Roopam Jain's Blog


Polycom Delivers a Powerful Punch - Acquires HP's Videoconferencing Business

01 Jun 2011

Yet another major acquisition news came out this morning. Polycom announced that it will acquire HP’s Visual Collaboration Unit including the Halo products and managed services, ending HP’s not so successful venture into the videoconferencing market. The acquisition, which is valued at $89 million, is expected to close on August 1, 2011. According to Polycom it will be immediately accretive upon close.

The acquisition price seems miniscule compared to some of the mega acquisition numbers we have seen in recent months. However, it should be noted that HP’s sales from Halo are far smaller and not close to the success seen by its competitors in immersive telepresence. But that’s not why Polcyom is acquiring HP’s videconferencing business – it’s not a technology acquisition by any means.  Polycom already owns all the technology components that HP videoconferencing brings to the table. So this is clearly a potential customer acquisition and market growth move.

The HP acquisition and partnership announcement gives Polycom the added muscle in a fast growing and consolidating market. From day one Polycom gets access to HP’s 425 blue chip videoconferencing customers. More important than the acquisition news is the announcement that HP and Polycom have established a strategic relationship in which Polycom will be an "exclusive" provider to HP for telepresence, including both resale and internal HP deployments. That itself opens up immense opportunities for Polycom. HP’s 320,000 employees have a growing need for collaboration internally, creating a strong new customer for Polycom. The exclusive partnership also means Polycom will get access to HP's global distribution channels and sales team to sell its conferencing gear to HP's vast customer base. Considering that videoconferencing despite all the hype remains an under-penetrated market, think of the all the sales opportunities this could generate for Polycom among HP customers that are already investing in networking, storage, and managed services.

The two companies have agreed to make Polycom videoconferencing and telepresence applications available for WebOS platform and TouchPad line. Mobility is a hot topic and the most exciting developments in collaboration are coming to mobile devices. This partnership will further strengthen Polycom's growing integration with tablets and smart phones.

Along with the acquisition announcement Polycom also made headlines by announcing -

  • Open Visual Communications Consortium - Long time in the making OVCC is an open video exchange cloud with carriers to help expand inter-exchange and B2B videoconferencing beyond proprietary video platforms and carrier networks. The 14 service providers as founding members include top names such as AT&T (a strong Cisco telepresence partner), Verizon, BT, Glowpoint and Telefonica.
  • Polycom and Microsoft announced “Rally”, codename for a purpose-built HD telepresence product. It’s the first room telepresence solution with an embedded Lync client, and will natively integrate with Microsoft Office 365 cloud service as well as premise-based Lync systems. This further solidifies Polycom’s growing partnership with Microsoft. In a UC webcast today Polycom had a strong showing from its key partners including HP, Juniper, and Microsoft.

There are several questions that emerge from the Polycom-HP announcement. What will happen in the long term to the Halo product line? Though Polycom has announced its commitment to support Halo and the existing customer base, it is unlikely that Polycom will continue with dual telepresence lines. Also, after the acquisition will Polycom continue with HVEN telepresence network and managed services and will that create conflict with its service provider partners? Lastly, there are big challenges for Polycom to truly leverage HP’s channels to sell videoconferencing products, which is a very different sale from HP’s core products.

Polycom has been gaining a lot of momentum in recent months and has benefitted significantly from a growing ecosystem of partners, particularly Microsoft. This announcement creates another solid  partnership. What competition has to worry about is how to counteract an even more powerful Polycom. It is evident that this acquisition is a move against Cisco. It also means the end of HP’s OEM partnership with Vidyo which has been gaining significant mindshare for its SVC-based videoconferencing line. The HP-Microsoft-Polycom triangle of partnership could mean huge challenges for Polycom’s competitors.

Microsoft Acquires Skype

10 May 2011

For the last several days, the rumor mill was abuzz with possibilities of a Skype acquisition.  Microsoft’s announcement this morning that it is acquiring Skype for $8.5B in cash seems aggressive and risky from a financial point of view but could be a game changer for communications.  This acquisition could make Microsoft a serious contender in the cloud and will help Skype overcome the huge challenge of credibility among enterprise users. However, all this comes at a high cost for Microsoft, a company not known for acquisitions.

Skype, with over 600 million registered users in 2010, had only 8.8 million paying users. It made $860 million in revenues in 2010 and had long-term debt of $686 million. That’s the part that leaves many scratching their heads. It is a huge acquisition by any means of a web-based company - looking at the price-to-sales ratio of the acquisition Microsoft is paying about eight times the revenues.  Do the possibilities of integrating Skype in Microsoft’s portfolio give Microsoft the competitive advantage (over Google, Apple and Cisco) and the income generating potential in the long term?

Microsoft will integrate Skype’s capabilities into its enterprise products (voice, video, etc.) and also into Xbox/Kinect for video calling.  However, there is significant overlap as several of Skype’s capabilities are already available today through Lync and Live Messenger. Microsoft’s Kirk Koenigsbauer demoed Lync videoconferencing over Kinect at Enterprise Connect in March. Having said that, Skype is a way better IM and voice/video calling client than Live Messenger.  Additionally, Microsoft will integrate Skype into Windows Phones which can possibly help narrow the huge gap between Windows Phones and iPhone and Android.  And there’s the speculation that Facebook will get access to Skype as part of Microsoft's partnership with Facebook.  Indeed Skype’s vast reach today can open a world of new opportunities for Microsoft but how and when Microsoft will make money on Skype is hard to see yet.

From a UC perspective, this will truly give Microsoft the network and the reach to take UC to the cloud at a large scale. Since Skype made significant changes last year, there was anticipation already about Skype becoming a serious contender for voice and video for mainstream businesses. However, the biggest concerns were around user perception that Skype is a free consumer-grade service and not yet enterprise-ready from a security and reliability perspective. That’s where the Microsoft Skype marriage can make some true market changing moves. Additionally, Microsoft which has been struggling to get into the SMB market can clearly access that now with Skype. Although, from a financial point of view it is not clear immediately how Skype, which posted a loss of $7 million in 2010, can help Microsoft’s huge money losing online services division.

What does this mean for Microsoft’s competitors?  On the enterprise collaboration side, Microsoft’s competitors have been challenged by its fast emerging UC portfolio and Microsoft's market disruptive prices. Skype as a low-cost provider will only increase the headache for Microsoft’s competitors. The announcement made by Skype and Citrix Online in March also looks questionable now.

Given all the above it’s not hard to see why Microsoft made this acquisition. Like any major acquisition it will be a while before we see the integrations and there will be organizational and execution challenges along the way. But there are several interesting possibilities that will unfold with time, possibilities and opportunities that come at a very high cost for Microsoft.  The angle might as well have been to keep Skype out of Google and Cisco’s hands.

On a personal note, I like my Skype the way it is and I like it free and I am hoping Microsoft doesn’t mess with that.

Videoconferencing Trends to Watch

03 May 2011

This week we published our 2011 videoconferencing endpoints research which points at the huge growth potential for videoconferencing. Global revenues for the videoconferencing and telepresence endpoints market reached $1.7 billion in 2010, growing at a robust 17.8%. The strong market growth in 2010 can largely be attributed to a surge in interest for videoconferencing to cut travel costs and enhance the communications experience. The overall outlook for videoconferencing is starting to look more and more attractive.  As the economy continues to improve and the general interest in all things video keeps rising, IT managers are looking at the feasibility of rolling out “pervasive video”. Many vendors are touting the mantra “video is the new voice”, pushing the notion that simple voice calls will become a thing of the past. While mainstream adoption of pervasive video may still be a few years away, the demand drivers are all aligned for the market to pick up pace. Here are key trends and findings-


• The market has seen accelerated pace of new product developments, pricing shifts, as well as consolidation. While the market for room systems will continue to be healthy, the fastest acceleration will be seen in desktop and mobile segments. The spread of mobile and desktop video will feed into the growth of room-based systems. Vendors are carving a solid path to address an end-to-end video strategy that spans all the way from immersive and room-based video to desktop and mobile video.

• The small and medium business segment will likely become the next economic growth point in the future. SMB adoption continues to grow at a much faster pace than adoption by enterprises. Videoconferencing vendors are targeting the SMB customer by making products easy to install and use and by providing lower prices. High SMB penetration seen by LifeSize and Polycom in 2010 has resulted in stronger overall SMB data for the industry. 


• In 2010, market growth was primarily driven by room systems. Most businesses perceive better ROI in multi-user room systems as compared to personal use executive systems. Executive systems are seeing heavy competition not only from software-based desktop video clients but also from the influx of enterprise tablets that are increasingly video enabled. While Executive systems will continue to remain under pressure, declining prices as well as evolution of new form factors such as the Avaya Desktop Video Device will boost growth.

• B2B and interoperability issues have taken center stage. As usage climbs up, customers are looking to maximize their ROI by making video extensible to an increasingly diverse base of endpoints and clients - with both their internal and external value chain. While there is work that still needs to be done, endpoint vendors are focusing on providing interoperability with other vendors’ solutions and service providers/carriers are introducing inter-exchange services that can connect their customers to users on other carrier’s networks.

• The mobility factor continues to gain unprecedented attention. The invasion of tablets in the enterprise will be strong over the next few years with a diversity of form factors. Faster, smarter, and more capable smart phones and the emergence of collaboration-ready enterprise tablets is fueling the interest in mobile videoconferencing. Additionally, the move toward 4G will help carriers deliver higher quality video.

• The growth of UC has had a tremendous impact. Video is being viewed as an essential element of a UC solution. Desktop video in particular is expected to shift from a standalone solution to a collaboration suite. Accordingly, adoption of desktop video will be impacted by the uptake for UC.


• The consumerization of IT and viral growth of video in the consumer market, along with rapid adoption of social networks are changing the way people communicate. These mega trends are also bringing down the cultural barriers that have traditionally restrained wider use of videoconferencing and are having a deep reaching positive impact on promoting video adoption. Green initiatives continue to be a key driver.

 
• Most businesses today do not have the network infrastructure to support wider deployments that require not only a high bandwidth data network, but also upgrades to existing video infrastructure, such as MCUs, gateways, management software etc. The immense growth seen in the endpoints market is increasing the demand for videoconferencing infrastructure and 2010 has already seen this trend.


• Videoconferencing in the cloud is a nascent market starting to evolve. New cloud services that combine hosted email, messaging, groupware, along with video and web collaboration will see greater adoption as users increasingly evaluate collaboration as part of a bigger enterprise communications purchase. These services will be available both as public clouds as well as private non-shared more secure and flexible clouds.

 
• The competitive landscape is fast evolving. Cisco TANDBERG solidified its position and continues to dominate the revenue market share. Polycom leads the market in terms of unit shipments and posted the highest growth in 2010 in the industry. A large part of Polycom’s success can be attributed to the strength of its product line and a well- executed channel strategy.

For further information and in-depth market metrics, forecasts, market shares and valuable insights see the full study titled “World Videoconferencing and Telepresence Endpoints Market: Market Gathers Steam as Customers get Ready for Pervasive Video” (code N8C3-64) on www.frost.com.

Polycom's New Direction

20 Sep 2010

Polycom announced today the addition of six new executives to its management team. These appointments include Joe Burton as SVP and CTO and Sudhakar Ramakrishna as SVP and General Manager Products. Joe Burton comes from Cisco where he served as CTO for Unified Communications. Sudhakar will join Polycom from Motorola where he is Corporate VP and GM for Wireless Broadband Access Solutions and Software Operations. Polycom also announced the combination of its video, telepresence, and voice development units into a single R&D organization to better establish itself in the UC market. Polycom will be forming three new lines of business (LOBs) - enterprise and government/public sector, service provider, and small-to-medium business (SMB) - focused on better meeting end user needs in each of these sectors.

There is certainly a big shakeup going on within Polycom's management. It started a few months back when Andy Miller replaced Bob Hagerty as CEO. Today's announcement is not surprising since Andy, who came to Polycom from Cisco and Tandberg, had promised to shake things up and focus more on the broader unified communications market. He had also talked about transforming the Polycom culture that is more product and technology focused. Polycom grew at a strong pace in 2010, reporting a 25% revenue growth in the first half of 2010 over same period last year.

Polycom is at unique cross roads today where it faces competition from new directions. Not only is the combined Cisco-Tandberg entity a huge threat but also Polycom's long term partner Avaya is switching gears to partner closely with Polycom rival LifeSize to offer an end-to-end video product line. Avaya announced its own desktop video device last week at an event in New York. Polycom's traditional business structure was soon going to become a hindrance. We believe the new moves being put in place bode well for a more concerted UC effort by the company as well as renewed vertical and end user focus. We have to wait and watch if and how the new management can execute and establish Polycom with a bigger UC vision.

Ten Web Conferencing Trends to Watch

18 Aug 2010

Last week we published the 2010 web conferencing study which points at exciting opportunities in the fast evolving web conferencing space. A veritable explosion of web 2.0 tools and growing need for real time collaboration continues to draw users to web conferencing. As companies look to accelerate team productivity and support better and faster decision making, applications like web conferencing are becoming a critical component of enterprise communications.

IT is starting to make web conferencing an investment priority as part of a bigger bundle of collaborative applications. The future holds growth opportunities as web conferencing gets increasingly adopted as a standard communication tool like email and IM. Here are top ten trends in the web conferencing market -

• Next generation of collaboration evolves - Web conferencing continues to morph and evolve substantially as new technologies are developed and introduced. New cloud services that combine hosted email, groupware, and messaging with collaboration are starting to become available. These collaboration bundles will overshadow stand alone web conferencing, as users look at getting the most value by buying an end to end communications suite. 

• Hybrid models continue to emerge - Collaboration and information sharing has represented a low hanging fruit for cloud service vendors. As IT evaluates migration of critical communications such as email to the cloud, delivery models that provide core services from the cloud via hosted solutions will increasingly be combined with on-
premise applications. Private clouds that offer many of the same benefits of public clouds but are managed within the organization for better control and security will see increased prominence.

• SaaS momentum strong though on-premise will grow faster - SaaS is the dominant delivery model for web conferencing today. Due to ease of use, rapid deployment, limited upfront investment, and lower management costs SaaS will continue to be dominant especially among SMBs. However, as the world of enterprise communications converges around UC, initial deployments are going to be on-premise. For several companies the quest for customization, specific features, and deeper integration are key reasons for adopting on-premise web conferencing and UC.

•  Focus on simplification - The dominant theme in 2010 among web conferencing vendors is focused on creating easier to use solutions at attractive price points to move the market beyond a niche status. Pricing pressures continue to intensify as the market matures and ease of deployment/use are becoming increasingly important. The desired user benefit is cost and time savings, as customers prioritize on using the product quickly without enduring a substantial learning curve.

•  Targeting the IT buyer - With integration of conferencing capabilities in broader enterprise communications, IT is making key decisions related to collaboration purchases that are starting to span wider deployments. Though departmental level buying is still strong and line of business heads continue to invest from their operating budgets,    there is a greater push from IT to standardize on enterprise wide solutions. Line-of-business managers have a significant influence on IT strategy and are coming to the decision making table for vendor selection.

•  Integration with social media - The integration of enterprise software and social networks is clearly the next big communication trend. With the immense rise in adoption of Twitter, LinkedIn, and Facebook, web conferencing and UC vendors are now focusing on providing integration with social networks to change the way users interact with coworkers and customers and to create a more sticky user experience.

•  Mobility is huge - A big technology theme for conferencing providers in 2010 is mobility. New form factors to support the growing need for mobile communication and collaboration are emerging. In addition to soft clients that sit on the most popular devices (iPad, iPhone, Google’s Android-based smart phones, and Blackberry); tablets have emerged as a new form factor for mobile collaboration.

•  The spotlight is on video - Video integration with all forms of collaboration is another area of technology focus. There is a growing demand for video to be integrated, all the way from desktop to conference rooms to mobile devices. Web conferencing vendors that provide desktop video are reporting higher usage, particularly for applications like virtual classrooms, training, and customer-facing events. Furthermore, with the next generation of smart phones and impending 4G arrival, video on mobile devices is now becoming a reality.

•  Green Business - Green initiatives continue to draw new users to conferencing technologies. Many vendors are providing green calculators to help users realize the carbon emission savings and to create a larger following. Green business initiatives are still in their infancy stage and will drive greater adoption of conferencing in the long term.

•  Shifting channel strategies - Vendors' channel strategies are evolving at a fast pace. The overall shift in the future is going to be toward selling through a larger community of VARs and SIs as vendors increasingly add web conferencing to hosted email and other collaboration offerings. The trend toward low prices indicate that channel partners have to find opportunities in tagging value-add services as well as selling in bulk to see the true long term revenue benefits.

Citrix Online Extends its Reach into SaaS based IT management

25 Feb 2010

Citrix Online announced this week that it is entering the IT Management market with the launch of GoToManage, a SaaS based offering for remotely monitoring, controlling and supporting IT infrastructure. This offering is a direct result of Citrix Online’s acquisition of Menlo Park, California-based Paglo Labs. GoToManage will target Citrix Online’s traditional target market of SMBs as well as independent IT consultants that are seeking a SaaS based alternative to on-premise IT management software.  With a simple pricing of $1 per device per month, GoToManage can be purchased individually today or bundled with GoToAssist services later this year.

Citrix Online has been focused on selling meeting and collaboration products (GoToMeeting, GoToWebinar, GoToTraining) to SMB users. The web conferencing and collaboration market, while continuing to grow at a significant pace, has started seeing increased competition and pricing pressures. Citrix Online has seen good revenue growth and successes in recent years. However, it has experienced pressure on its top line revenue growth in recent quarters. With the Paglo acquisition, Citrix Online is extending its reach into complementary markets such as IT management. Additionally, there is a growing need among IT consultants and SMB users that buy Citrix Online's remote support product GoToAssist, to be able to proactively manage their IT assets and systems, a capability that Paglo brought to Citrix Online.

We see considerable synergies between the two companies. Both Paglo and Citrix Online deliver IT services and applications that reside in the cloud without the need for end users to invest in any hardware or software - a need that clearly fits well with Citrix Online's target market i.e. the SMBs and independent IT consultants. Paglo will bring a new set of customer base to Citrix Online providing opportunities to cross sell its meeting products and vice versa.

Polycom takes on Cisco-Tandberg, arms itself with two key alliances

27 Jan 2010

To counter the stronger competition it has from the Cisco-Tandberg merger, Polycom has come out with two key announcements in the last one week. The first one is a partnership with Siemens Enterprise Communications which will integrate Polycom's telepresence and high-definition videoconferencing products with OpenScape UC platform as part of a global resale agreement. Siemens Enterprise Communications, which recently received new life after the Gores acquisition is aligning its strategy and resources to better compete against Cisco, the combined force of Avaya-Nortel, and Microsoft. Video-enabling UC and integration of all forms of video devices with UC have been a key area of focus for most vendors.

We spoke with Polycom about a second significant alliance. Polycom has teamed up with Juniper to announce integration between Polycom’s video infrastructure systems and Juniper’s policy manager to offer a “conferencing-aware” network solution for carriers and service providers. Specifically, integration between Polycom’s Video Control Platform (DMA) and Juniper’s Junos Space SRC (Session and Resource Control) platform will provide service providers the intelligent bandwidth and policy management capabilities to better utilize converged networks to deliver video, without any need for costly overlay network requirements. The partnership with Juniper better positions Polycom against the synergy that the Tandberg acquisition brings to Cisco i.e. Tandberg’s robust videoconferencing infrastructure and network management tools which are key to any large scale videoconferencing deployment. At the same time it will enable Cisco's rival Juniper to establish a footprint in the video collaboration space.

After the Tandberg acquisition Cisco more than any other UC vendor, has an end to end video strategy all the way from desktop to Telepresence. At the same time, by belonging to the Cisco camp Tandberg may have opened up new doors of opportunity for Polycom. Polycom will continue to build up muscle by looking at all opportunities to bring joint UC and conferencing products to market, offering an alternative to customers that do not want to get tied up in an all-Cisco solution. Expect to see some interesting partnerships emerge in the future.

 

Will 2010 be the Year of Desktop Video?

20 Jan 2010

2010 will mark the end of an extraordinary decade that will be remembered for significant leaps in collaboration technologies and extreme challenges that emerged from a globally crippling recession. When it comes to adoption of enterprise video, there are great strides being made – all the way from desktop to telepresence. And we all know mainstream desktop video is coming. It’s more a question of “when” rather than “if”. Having covered conferencing markets for more than 10 years, I have seen videoconferencing adoption have its fair share of false starts. So, what’s likely to be different in the future? Well, for starters there is an unprecedented awareness and pent-up demand for video among the general populace. This is not only emerging from a viral increase in consumer use of video (Skype, YouTube …) but also from the true understanding of benefits related to video adoption in the enterprise i.e.  travel cost savings and higher productivity.

 

After the arrival of High Definition, video conferencing room systems revenues grew at an impressive pace of over 20% annually in 07 and 08. However, 2009 was a mixed year for the industry. Here’s a quick recap of how the different videoconferencing segments performed. The sales of room-based systems, the largest market in videoconferencing, declined (initial estimates show a 4 to 5% revenue drop). Telepresence, where the travel replacement savings are the most compelling, defied a Capex-restrained environment and grew at more than 75% in revenues. A bright spot in the videoconferencing industry was videoconferencing network systems, which grew at more than 20% in revenues indicating that in times of lower IT budgets, users will invest in infrastructure to get more out of their existing investments. Another hot spot for growth in the videoconferencing market is managed services. Managed videoconferencing services have seen significant ramp-up growing by 26% in revenues last year which clearly points at a new emerging direction. Users are increasingly looking to outsource the management of videoconferencing to a third party provider that offers ease of use, reliability, and the ability to interconnect multiple vendor solutions.

 

Frost & Sullivan predicts healthy growth for all video segments. One area where we will likely see the highest growth in the future is desktop video. The industry’s so-called holy grail, desktop video is within reach now more than ever before. The demand for video at the desktop is nascent and is just beginning to build up. Skype’s recent announcements of HD desktop video and its plans for videoconferencing on TVs and Google’s free videoconferencing feature all point at how video adoption will go nowhere but mainstream. While we are a few years out from wide scale desktop video implementations, the market has reached the point where IT managers and users alike are starting to take a look at it – communication infrastructures are being upgraded and video is finally getting attention as a value-add application over IP networks.

 

While many believe that video in the enterprise will become viral, most organizations are holding back as their infrastructure is not ready for it – when I say infrastructure I mean not just the bandwidth availability but also management capabilities to deliver video as an enterprise grade application. What does it take to spread video to hundreds and thousands of desktops and are IT departments ready for it today? The challenge of bandwidth availability will have to ease up and networks have to become more video ready but the network management aspect is an area where the industry still needs a lot of innovation. So today while the video clients themselves are well developed, it is the ability to connect these clients and manage a wide scale desktop deployment effectively and cost efficiently which is still lacking. Provisioning, control and network management at a low cost are areas where we expect to see considerable developments.

 

Despite a laundry list of challenges hindering wider adoption, desktop video will be one of the most talked about technologies. If you are an IT architect, its time to sit up and watch the influx of video over the next few years and get ready to evaluate the value of video in your organization. Yes, there are roadblocks but all that will be overcome, as products and technologies emerge to make desktop video more scalable and manageable easing up IT’s fears.
 
What do you think? If your organization is seriously evaluating desktop video drop us a line on how you expect to meet these challenges.

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