With Cisco Systems' $3-billion deal to acquire Norwegian video conferencing powerhouse Tandberg, enterprise video is now ready to go mainstream. End-to-end deployments from the desktop to the conference
"We now have a household name with access to C-level executives, its sales force and channel and its massive marketing budget in the mainstream video conferencing space," said Ira Weinstein, senior analyst and partner at Wainhouse Research LLC. "This means the tides will rise. The level in the lake will go up. We will all benefit. We will see increased end-user awareness and demand. We will see additional sales, and this market will grow."
Casual observers may believe that Cisco's enterprise video business is already a big deal. After all, consumers have seen fictional presidents and anti-terrorism agents using the company's immersive Telepresence video conferencing technology extensively on popular TV programs like 24, thanks to Cisco's deep pockets on the marketing side of things. But Cisco's high-end Telepresence solution is something of an ivory tower in a vast video kingdom.
"Cisco is the market leader in telepresence," Weinstein said. "There's no debate. But the telepresence market represents only something like 1% or less of unit sales of video conferencing. The real day-in, day-out stuff is the standard video-conferencing stuff that Polycom and Tandberg sell every day."
With Tandberg in the fold, Cisco will be the market leader in end-to-end enterprise video, a position that it really hadn't tried to grow organically, said Irwin Lazar, principal analyst and program director for collaboration and convergence at Nemertes Research.
"Cisco really only had the high-end solution," Lazar said. "They haven't got a good approach for [non-Telepresence] room systems. They haven't got a desktop strategy. Their MCUs [Multipoint Control Units] are from their OEM agreement with Radvision."
"If you look at the Tandberg portfolio, they have a much better end-to-end [line]," Lazar said. "They have a much better management platform; they have a gateway out to 3G and 4G that gives them the ability to deliver video to mobile devices. All those pieces Tandberg had and Cisco didn't."
While Polycom and Tandberg have toiled in this kingdom of desktop video and broad-deployment room-based video conferencing, that kingdom has remained relatively small, to some degree because early products were unreliable, had spotty quality and were nearly impossible to use.
Today every product demo on VoiceCon's main stage, from Cisco to Siemens to Avaya, features some sort of video conferencing element, and more often than not, those video sessions are built on either Tandberg or Polycom technology.
The Cisco-Tandberg deal will create some polarization in the market. All the major unified communications vendors have been building relationships with both Polycom and Tandberg in an effort to improve their enterprise video story. Now, this partnership dynamic will shift, and customers could get caught up in waves of change.
"What this will do is … drive some of the unified communications and telephony players that were partnering with both Polycom and Tandberg [closer to Polycom]," Weinstein said. "Those companies will probably spend more time hugging Polycom now. Microsoft had been partnering with both, but now that Tandberg is part of Cisco, they're not going to spend a lot of energy with Tandberg because they compete with Cisco. They're going to spend a lot more time with Polycom."
There will always be a high degree of interoperability among all the vendors, since everyone is edging towardSession Initiation Protocol (SIP), the broadly used standard for initiating video, voice and instant messaging sessions. But the fact is that many unified communications players spent a lot of time building up tightly integrated partnerships with both Polycom and Tandberg. And Polycom and Tandberg have also taken steps to interoperate more with each other. However, Cisco's market dominance will probably force Avaya, Microsoft, IBM and others to concentrate their partnering efforts on Polycom from now on.
Cisco's acquisition of Tandberg is also a moment of truth for Polycom, the former market leader in enterprise video before Tandberg overtook it in recent years.
"[Polycom is] still a leader in terms of installed base," Weinstein said. "There are more Polycom video conferencing systems out there than anyone else's, including Tandberg. Polycom is not a trivial player."
Unfortunately for Polycom, its biggest rival now has extremely deep pockets. It will need to step up its game. If it fails, enterprises will have less choice, Lazar said.
"Polycom is going to have to be extremely aggressive with pricing and go after channels in order to remain a viable No. 2 vendor," he said. "In the short term, this is good for customers [of all vendors] because that will provide more competitive pricing from Polycom and it could keep Cisco and Tandberg's prices down low. But if Polycom stumbles and is not able to keep its market share up, then you run into a situation where it's Cisco-Tandberg and no one else. All the other players are very small, whether it's Mitel, Lifesize, Aethra or Vidyo. None of these have the reach, channel and support structure of Cisco-Tandberg. "
"Video conferencing is likely to remain an oligopoly for quite a while," Weinstein said. "It's been a two-horse race for a long time, and this acquisition means that it is still a two-horse race."
While market shares and marketing budgets and the ability of vendors to scale deployments may shift as Tandberg and Polycom duel and the smaller startups scrap, enterprises still have good products to choose from across the board, Weinstein said. It's just a question of who can deploy those large-scale, global video strategies after the dust from the Cisco-Tandberg deal settles.
"The products themselves are exceptional," he said. "Not just Cisco, Polycom and Tandberg, but across the board. Today's video conferencing products are reliable, powerful and rock-solid performers. We just have stronger household names behind some of them, and that's good for everybody."
Let us know what you think about the story; email: Shamus McGillicuddy, News Editor