Why Cisco Bought WebEx
Connecting The Dots has a very interesting analysis of why Cisco bought WebEx. Steve Borsch makes very clear why this acquisition is a Web 2.0 platform play:
"When Cisco bought into the social networking game, there were a lot of folks in the blogosphere scratching their heads wondering why they did it. I didn't pay much attention to this acquisition since it seemed tactical and not terribly interesting. But now with Cisco buying WebEx (press release here) it sheds a whole new light on their potential strategy to become even a bigger and more material part of the Internet-as-a-platform layer....If you consider what Content Delivery Networks (CDN's) like Akamai and Limelight bring to efficient Internet content delivery, then this acquisition makes more sense. CDN's deliver regardless of the usual internetwork latencies and as such are vitally important if you're a global brand to ensure your stuff gets to people quickly anywhere in the world. This is even more important now since many of us are stuffing the Internet full of video and other huge files. This acquisition thus begins to make strategic sense on several fronts:
1) Unified messaging is the buzzphrase that every enterprise vendor in the game is pitching and/or striving to offer. As voice becomes an integral part of every Internet-centric communication (collaboration, virtual worlds, et al), it is imperative that unified communications products (voice, video, email, IM, fax, etc.) are tightly integrated within any vendor's software offerings or suites. At a minimum, Web conferencing is SUCH A FUNDAMENTAL PART of online collaboration -- which I write about often and you KNOW is exploding -- buying the Web conferencing leader (87% market share) instantly positions Cisco as an infrastructure-centric player
2) Scalable delivery. WebEx early on built their proprietary MediaTone network. In my view, that network alone is worth the price Cisco will pay. When you examine the revenue picture of Akamai, Limelight and others -- without even knowing what's on the WebEx roadmap for future services -- this makes even more strategic sense. I can only guess that scaling the MediaTone network to handle CDN-like services will be a relative no-brainer
3) Lastly, think about the future of collaboration. Will it be a two dimensional, flat-file world? Nope. It will first be a social networking, collaborative place -- bringing together project/task management, file management, calendaring and more -- but will absolutely require incredibly rich communications to be an integral part of these offerings."
I totally agree with all of these points. Point 1 and 3 are really variations on the same theme: collaboration suites are the next generation of must-have enterprise software. It's at the heart of Microsoft's acquisition of Groove and Ray Ozzie's ascent to the role of Chief Software Architect. (See my account of the original Live Software rollout with Bill Gates and Ray Ozzie in November 2005.) It's why sharepoint has been described as "the golden application for Microsoft". It's why Breeze (now Acrobat Connect Professional) was such an important part of Macromedia's strategy, and now Adobe's.
Here's the Google Trends graph of Sharepoint vs. Lotus Notes vs. Webex. While Webex isn't really an equivalent product to Notes and Sharepoint, they are all in this enterprise collaboration space. As you can see, Sharepoint passed Notes in search volume in late 2005, and has been on a fairly steady upwards trend since its introduction. And both are still ahead of Webex in search volume.
But point 2 was the one that really got my attention: that the value may not have been in the application itself so much as in the network infrastructure (which is more Cisco's bailiwick.) Even more thought-provoking was Steve's conclusion, which I hope Cisco also comes to:
"I only hope that they're going to deliver something akin to what Amazon has done with Amazon Web Services and give the world of creators a scalable unified messaging/communications infrastructure upon which to build...affordably."
This is a really important insight. To become a real platform player in Web 2.0, Cisco will need to open up both the application and the infrastructure. Steve is really right to point to Amazon as the leader in thinking of the Web as platform. Everyone else who is building web services platforms -- even Google, who is the leader in so many other ways -- is really just building application-layer platforms, allowing people to build extensions to their applications. But with S3, EC2, and SQS, Amazon has built services that allow others to build on their infrastructure, not just on their applications. And when a platform allows people to build whatever they want, look out!
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Comments: 7
[03.16.07 09:11 AM]
Tim,
Since 2004 I've invested a lot of effort, energy and enthusiasm in my blog in an attempt to infuse it with some intrinsic value and be part of the conversation...and I must admit that your validation of this post is among the top milestones on my journey.
Not to come across as some gushing fanboy, but few people I've talked with about the post and the points within it, understand the infrastructure-centric ramifications of this acquisition like you would...and did.
You see so many "dots" on the horizon in your position as publisher, your experience, geographical presence in the Mecca of tech, your time in the game, as well as driving Etech, Web 2.0 and other cutting-edge conferences, that it's *really* delightful to be included as one of those dots (however small in nature) that you've included in what you are connecting.
You said, "Even more thought-provoking was Steve's conclusion, which I hope Cisco also comes to:" Like always, the important blogosphere conversations makes me want to be that fly-on-the-wall in the strategic meetings on "what we should do with this acquisition" and also whether or not Cisco management is even accessing the buzz in the blogosphere (though dozens or hundreds of free perspectives from thought leaders like you seems too good to pass up).
Unleashing the collective developer ecosystem globally to leverage the WebEx infrastructure would be an interesting start and I also hope they're listening...
~Steve
[03.16.07 09:24 AM]
Great post, Tim....and Steve! (He and I hang out here in Minnesota Blogland. Lord knows the weather keeps us inside a lot thinking about such things.)
Hey, Steve, after this, you really should come to eTech....
[03.16.07 10:15 AM]
Jen Pahlka of CMP, who is one of the program chairs for the Web 2.0 Expo, just sent me the following note:
"Webex is also launching their Connect product (which is built on the MediaTone Network and designed as a business mashup platform) on Monday in the Launch Pad program. This is supposed to be pretty much, AFAIK, what Steve Borsch is asking for in the last part of your post where you quoted him.
Also, Subray Iyar (Webex CEO) will be on a keynote panel on Wednesday on Enterprise 2.0."
[03.17.07 06:13 AM]
Great discussion. I'd add Telepresence as a critical component of the collaboration and distance independent interaction discussion. Cisco has continually stated that TP would be their fastest product to the billion dollar revenue level. If Cisco is to follow the Amazon path, then that would be terrific, but that is quite a leap from where they are today.
[03.17.07 06:34 AM]
A couple of observations (of my own) regarding the WebEx acquisition:
- my first exposure to it was about a year and a half ago (pretty late to the game I'll admit) when one of our Dell servers crapped out. My initial reaction was "that's neat... I wonder why more people aren't using this". Their whole usage of subdomains for support-customer meet up meshed with "The (internet) Way Things Should Be Done"(tm) and got them past my "well, it doesn't completely stink" filter.
- about a week later, that view got "reality adjusted" after I realized that WebEx only extended Dell's incompetent "Have you tried rebooting your computer?" (HYTRYC?) tech support directly to the desktop. In addition, I got a little nastygram from corporate security asking me to remove the software installed by WebEx.
- while attempting to set up a WebEx service account for a friend's business, it became apparent that WebEx is still getting their head around how to service the medium sized business market (to be fair, this was WebEx Japan...) Bottom line was they had difficulty quoting pricing or even defining the service offering (and they lost business because of it).
- WebEx is hardly unique. Between the built-in conferencing that Microsoft IM has to crossloop.com/showmypc.com (or any other VNC meet-up point hack of the day) to hamachi to iremotepc.com, there are more options for remote access that users can throw stones at. Hell, I suspect that WebEx doesn't have market share when you consider things like GotoMyPC.
- WebEx does not have a VoIP/video conferencing play (yet). Right now, WebEx combines all the frustration of IVR phone menu systems with bullshit hand-holding of "HYTRYC?" to the Desktop... and I fail to see how video conferencing or VoIP is going to improve upon that particular low point.
- Nothing is more scalable that an external meet-up point combined with a healthy dose of peer to peer STUN NAT/Firewall traversal. In fact, there's not a scalability win that's needed for anyone who decides to complete in this service area. All it will take is someone implementing the WebEx equivalent in Flash (no software for security departments to run down) and someone is going to feel very cheated for having spent +3000 million dollars (those numbers are *stupid* frightening... yes, they had a +30% jump in earnings, but did anyone bother to look at their bottom line? Keep in mind that a one-time sudden jump in earnings is something to sit up and take note about, but not in just a positive light; it could be creative book keeping... and, in fact, looking at past performance, that's *exactly* what it looks like).
One thing that nobody seems to be talking about is that the WebEx acquisition is the harbinger of continued and increased outsourcing (perhaps that's how cisco is *really* thinking of regaining their money on their investment). If I were a CCIE, I'd be worried. In light of Skype's voice services program, I think it would have made more sense if Skype brought WebEx rather than Cisco... but I guess after ebay brought that +billion dollar pony, they didn't want to buy another one... next sucker up!
[09.16.07 09:56 PM]
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csven [03.16.07 09:03 AM]
"It's at the heart of Microsoft's acquisition of Groove"
This caught my attention when it occurred but from the perspective of a product designer/CAD user with an interest in 3D virtual spaces: Groove gets installed with PTC's Pro/ENGINEER (or it did; not sure if that's true now). It is/was part of their collaboration suite called, of course, Pro/COLLABORATE. And as you're probably aware, that stuff has being folded into their larger PLM system called WindChill, which competes with UGS (reportedly moving toward avatar-based systems) and Dassault (which has been pushing collaborative VR in their own efforts)... and which Qwaq, the new and first Croquet-based offering, resembles.