7000 offers a nice Lync room system integration, but its appeal is limited to customers willing to purchase new equipment. Radvision was the first to market with a robust Lync video gateway, and many room system competitors offer Lync integrations--some with strong investment protection.

Polycom was the go-to-market partner for many UC vendors that were competing against Cisco's video-enabled UC offerings, but Polycom's allegiance to Microsoft Lync alienated many of them. Polycom must maintain its position as Lync friendly while simultaneously building credibility as a general best-of-breed UC partner. HP provides a good model of this, as it is friendly to several UC firms including Microsoft and Cisco, as well as its Alliance One partners that include Avaya, ShoreTel, and Alcatel-Lucent.

Kevin Parker has inherited Polycom at an interesting time. Polycom is in a reasonable position. It has a strong brand (look for the Lucent-like logo), a good cash position, and a market leadership position.

The market is changing quickly, Skype, WebRTC, and consumer apps like FaceTime will continue moving Video communications from niche to mainstream. Unified Communications is building momentum, and the vast majority of businesses are not video-enabled. Polycom needs more than business acumen from its new leader; it needs thought leadership and vision as well. The future industry leaders are the ones that will deliver technology that enables people (and/or applications) seamless visual interaction wherever and whenever it is needed.

Dave Michels is a Contributing Editor and Analyst at TalkingPointz.

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