[This interview first appeared on NoJitter on September 28, 2017]
In the summer of 2016, Polycom was on track to be acquired by Mitel. The shareholders of both companies had agreed, but private equity firm Siris Capital unexpectedly intervened with a better offer just weeks before the expected close. Paying a $60 million penalty to break its engagement with Mitel, Polycom opted for the Siris deal, which allowed the company to retain its independence, now as a wholly owned subsidiary of Siris Capital Group, LLC.
The first action Siris took, even before the acquisition completed, was to name Mary McDowell as Polycom’s CEO. At the time of her appointment, Mary was an executive partner at Siris Capital. Although she was new to unified communications, she wasn’t new to technology, telecom, or large acquisitions, having spent 17 years at Compaq Computer Corporation and Hewlett-Packard during the PC’s heyday, followed by nearly a decade at Nokia.
After HP, Mary headed to Nokia, serving in several senior roles once more, including running its Enterprise Solutions business from 2004 to 2007 and leading its global feature phone business — the part of Nokia that still grew market share after the iPhone came to market. She was at Nokia until 2012, then transitioned into her role at Siris Capital before coming to Polycom just over a year ago.
In addition to her role at Polycom, Mary currently serves on the boards of Autodesk and UBM (the parent company of No Jitter and Enterprise Connect).
Mary grew up in the Midwest. She says that makes her “nice, not soft.” She obtained a computer science degree from the University of Illinois Urbana-Champaign College of Engineering, and has received the distinguished alumni award from the university. She currently lives outside of NYC with her husband, who leads the National Kidney Foundation.
I had the opportunity to meet with Mary, now with a year under her belt leading the charge at Polycom, to discuss how things are going. We dove into the acquisition, Polycom’s position in the market, and future strategy; and our conversation went something like this:
Coming from outside the industry, what surprised you most about Polycom?
Polycom is all-in on video; and by that, I mean we use video for everything. I’d never seen anything like it. Any casual conversation or 1:1 that in other places you’d do via a cell call is done with video here. I like it because it makes the interaction more human, but you definitely can’t do meetings in your bathrobe.
Unlike companies where video is reserved for executives or a few conference rooms, we make it available to everyone. When video is always available and employees have more than one way to access it from wherever they are, it becomes the ubiquitous communications channel.
Your arrival coincided with Polycom going private. How do you think that has that affected the company?
There are some of the typical things about being owned by private equity: They care about cash, and there’s a lot of oversight. But one of the benefits is that we can now have conversations about problems that take more than 90 days to resolve. For example, we were able to reduce our channel inventory levels to a healthy level in Q4, something that is tough to do as a public company where the focus on quarterly earnings reports often hinders corrections of that sort. With inventory at healthier levels we can improve linearity and working capital.
Just before Siris arrived, Polycom was about to be acquired by Mitel. In fact, Polycom had to pay a $60 million penalty to break the engagement. Do you think that made sense for Polycom?
When I first joined, I spent a lot of time talking with partners. Almost everyone was pleased that the Mitel deal did not come to fruition. For example, we do a ton of business with Broadsoft. Being part of Mitel would have made Polycom part of a direct competitor. Same with Microsoft. I think it is probably one of the few cases in history where employees were actually relieved to be purchased by a private equity firm as they saw the Siris deal as a much better outcome for Polycom.
What have you learned/experienced over the past year that has impacted your strategy moving forward?
Polycom has had a lot of success in the voice business by promoting open SIP devices and not offering any kind of call control functionality itself. Part of our thesis was that Polycom could start to attach its video endpoints to the new generation of video-as-a-service (VaaS) providers. It is essentially an expansion of our end-to-end solution to an ecosystem play in which we would partner more deeply with Microsoft and other players as well as offer our own end-to-end video solutions.
As I mentioned, we have had good traction with Microsoft and Skype for Business and Office 365, and we expect to build on that momentum with new Teams-capable solutions. We are also starting to see “green shoots” with some of the other players. What has been a pleasant surprise is the resiliency of the video infrastructure business. While the overall market for on-prem video infrastructure is declining year over year (for essentially everyone), for many customers, the scalability, interoperability, and security that the video platform delivers have kept them buying Polycom. Our transition to Clariti, which allows customers to buy video infrastructure as software to deploy on their own hardware, is showing good growth. So overall we are on the right track, we just need to continue to run as fast as we can.
Cisco and Vidyo have made aggressive moves toward cloud-delivered services. Zoom has always been there. What are your thoughts on premises-based vs. cloud-delivered video services?
I would never frame it as an either/or situation — more horse for courses. The trend toward use of cloud is clear, but we still sell a good amount of on-prem gear (more than we originally modeled). The other thing we hear a lot is that people want hybrid solutions — some elements on prem and some in the cloud. And then there are some regions (e.g., China) and industries (e.g., government) that want the security and control of having the stuff on prem. Nothing actually ever goes away in the tech world, and I think we will continue to see customers keep on-prem systems for the foreseeable future.
We confirmed last year that we don’t intend to offer VaaS ourselves, which means we can effectively partner in a non-competitive way with VaaS providers such as Zoom and others. We see it as a new opportunity to grow the sales of Polycom video endpoints. As cloud providers move further up to serve larger enterprises, the demand for enterprise-grade room solutions grows with them. And that is something we are very very good at and happy to provide. It’s kind of like the phone play but now for video. Of course it is harder, as video is not really standardized to the extent voice is, but the opportunity is great. We are starting to see momentum and the value we can provide in the room around audio quality and video experience makes us a very attractive partner. I should note that we have some customers like BT, SoftBank, and Pragmatic that are using our video technology to provide their own video services, which is another growth opportunity for us.
Last year we also announced that we would leverage the infrastructure talent and technology to create a video interop service with Microsoft, called RealConnect for Office 365. (Though I confess I like our internal code name, Aqua, so much better; that’s how I typically refer to it.) With Aqua, we can help customers who want to make the move to Office 365 but want to leverage their existing video endpoints — be they from us, Cisco, or someone else. Again, a great growth opportunity as it is giving us access to Cisco accounts, which are essentially greenfield for us.
The technology industry and Silicon Valley get criticized for the shortage of women in leadership roles. What’s the best way to go about remedying that situation?
I don’t think there is a silver bullet here. At Polycom, 40% of our executive team is female. I was fortunate to “grow up” at a time when the industry was more geek and less bro. I wish I knew what the remedy is! I guess the good news is that the topic is getting a lot of play in the Valley and you are starting to see companies change some of their hiring practices (requiring diverse slates, resumes without names, etc.) which is a positive step. It will take conscious effort on the parts of both women and men to make sure we are looking for talent in an open-minded way.
For several years Polycom has worked closely with Microsoft and Skype for Business with regards to both telephony and video. However, there’s considerably more options for certified devices and services today than in years past. Have the benefits of this partnership played out?
Microsoft was one of the drivers of Siris acquiring Polycom, and the relationship between Microsoft and Polycom remains quite close. We do this not because we’re nice guys but because it is mutually beneficial from a business standpoint. We are the only partner, for example, to offer the full range of products (phones, video systems, interoperability services, etc.) for Skype for Business, Office 365, and now Teams.
Coming as I do from the PC industry, I’ve spent a lot of my career working with Microsoft. So I am not so naïve that I’m expecting an exclusive relationship — and we wouldn’t want that sort of “monogamy” either! As we build out our ecosystem, I see Microsoft and BroadSoft as key “anchor tenants” and, as said, we are actively forging new relationships. Tech partnerships, if they are to be more than a press release, are about business results and driving value for customers together. The minute you’re not delivering value, there’s no point to the partnership.
The good news is that customers are seeing the value Polycom brings to the Microsoft ecosystem, as evidenced by our market share in phones (>70%) and the strong reception we are seeing to our native Office 365 integration with Polycom Group Series — and we’ll have it for Teams as well. We are the only vendor to have that native integration with video endpoints. As we ramp up our MSR and RealConnect services and prepare for Teams, we will have a good story for our customers and a great business opportunity for Polycom. Can’t ask for more than that.
Your spouse is the CEO of the National Kidney Foundation. Does your proximity to his work impact you as a business executive?
My husband, Kevin Longino, is a recipient of a kidney transplant himself as he has the same hereditary condition that killed his grandfather in the 1950s (pre-dialysis, pre-transplant days). Consequently, the work he does — raising awareness of kidney health (most people don’t know they have a problem until it’s too late), eliminating preventable kidney disease, working to increase the supply of donor organs through living donor transplant programs, and improving the lives of dialysis patients through clinical research — is very real to me. We got lucky. Nearly every week he’s got a story about someone who died waiting for a transplant. It’s heartbreaking, and a reminder to be thankful for every day and to give back however you can. By the way, have you signed your donor card??
As a matter of fact, I have. Thanks Mary, and may you and Polycom have a wonderful second year and beyond.