Summary
Cisco’s acquisition of Tandberg significantly “raises the bar” in the telepresence, video- and unified-conferencing, and web-conferencing markets as it consolidates the market and meets the full spectrum of price ranges and business user applications. The merger reduces Cisco’s market barriers and some of the usability and connection issues that have plagued comparable solutions. Cisco also demonstrates a move from proprietary vendor interconnections to “vendor agnostic” interoperability.
Analysis
The competitive pressures between telepresence, video- and unified-conferencing, and web-conferencing vendors has been intense during this recession as most products have become commodities due to their inconsequential differentiation. In spite of their relative maturity, most competing products and solutions within this market have remained difficult to use, complicated and unreliable to interconnect and integrate with other vendor solutions. Many of these product solutions tend to fall short in meeting corporate-wide needs such as personnel usage and adoption, and sometimes also fall short in meeting their return on investment.
The purchase of Tandberg creates a “check mate” situation for their competitors because it significantly consolidates this highly segmented market. Together, Cisco-Tandberg can potentially resolve some of the market barriers and simply their previously complex web of competing business alliances. The purchase also enables Cisco to effectively cover the lower price points and the single to six participant product market, which is a space that Tandberg dominates.
This merger also demonstrates Cisco’s readiness to embrace video as a significant part of their corporate strategy and their support of interoperable, open architectures that are required to meet the requirements of both enterprise and consumer users. Tandberg has made major strides in resolving technical issues which other vendors are still struggling to reconcile. A partial list of Tandberg's significantly differentiating technologies include HDTV conferencing, standards-based implementations (such as a 3G to H.323 Gateway) that support “vendor agnostic” interconnections, advanced video bridging technology that simplify the interconnections with different interfaces and video codecs, a call control server, and improved accessibility via their Firewall and NAT traversal technology. It is interesting to note that Tandberg’s advanced technologies have not only addressed some of the critical areas which have blocked the growth and adoption of corporate video and conferencing systems, but some of those critical resolutions could also address some of the “missing puzzle pieces” that have hampered high-quality consumer online video and communication systems.
As a result of the Cisco/Tandberg acquisition, it is expected that companies such as Microsoft, Adobe, AT&T, and others with unified-conferencing and telepresence solutions will be evaluating other video conferencing vendors, such as Polycom, as potential acquisition candidates.
Cisco has taken a giant step forward by selecting Tandberg who has key technologies that are clearly more advanced than Cisco’s. Cisco could leverage the joint knowledge gained from this “marriage” to enable similar advancements within their other products. On the other hand, Cisco and Tandberg could limit their potential revenue growth and technical advancement if they merely put their focus on the benefits of their expanded the sales channels, distribution, and partners.
Will Cisco continue to foster joint Cisco-Tandberg creativity to strategically expand on it or will they focus more on company acquisitions to add the needed “building blocks” that will fill the “missing pieces of the puzzle” that can accelerate the maturation of video and conferencing technologies? Most likely, it will be a combination both approaches.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
