The Innovation Leak

by Dave Michels

Cisco recently paid $700 million to acquire Acano. It’s a familiar story:

Big company fills gaps in portfolio by acquiring growing upstart.

It’s a happy story that rewards the innovation of the smaller firms. But in this case, it’s a story that raises questions about retention at Cisco since Acano was largely comprised of former Cisco employees.

Tandberg was a highly innovative company. The Norwegian company started in radio, pivoted to reel-to-reel tape systems, and then after a bankruptcy in 1978 remerged as as a data company (Tandberg Data) that offered computing storage solutions. Its final evolution transitioned the engineering firm into video conferencing. It did well competing primarily against Polycom, Cisco, HP, and VTEL.

When Cisco acquired Tandberg in 2009 it took out a major competitor, leaving it to Cisco and Polycom to duke it out as the market leaders of enterprise video. Competitive pressures usually stimulate innovation, but these vendors were too preoccupied with each other. Some employees saw an opportunity to better address the needs of the customer.  

The biggest recent innovations in enterprise video conferencing came from the smallest companies: Acano was determined to eliminate the gulf between audio and video conferencing and extended an olive branch to Microsoft. Pexip was focused on the universal MCU. Blue Jeans figured the MCU was best delivered as a service, and Zoom also believed the cloud made sense, but focused on user experience. All of these companies were founded by employees that cisco got through acquisitions.

Acquisitions can fill holes, but can they stimulate innovation? It’s a deceptively simple question. Can entrepreneurs ever be happy at a behemoth? After this $700 million lesson it might be something Cisco asked, and perhaps that’s why the acquisition details specifically earmarked “equity awards and additional retention based incentives for Acano employees.” Retention in technology is especially hard when the employees are millionaires.

We will have to revisit the retention question in a couple of years. It’s safe to assume that Cisco wants to innovate. The Collaboration Summit is around the corner and all eyes will be on Cisco’s most recent acquisition of Tropo. In addition to Summit announcements, I’ll be curious if the Tropo team is still intact.