Network and Telecom Strategies Blog

Cisco + Tandberg, More Thoughts

posted by: Mark Cortner

I recently participated in an analyst roundtable discussion with executive leaders from Cisco and Tandberg to discuss the strategy behind the pending acquisition of Tandberg by Cisco.  The discussion summarized many of the high-level objectives stated in past briefings and press releases, but also added more insight into the benefits the companies anticipate as a result of the acquisition.

In general, the benefits from an acquisition such as this could be derived within one or more dimensions; an improvement in market positioning, acquisition of a critical mass of key knowledge resources, expansion of product capabilities through technology acquisition, and top-line revenue growth. The executives from both companies initially stressed that the people component of the acquisition was perhaps the most important benefit that the combined companies would experience. I agreement with this opinion, I believe that Tandberg will add strong technical, marketing, and sales expertise to Cisco. The addition of Tandberg expertise will enhance Cisco’s credibility with the technical influences and decision makers within enterprise IT organizations.

Cisco’s vision includes high growth for video-based applications, with conferencing opportunities both with enterprise and service provider networks. Cisco reiterated the importance of driving a network effect for video and made brief mention of Tandberg’s Codian MCU. If Cisco and the rest of the industry is successful in driving increased interoperability and in turn, higher utility, I believe when we look back at this value from acquisition the most significant technological/product component will in fact be Codian.
 

Cisco + Tandberg: A New Open, Interoperable Product Portfolio?

posted by: Mark Cortner

Earlier this week, Cisco and Tandberg provided an initial peek at plans for an integrated product portfolio that will be disclosed following the closure of Cisco’s pending acquisition of Tandberg. In the announcement, the companies stated that they believe that competition and industry expansion will be best served through open standards and interoperability. I recently posted thoughts on Cisco’s release of its proprietary telepresence protocol to the public domain and its intention to propose the protocol as an open industry standard as is an initial step to drive interoperability standards in telepresence. The release indicates that Cisco will create an open architecture that enables greater interoperability with third-party systems beyond "telepresence" systems.

I’m curious to learn how this architecture will deviate from Cisco’s current visual collaboration architecture(s). I agree that one important factor related to industry expansion will be interoperability between vendors in all visual collaboration categories—immersive telepresence, room-based videoconferencing systems, personal systems, and infrastructure elements such as MCUs. The degree of customer acceptance and adoption achieved by video-based solutions will depend greatly upon how each type of solution can interoperate with other systems—from the same vendor and different vendors, both internal and external to the enterprise. I find that enterprise perceptions of video-based collaboration vary significantly, as many are still wary of past interoperability and limitations on system utility. I believe Cisco and Tandberg are on the right track, they realize that without widespread interoperability, the past barriers to video adoption will be difficult to overcome and new growth segments such as personal systems will not reach their market potential ... it will be interesting to see how the "open and interoperable" strategy will unfold and translate into actual product strategy and implementations.
 

Telepresence: Enabling The Network Effect

posted by: Mark Cortner

Last week, BT announced new pricing for its telepresence service, Global Video Exchange (GVE). In the past year, BT has driven numerous advancements in the market related to global telepresence services. The new pricing will further encourage customers to expand the use of their telepresence systems with other business partners and their own customers and drive increased system utilization.

The new pricing plans allow customers to select from one of several monthly allotments of telepresence events using BT’s GVE service. The events have no session duration limit and may include up to five telepresence endpoints per event. The session allotments will enable businesses to budget and project costs more effectively for telepresence usage as opposed to per minute pricing.

BT has GVE service nodes in the US, EMEA, and APAC which provide neutral nodes of connectivity to other service providers’ MPLS networks. With the GVE service, BT can assure a high quality telepresence experience on a global basis and does not require all endpoints to be directly connected to the BT network. The current GVE service is only compatible with telepresence offerings from Cisco, although look for this to change soon with the recent announcement that Cisco is releasing its proprietary telepresence protocol to the public domain and several vendors (including Tandberg) have already licensed the protocol. BT is progressively building toward the concept of a public routed network for telepresence, one of the key building blocks to encouraging the use of visual collaboration with other business partners and communities of interest external to the enterprise.

Polycom + Juniper = Cisco + Tandberg?

posted by: Mark Cortner

The alliance announced earlier this week between Polycom and Juniper Networks is targeted to deliver “an intelligent service provider solution for assured-quality, managed video services over a converged network” … and also targeted as response from both companies to Cisco’s pending acquisition of Tandberg. The alliance will allow enterprises to extract more business value from visual collaboration applications by enabling HD videoconferencing and telepresence traffic to traverse common network facilities with guaranteed quality levels. The alliance will deliver services, touted as the first “conferencing-aware” network solution by mid 2010.

The announcement indicates a deepening of the relationship between Polycom and Juniper, with Cisco’s competitive overlap increasing over the last several years and now punctuated by the pending acquisition of Tandberg. The stakes are high for both Polycom and Juniper; the announcement cites market estimates that project the annual growth rate for the visual collaboration market to be nearly 20% and reach a market size of $900 million by 2015.

The alliance will leverage Polycom's Open Collaboration Network strategy, providing an open and interoperable collaboration solution – a key point of differentiation directed at Cisco that partially dissolved with Cisco’s announced royalty-free licensing of its proprietary telepresence protocol to the industry. But the most powerful claims by Polycom and Juniper are that their alliance will provide a solution that improves network utility with lower bandwidth consumption and much higher session resiliency as compared to its “leading competitor”, aka Cisco-based networks. The game is on …

A Step Forward for Telepresence

posted by: Mark Cortner

The prospects for telepresence systems to expand beyond today’s vendor-specific islands of visual collaboration took a step forward this week. Cisco announced the release of its proprietary telepresence protocol to the public domain at its Networkers Live 2010 conference in Barcelona. Cisco will license the protocol, the Telepresence Interoperability Protocol (TIP), royalty-free to all industry players. The protocol is not an industry standard, but is actually intellectual property that Cisco is making available to the industry in an attempt to facilitate intercompany telepresence applications and usage. Cisco intends to propose the protocol as an open industry standard and is an initial step to drive interoperability standards in telepresence. The impact of enabling essentially a defacto standard for telepresence interoperability will allow the telepresence offerings, and most significantly the multi-screen systems, from all licensees to interoperate with each other as well as those systems developed by Cisco.

The announcement by Cisco was accompanied by news that Tandberg, LifeSize, and Radvision have already licensed the protocol. The videoconferencing industry has seen some significant consolidation in the last several months – Cisco is in the process of acquiring Tandberg and LifeSize was acquired by Logitech in late 2009. The licensing of the protocol is a significant step forward, though the news that Tandberg was a initial licensee is not a surprising step given its pending acquisition by Cisco (this would have been more significant if Tandberg, a dominant player in the global market, was not in being acquired by Cisco). The notable vendors absent from the initial licensee list including Polycom and Sony, although Cisco has indicated that some industry players (unnamed) are still in the process of reviewing the protocol license.

Cisco’s Acquisition of Tandberg

posted by: Mark Cortner

The first hurdle to Cisco’s proposed acquisition of Tandberg appears to have been cleared—earlier today Cisco announced that it now controls 90% of the shares in Tandberg. Cisco received acceptances representing 89.1% of the outstanding shares and purchased an additional 2% of the outstanding shares in November, resulting in control of 91.1% of the shares and voting rights in Tandberg. The process to clear this initial hurdle took slightly less than 60 days from when Cisco’s original acquisition bid was presented to Tandberg shareholders and will cost Cisco $3.4 billion, an increase from its initial offer of $3.0 billion. The remaining hurdles include the satisfaction or waiver of the remaining conditions to the offer through the Oslo Stock Exchange and approval from the U.S. Department of Justice.

The effect on the videoconferencing market and Cisco’s market share will parallel that following Cisco’s acquisition of WebEx in early 2007 for $3.2 billion. The acquisition of WebEx vaulted Cisco into the collaboration market and positioned Cisco as the market leader overnight. The successful acquisition of Tandberg will similarly position Cisco as a global market leader in videoconferencing, significantly augmenting its current market position developed over the past several years with its own high-end telepresence solutions and high-definition room-based videoconferencing systems.

I anticipate Cisco will quickly add integrated capabilities between its Unified Communications Manager and WebEx applications with the Tandberg videoconferencing product lines to facilitate pull-through and refresh system opportunities. With this acquisition, Cisco has improved its overall market position in the unified communications and collaboration markets (these are rapidly blending together) and has created another strong product basis to successfully cross-position with other elements of its portfolio. In terms of the chess-match between Cisco and Microsoft for leadership in the UC market ... advantage Cisco.

Polycom vs. Cisco

posted by: Mark Cortner

The last month has seen several interesting developments impacting enterprise video with much of the attention being focused on Cisco’s proposed acquisition of Tandberg. But with less fanfare (at least to this point), Polycom has contributed several significant announcements of their own that may mute potential defections to the “new” Cisco video portfolio.

The acquisition of Tandberg by Cisco will add several key products which are well aligned with its vision for visual collaboration—most notably in the areas of desktop videoconferencing and especially high-density, high-definition multipoint conferencing through the best-in-class Codian product. But the recent announcement by Polycom regarding its new RMX 4000 multipoint conferencing platform is an effective a counterpunch to Codian and enables hundreds of simultaneous HD videoconferencing sessions and supports more than a thousand standard-definition video and audio conferencing sessions.

The introduction of the RMX 4000 will enable Polycom to not only address and facilitate the expanded use of visual collaboration within large enterprises but should also pause some of the advances Cisco has made over the past year with the carrier community. The market conflict driven by UC continues, I expect some (many?) enterprises may struggle with the ramifications of Cisco’s pending acquisition of Tandberg. I’m sure Polycom is preparing for the new competitive landscape in videoconferencing and this announcement is a nice addition to its arsenal.

Personal Telepresence

posted by: Mark Cortner

The same week Cisco announced an agreement to acquire Tandberg, another interesting and potentially disruptive development occurred in the visual collaboration market—LifeSize announced a new high-definition videoconferencing product that may redefine and expand the market for telepresence solutions. The product, LifeSize® Passport™, is approximately the size of a netbook and delivers a personal “telepresence” experience at a price point below $2,500 USD.

Lifesize’s Passport supports 720p HD video at 30 frames per second and HD audio and requires only 1 Mbps of bandwidth. The current release of Passport supports point-to-point HD video, although one would suspect that a multi-point version is in its future. In addition, and other evidence point related to the growing acceptance of Skype in the enterprise, Passport supports Skype as an audio source enabling the product to directly connect with any Skype user worldwide. The product also connects with other LifeSize and standards-compliant enterprise videoconferencing systems.

LifeSize has broken some new ground with Passport—including form factor, integration with Skype, and price point. I suspect that other industry players will follow quickly and further dilute the telepresence category (by positioning high-definition video and telepresence as one and the same). With that said, new videoconferencing products such as Passport will undoubtedly continue to add value by enabling the proliferation of and expanding the use of videoconferencing by enterprises. The support for Skype audio is a great step forward though this would be enhanced further with the ability to interoperate with Skype video too …

 

Cisco to Acquire Tandberg

posted by: Mark Cortner

Cisco announced today a definitive agreement to launch a cash offer to acquire Tandberg for $3B. The proposal was recommended unanimously by Tandberg’s board of directors and represents a 25% premium to the 3-month volume-weighted average closing price for Tandberg’s stock.

The acquisition, expected to close during the first half of calendar year 2010, will significantly expand Cisco’s portfolio of visual collaboration products and immediately establish Cisco as a market share leader in enterprise videoconferencing solutions. Cisco will gain a leading position in room-based videoconferencing systems, obtain potentially the best high-definition, high performance multipoint control unit technology (i.e. Codian) in the market today, and acquire new products in the accelerating desktop videoconferencing and media phone product categories.

The most significant overlap between Cisco’s current visual collaboration product portfolio and the products acquired with Tandberg will be the high-end telepresence systems. Cisco and Tandberg have both been very successful in the telepresence market and it will be interesting to observe and analyze Cisco’s approach to supporting, integrating, and consolidating these product offerings given that current enterprise customers of both vendors have made significant investments in these platforms.