Cisco Calls the Skype Kettle Black


I didn’t see this one coming – but it makes perfect sense.

Cisco communicates to the EU that Microsoft and Skype together may not be such a good thing for the industry, and thus appealed the approval of the merger to the EU. That isn’t in itself too surprising until you consider that the EU and the US have already approved the deal, and that the EU and US has already heard Cisco’s concerns. There is a very good chance that the decision won’t be changed. But there is also the chance some detail gets revised. There are two issues here: why did Cisco do this and is it a reasonable claim?

Why they did it largely falls into the nothing to lose category. It’s like challenging a referee’s call. There might be a small price, and it might be futile, but the call isn’t likely to come back any worse and there is a chance the outcome gets changed. But even if the EU makes no change in their decision, it slows down the merger. At the current rate of change, delaying things a few months is eternity. A lot can happen.

Consider how much has happened just since Microsoft announced the acquisition:

  • Skype continues to penetrate business. At the time of the acquisition, it was considered much more to be a consumer app than it is today.
  • Video is coming fast. As I wrote in this post, almost every major unified communications vendor is now offering desktop video solutions – most of which can only communicate with internal peers. As organizations deploy desktop video software and webcams, if you want to vtalk with an external partner or customer – Skype is likely your best option.
  • The expansion of desktop video solutions puts more unwanted attention on telepresence or room systems. The holy grail solution is clearly becoming one that seamlessly interconnects rooms, desktops, and mobile devices.
  • Cisco killed its UMI home telepresence solution earlier this year. Also in Feb 2011, Cisco killed its enterprise email offering in WebEx. Effectively, Cisco conceded two important battles to Microsoft.
  • Skype is in a firestorm of video, mobile,  collaboration, and Internet – four super hot categories in one solution – backed by a huge base of users.

Is Cisco’s claim reasonable?

  • There is an element of hypocrisy. Cisco is not exactly an open company – its telepresence and video solutions involve multiple proprietary components. But Cisco’s degree of openness is not in question. Various governmental organizations are evaluating MS and Skype – not Cisco. Isn’t an expert at proprietary technologies best suited to identify them? The fancy features of Cisco’s telepresence systems are proprietary, but Cisco does adhere to basic H.264 standards and does in fact offer basic interoperability. More so than Skype or Microsoft Lync can claim.
  • Cisco is the enterprise market leader. According to Wainhouse research (Q311), Cisco is the undisputed market share leader in terms of revenue. Polycom shipped more endpoints, so Cisco is also the price leader. That’s a tough position to cry unfair competition.
  • Thirty+ vendors organized and created the UCI Forum in the Spring of 2010 – to improve interoperability among vendors – particularly regarding video conferencing: Cisco (and Avaya) refused to join. Ironically, Microsoft and Polycom led the charge.
  • Skype is unabashedly proprietary. (See: Skype: Interop is a Waste of Time). Microsoft Lync is proprietary – Microsoft invented a new codec for video. So far Lync and Skype are not interoperable, but that is likely to change.
  • Cisco has been in this very hot seat back in 2009 when it offered to acquire Tandberg. To close the deal, the EU required Cisco to divest and open source its TelePresence Interoperability Protocol (TIP) and a library of associated software. Cisco + Tandberg became the largest enterprise video vendor, but had nowhere near the 700 million users as Skype does.

Here’s the Reality of the Situation

Cisco blew it. They coulda shoulda bought Skype. They blew it, and evidently figured out it was a big mistake.  They say hindsight is 20/20, but I have two claims to fame here:

Cisco had the chance. It would have been a defensive play to keep others from buying Skype, and it would have been an offensive play to expand its room based dominance to the desktop. Cisco was pre-occupied with its stock price  – acquiring Skype just wasn’t in the cards. In fact, Cisco was busy divesting itself of consumer stuff  (Flip) and back then most saw Skype as a consumer play. Of course, we were also talking about the consumerization of IT and it now seems pretty obvious that Skype and Cisco were actually competing in the same tournament.

The final point is, sad as it be, it isn’t clear that interoperability is feasible. The patent system is stifling competition (again). Even Google’s “open source” webM, is embattled in patent issues. Apple worked to kill flash – and now its savior Google has dropped Flash support in Chrome for Android (Google liked Flash as it was Apple’s enemy, but now Google is more excited about WebRTC).  As much as the users complain about interop – the vendors do fine without offering it (Skype, FaceTime, …). Perhaps the best option is a new breed of video interchanges such as Vidtel and BlueJeans.


Dave Michels