How Cisco and Polycom Can Save Their Lunch by Embracing the Cloud
By Jeff Cavins, CEO FuzeBox
Software is Eating the World
You’ve probably heard the above phrase. It’s a quote from legendary investor, Marc Andreessen, and he’s clearly been spot on. Software has been transforming industries from retail (Amazon), to information storage (DropBox), to the more efficient sharing of existing resources (think AirBnB and rideshare solutions), and voice communications (Skype). Software is constantly changing and improving the way we live our physical lives in fundamental ways.
Much of the software of today has moved to the cloud, which gives service providers the flexibility of delivering software as a service (SaaS), greater reach, the luxury of providing broad updates that benefit all users and a low cost delivery model. The ultimate advantage of the explosive growth of the cloud is that users have more choice, not less.
In the business world, the advent of touch screen devices – essentially handheld supercomputers with vastly improved user experiences – is allowing the world to democratize expensive tools that were previously available only through proprietary hardware solutions.
For example, this year we’re seeing particularly dark clouds amassing around companies likes Cisco, Polycom, and Microsoft, and their highly profitable conferencing, telepresence, and collaboration divisions. Recently, Microsoft announced that it ditched Live Meeting; Cisco is laying off portions of its WebEx unit and its telepresence sales continue to drop; meanwhile Polycom is laying off workers while its revenues declines and its stock hits a 3-year low. In the past three quarters, Polycom’s year-over-year revenue growth has slipped from 20% to 7%, 5% and a decline of 6%. As a result, Polycom’s CEO just announced that the company is moving towards software. Remind you of anything? Say, HP? Marc Andreessen makes the case that you are either born software or you are not; and you don’t wake up one day and decide to have software DNA. It must have existed at the birth of the business.
We now live in a combined BYOD and SaaS era. Mobile hardware is becoming powerful enough to be commoditized, capable of running traditionally high-powered applications like telepresence. In addition, mobile networks through long term evolution (LTE) are getting as good as broadband and corporate LANs/WANs. Software solutions can now be built to appeal to a broader set of use cases, while being far more adaptable to the ever-changing needs of customers. These factors are fostering the era of dedicated hardware, that is fixed, expensive, hard and expensive to upgrade, oddly not tailored to individuals, and limits user choice, to go the way of the Dodo bird.
How to Turn Things Around
1. Don’t try to go into software
Polycom and others have stated their intent to ride the wave of the cloud and become a software company. Those in software however, know that unless software is in your DNA and your blood, you’re not going to successfully make the transition and compete with leaner startups that can pick you apart piecemeal. Instead, open up your hardware and make it interoperable with the great software that’s coming out on the market now. This move can help users find new value in your products and it’s a first natural step to understanding the open world of software.
2. Make your hardware dead simple
Like the great Larry Tessler once said, “never be compatible with a poor user experience.” Telepresence systems – once one of the great enterprise collaboration platforms – can only compete if there is a maniacal focus on the individual user experience, rather than the focus of mining million dollar margins on hardware. Booting up a telepresence system is like going through a pre-flight checklist in a Boeing 747– it’s neither easy not intuitive. Compare that to launching an app on a tablet, gesturing with your index finger and you’ll understand the difference in user experience right away.
If there is anything that is truer, it’s that users always want more choice, not less. This is a huge reason why Polycom and Cisco are currently in trouble. They are forgetting the most important aspect of business in todays Post-PC, BYOD era: providing a superior user experience. They must deliver a great experience that users appreciate and value, alongside choice they deserve: portability, interoperability, mobility and quality. Consumers no longer take imposed limits sitting down; they want choice in their devices and flexibility in working across different solutions.
3. Make telepresence an open platform
Warren Leiberfarb, a prescient film industry executive once said, “When you limit your users you will lose them.” Customers are being disadvantaged and underserved by these proprietary hardware solutions. Sure, Cisco has developed social collaboration solutions like Jabber and has tried (but failed) to take telepresence mobile with the Cius tablet – but these efforts are in vain when they do not interoperate seamlessly with the rest of the software world.
Cisco and Polycom should leverage their ability to provide high-end services and become a platform for all the great software out there. They should integrate with other video conferencing technology that’s a better fit for mobile; add greater collaboration, cloud storage, and media sharing options; and support gesture-based technology. The old guards need to shake up their thinking and aim high. Or they’ll be devoured.
We’ve Seen This Before
A number of other industries have gone through similar upheaval in the face of innovation.
The film industry provides a great example. Executives panicked in the 80s when the neighborhood rental VHS industry came about. They did their best to crush it, until they realized that chains like Blockbuster and Hollywood video were actually adding an incremental channel and increasing industry revenue. Further disruption has come along since then, including DVDs, Blue Ray, and now digital downloads and on-demand streaming. With the introduction of each of these technologies, the film industry succumbed to periods of fear. It turns out however, that each of these new channels helped to grow the industry overall and supported the traditional revenue channel: the Box Office. So why fight it? These technologies just allow content and services to be provided with a better user experience – embracing innovation and customer choice is the key to long-term success in business.
Hardware providers are now going through a similar transition. However, business and users continue to rely heavily on these traditional solutions. The last thing you want is for existing users to be alienated from an entire market due to a bad experience.
Polycom and Cisco and Microsoft have the opportunity to lead their customers into a new generation and there is a new generation of user in business, a generation that has grown up with software in their DNA. It won’t be easy; their strategies may even cannibalize profits for the short term, but it will help ensure long-term sustainability. And although this article focuses on conferencing and collaboration, any hardware maker should be wary.
Unless you’re building for the next generation of customer, you better be looking over your shoulder.