Cisco Acquires WebEx Part 1: March Madness For The Unified Communications & Collaboration Market
What a month. Not only do we have one of the more exciting times in college sports, we have a certain level of mania hitting the unified communications and collaboration markets. On top of the news coming out of the VoiceCon event earlier in the month, and the recent Microsoft acquisition of TellMe, we now have this $3.2 billion dollar deal between Cisco and WebEx. There has been a tremendous amount of media coverage already but not all the news reports have taken a look at all the different angles this deal includes. Much of the coverage has been focused on web conferencing. While an important aspect, Cisco had many less expensive options available if all it wanted to do was buy its way into the hosted web conferencing market. In this two-part post, I’ll walk you through several facets of the acquisition, what it means to Cisco, and what it means in regards to Adobe, Google, IBM and Microsoft. Part 1 of this article is below.
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Cisco gains access to the WebEx Media Tone Network
The crown jewel of WebEx is the Media Tone Network (MTN). It is a distributed, P2P network architecture that has enabled WebEx to avoid use of centralized servers for web conferencing. The people and the MTN technology itself would belong to Cisco who can either advance it, or reuse parts of it for its own application networking purposes. WebEx also has data centers world-wide and research centers (in China, etc) that Cisco could find valuable.
Cisco gains a SaaS collaboration platform
WebEx was bright enough to see the writing on the web conferencing wall some time ago. The web conferencing market is incredibly crowded, with over 80 vendors last time I counted. The market has tremendous downward pricing pressures. Given convergence trends, it is questionable whether we will even track a distinct web conferencing market by 2010. It is a difficult technology domain to grow a business.
WebEx acquired Intranets.com in 2005. At that time Intranets.com had 300,000 paying subscribers and 10,000 company sites (primarily in the SMB market). WebEx re-launched Intranets.com as WebOffice. In 2006, WebEx launched AIM Pro Business Edition Service that works with enterprise directories. WebEx also has good integration with Microsoft productivity tools (e.g., Office Outlook support for its web conferencing service). Cisco gains stewardship over a hosted collaboration platform that includes e-mail, calendaring, instant messaging, presence, web conferencing, lightweight document management, task management, discussion forums, and expense reports.
In 2006, WebEx announced WebEx Connect, a program similar in concept to salesforce.com’s AppExchange framework. WebEx Connect leverages a key partnership with Cordys to enable “business process mash-ups”. The WebEx Connect Grid includes methods to integrate with enterprise applications as well as the WebEx SaaS environment. Cisco has the opportunity to create an extensible partner ecosystem based on a Web 2.0 / Office 2.0 foundation started by WebEx.
While WebOffice and Connect diversified WebEx from being so dependent on web conferencing revenues; the web conferencing assets are still very valuable. WebEx has added specific modules onto the basic meeting platform to handle business functions such as corporate training, customer support, marketing events and sales demonstrations. These modules provide Cisco with an up-sell opportunity from basic online conferencing services.
More importantly, the deal is also a bold chess move versus Microsoft and its Office Live Meeting service. WebEx is the market leader for hosted web conferencing. Microsoft has not been able to over-take WebEx. Cisco now has another point of competition with Microsoft and one where it has an edge, at least right now. The deal gives Cisco an option to sell hosted web conferencing into the SBM space as well as large organizations. To some degree, this move would be confusing to customers since Cisco would be competing to some extent with its MeetingExpress platform that also targets the SMB market (MeetingExpress is also where Cisco is using Adobe's Flash-based web conferencing technology). But, it's "reasonable". Cisco will need to articulate a better roadmap over time.
What I think…
WebOffice and Connect are the most intriguing aspects of the deal. The media has set WebEx up against Salesforce from time to time as a potential SaaS battle. WebOffice is doing reasonably well from what I hear. WebEx has been trying to build out a partner ecosystem around Connect but might not have had the resources it felt it needed to succeed. Cisco can help with that effort. The WebOffice / Connect platform also provides some rationalization for the series of social networking moves that Cisco has undertaken recently (e.g., Five Across). The social networking technologies that it recently acquired could also be used to further enhance what is offered by WebEx WebOffice and Connect. Cisco can also now offer VoIP/IP Telephony services to all WebOffice users as a future deliverable.
The deal puts an interesting twist on the recent IBM partnership. Cisco clearly wants to be in charge of its own destiny concerning unified communications. Cisco is not going to follow in IBM's shadow in the UC2 arrangement. There will be the expected "things are fine - they really are" by management on both sides (i.e., IBM and Cisco), but this obviously complicates the relationship, and makes it more difficult for the sales force to explain and rationalize the when/how/why one solution should be used over another. Still, I don’t see the IBM partnership seriously threatened. Cisco will play its cards shrewdly - the Lotus Expeditor client is a sound platform and the rest of the IBM deal remains attractive with much upside potential - Cisco simply does not believe that it is an IBM "add-on" but offers distinct value to the market independent of what it chooses to do (or not do) with IBM. (Note: Obviously, this deal was part of the reason the Cisco/IBM alliance was not strongly advocated during the Cisco keynote last week at VoiceCon.)
Adobe must be feeling quite confused. It is not clear at all where Adobe fits into the Cisco strategy longer-term. It could simply have reached its peak, or Cisco will continue to leverage the Adobe conferencing technology and keep IBM at a distance (e.g., replacing Adobe’s technology with Sametime for web conferencing).
Overall, the deal is another commentary on the older Latitude platform. Cisco can avail themselves to technology from Adobe, IBM and now WebEx. With so many options, customers should not expect future technology evolution from that existing Latitude platform.