Roopam Jain's Blog

Avaya Buys Radvision - Dives Head-first into the Videoconferencing Market

15 Mar 2012 | by Roopam Jain
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Avaya-Radvision acquisition rumors have been flying for months so it was barely a surprise when Avaya finally pulled the trigger and announced this morning that it is buying Radvision for $230 million. Avaya is paying about three times Radvision’s annual sales of $78 million in 2011. We see this as a technology acquisition that was a long time in the making after Avaya’s competition has clearly entrenched itself in the videoconferencing market.

Avaya offers a full portfolio of UC products but has been lacking in what is one of the fastest growing collaboration markets today – videoconferencing. Particularly after Cisco’s acquisition of Tandberg and Microsoft’s acquisition of Skype, Avaya was placed in a position where it was missing a key piece of the collaboration puzzle. While Avaya has been selling partner solutions from LifeSize and Polycom and offers its own desktop video solutions, this move places it in the middle of all the action in a multi-billion dollar enterprise videoconferencing space which grew at 22% in 2011, according to Frost & Sullivan’s latest research. Radvision in return will get a new home that it desperately needed after Cisco’s acquisition of Tandberg resulted in fallout for its OEM partnership, which at one point accounted for a whopping 35 to 40 percent of its revenues.

Having followed Radvision for years now, I had long ago reached the conclusion that its strength lies in its engineering and a well rounded product line but it could only go so far without a strong marketing and distribution channel backbone. With a fledgling channel strategy, particularly in North America, Radvision remains a distant player to market leaders Cisco and Polycom. In fact in recent years Radvision has been surpassed by stronger and relatively newer companies like Vidyo (co-founded and led by ex-Radvision Ofer Shapiro) and LifeSize and fast growing APAC vendors like Huawei. What Radvision lacked in marketing acumen and reach can now be made up by Avaya with its established UC channel network as well as a strong DevConnect community, Avaya’s developer ecosystem.

Radvision offers a full suite of videoconferencing endpoints and infrastructure products for room-based, desktop and mobile video applications. From a product line perspective, the acquisition will be complementary with little overlap.

-    Radvision’s Scopia videoconferencing products will enhance Avaya’s core UC capabilities integrating into the Aura architecture, allowing single user experience for multimodal communications over multiple media endpoints.

-    Avaya will also gain a platform in mobile video in a market that has been transformed by the strong emergence of video over tablets and smartphones. Radvision’s Scopia Mobile platform offers HD videoconferencing over iPhones and iPads and could add capabilities to Avaya’s Flare experience. Scopia Mobile is not available on Android yet. Avaya had originally introduced Flare over Android OS and recently extended it to iPad. Combined, these two solutions could open up interesting possibilities for a wide array of 3rd party mobile video apps.

-    Radvision’s recent products have been particularly targeted at the SMB space which will provide inroads to Avaya to penetrate new segments.

-    The acquisition will also offer Avaya opportunities in Europe where Radvision’s acquisition of Aethra has resulted in established channels and rapidly developing partnerships with leading service providers.

According to our latest research, Radvision holds a market share of 2.2% of a $2.7 billion videoconferencing endpoints and infrastructure systems market. While Avaya is not gaining a significant market player like Cisco did with the Tandberg and WebEx acquisitions, this move is strategic to Avaya. It makes Avaya a serious contender in the end-to-end collaboration markets where it can now offer a complete solution to its customers. It would be interesting to see if other UC vendors that do not yet own the videoconferencing piece will follow suit and move from a partner-friendly approach to a more self sufficient collaboration strategy. Anyone who uses videoconferencing today knows that the technology continues to face interoperability challenges. As a result, customers have shown a strong preference for end- to-end solutions from a single vendor. Both strategically as well as from a technology point of view, it places Avaya in a stronger position when competing head on with Cisco and Microsoft (which closely partners with Polycom for video). This is not a customer acquisition or a market share growth move by any means but a technology acquisition that will strengthen Avaya’s collaboration product portfolio. Moreover, as Avaya is preparing for its IPO, Radvision adds the highly valued video collaboration piece to its portfolio that positions it well in the eyes of investors.

Avaya’s three phase integration plan- starting with basic integration between Avaya and Radvision’s SIP and H.323 stacks followed by tighter integration of Radvision products with Avaya Session Manager and Avaya Aura and finally full integration of user interfaces - will take several months. However, Avaya is known for its nimble execution when it comes to integrating acquired companies into its fold.

The videoconferencing market, dominated today by Cisco and Polycom with a combined market share of over 75%, will have another large player to contend with. At the same time, Avaya has a challenging road ahead since both Cisco and Polycom have deep roots in videoconferencing through advanced product lines and strong channel and partner relations. Cisco announced this morning that it will buy NDS group for about $5 billion to accelerate its Videoscape platform. Cisco’s video vision in enterprise markets extends beyond videoconferencing to pervasive video through web presence, learning management systems, streaming, digital signage, surveillance, and video enabled smart boards. Bottom-line is that video collaboration in general is growing to become a key piece of business activities today. With the acquisition of Radvision, Avaya can further tighten its grip on the enterprise communications and collaboration market.