Cisco has indicated that it realizes that it needs to transform itself as well. Increasingly, the company has been talking about Web 2.0, social networking and such. To make the transformation possible, Cisco is also locked in an unavoidable battle with Microsoft. Those battles to-date have been relegated to networking and communication technologies. That is no longer the case given the acquisition of WebEx. Cisco has now significantly broadened the Microsoft battle-line to include a head-to-head battle with Microsoft’s Office Live effort. Cisco is now a hosted provider of collaboration and productivity software with a platform designed to include partners that can extend the core capabilities Cisco itself delivers. Cisco for instance could attract other Web 2.0 and Office 2.0 vendors to the WebEx Connect program to offer a very competitive alternative to Microsoft (and Google as well). The WebEx Media Tone Network also provides Cisco with a hosting capability that could be used to house custom social networking environments build with Five Across and other assets. While the deal offers tremendous opportunities for Cisco and its customers (refer to Part 1 of this two-part series), there are many unknowns however and several risk factors to consider.

So what's not to like...

Below, I outline some of these issues and close with a bottom-line assessment. There are several points of concern:

• Cisco lacks experience in managing a SaaS collaboration platform. There's no guarantee that it will do a better job than WebEx at selling WebOffice and building out the partner ecosystem around Connect. Cisco has a significant learning-curve as it transforms itself from a communications, networking and hardware vendor into one pushing a hosted collaboration and office productivity platform. Cisco also has no proven track record that would reassure stakeholders that it has the skills to build out the Connect partner community.

• Cisco lacks experience in the application and collaboration space in general. Cisco is just not used to competing with IBM and Microsoft at this level (or with Google for that matter). While the acquisition is a bold move, it may place Cisco ahead of where it sees itself in the market today. Market expectations could be well-beyond Cisco’s ability to fulfill them. For instance, WebEx has integration with Microsoft's productivity tools which Cisco needs to maintain and advance. Cisco now has to think about records management given the document management capabilities within WebOffice. Cisco is also now a hosted e-mail provider and needs to consider the security and archival aspects of e-mail information.

• Cisco is now an accidental competitor with Google. This might not have been Cisco’s intention, but given Google’s direction with Google Apps, and possibly a Google phone, Cisco needs to think beyond Microsoft. 

• Cisco has not proven it can capture the "hearts and minds" of ISV’s, application partners and other developer communities (when compared to IBM or Microsoft).

• The management organization resulting from these recent acquisitions is complicated. Different technologies report up into different branches of Cisco management.

• The technology is not totally compatible - this will frustrate developers and other partners. Cisco needs to address API interfaces, integration, and interoperability. A roadmap needs to come out soon.

What about Microsoft?

Cisco is aggressively in the face of Microsoft as a result of this deal. The most significant point of confrontation is WebEx WebOffice and WebEx Connect versus Microsoft Office Live. Cisco can deliver a SaaS collaboration platform now while Microsoft continues to face a series of questions around its SaaS efforts.  Cisco also gains “bragging rights” over Microsoft when it comes to hosted web conferencing. The next release of Office Live Meeting will bring Microsoft forward but WebEx has a powerful brand and is likely to remain the leading market provider.

Overall though - Microsoft still has a more cohesive set of technologies rather than a mix of several vendor products across different on-premises and hosted models. Given Cisco's lack of experience with applications, SaaS and so on - Microsoft has time to adjust and respond accordingly but it must take notice of Office Live deficiencies. On the enterprise front, the next wave of Microsoft’s unified communications products (e.g., MOLM 2007, OCS 2007, Exchange 2007, RoundTable, etc) remain in a power market position over the next few years. Again, Microsoft needs to realize that Cisco is not competing with it purely on the UC front so coordinating a competitive response across Microsoft will be necessary.

Bottom Line

Cisco now has the assets it needs to move into a broader collaboration, social software and unified communications market. The WebEx acquisition was the missing ante into the game.  But right now, it's just that – the ante. Customers and market watchers will need to see solid execution over the next year to prove that Cisco has the competencies to expand into these new markets and credibly compete with the likes of Google and Microsoft. Cisco needs to come back with a vision and roadmap that takes these acquisitions into account and rationalizes the relationships it has with Adobe and IBM.  Cisco still needs alliances with these vendors – so I expect all parties to try to work together around common goals. But given that companies are basically betting their future business here – all partnerships are tactical. Decisions Cisco and other communication and collaboration vendors are making today will determine who makes the “Final Four” in 2010.