Two Different Pictures

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A few months ago, highly respected and legendary prognosticator Elliott Gold predicted that Vidyo would pass Polycom. At the time it didn’t seem particularly reasonable. But as Elliot says “the trend is clear.” My reservations with his prediction were that Vidyo was so much smaller and that sooner or later Polycom will figure out software.

But I’m coming around to Elliot’s line of thinking, or a least his conclusion. Let’s look at some recent events.

Vidyo

I posted last month that Vidyo had yet another banner year. “Vidyo announced portions of its 2012 results including an increase in billings of 68 percent.” This is in a time that Polycom would like us to believe the market is flat.

Today, Vidyo announces another successful round of funding (Vidyo is a private firm). The firm “announced a $17.1 million round of financing, bringing the total amount of net capital raised by the company to $116 million since its founding in 2005. The financing was facilitated by strong support from inside investors and the addition of several new investors.”

At Enterprise Connect, Vidyo took its software based-solution a bit further by announcing Virtual Editions (VE) of its VidyoGateway and VidyoPortal. The company intends to lower the price of video conferencing to the price of audio conferencing. That was laughable a few years ago, but they just might be able to do it. One trick up its sleeve is ‘follow the sun’ licensing. Instead of idle hardware ports on an MCU during off peak hours, the Vidyo licenses can be moved to where they are needed.  Vidyo is offering a software-based solution, that can be virtualized, and efficiently implemented across a global network.

Vidyo’s success has been tied to SVC which is being embraced across sectors. SVC just wasn’t there a few years ago – nor were the networks and endpoints. The only thing holding back SVC now is the installed base of hardware that doesn’t support it. Another proof-point for why invest in hardware when software can do the job.

Polycom

Four months since unveiling it, Polycom has announced general availability of CloudAXIS. I do like the name, but it amounts to a universal IM client like Pidgin or Trillian. There’s nothing wrong with such a concept, but I feel Polycom is misleading us with its significance. Polycom bills it as a way to eliminate islands, but its key value is enabling a conference URL to be IM’d from a single client to users on multiple IM networks.

Most send meeting URL links via an appointment or email message. Supporting URLs to join a conference – be it IM, email, or calendar – is hardly breaking down the silos.
Earlier this month, Polycom announced its new RealPresence Group 700 solutions starting at $16,999 with multipoint licenses starting at $3,099. This is what I call “follow the moon” or looney. The good news is

Polycom has embraced SVC. The bad news is a bit of misdirection with “standards-based interoperable SVC.”  Admittedly, SVC interoperability is a kludge, and anyone that solves it should be commended. Polycom claims to deliver the “highest multi-vendor interoperability,” yet can’t cite a single SVC interoperable vendor.

The near-term video future is clearly SVC. Polycom even said so in 2010 when it announced its SVC plans. But it’s taken until 2013 to deliver products which are now competitively behind. Vidyo is on its third generation of “Adaptive Video Layering” and holds numerous SVC patents. Polycom finds itself in the unfortunate position of confirming its competitor’s strategy from behind.

I’ve always been suspicious of Polycom’s relationship with Microsoft. Polycom was the best friend of every UC vendor not called Cisco. Cisco’s one-two punch of VoIP and video resulted with numerous UC and video alliances being formed to the benefit of Polycom. When Polycom aligned itself with Microsoft, there was a giant sucking sound in the partnership section. However, It “seemed” I was wrong. Last January, during the Q4 results conference-call with analysts, Polycom CEO Andy Miller praised the Microsoft relationship. He said:

Turning to Strategic Alliances, our relationship with Microsoft continues to be a true sales differentiator for our company, consistent with recent Microsoft Lync market momentum, we experienced very strong double-digit growth in Microsoft-related bookings in 2012 versus 2011…We continue to work closely with Microsoft to make voice and video communications a pervasive, seamless experience of complementary solutions in the enterprise, driven by Skype-Lync Federation and combined with Lync to Polycom interoperability. …we expect partner related revenue to grow in 2013, especially in the latter half of the year, driven in part by the strategically significant alliances such as Microsoft.

In February, at the Microsoft Lync conference, Microsoft announced its new Lync Room Strategy (LRS). LRS is Microsoft extending Lync into high-end conference rooms. Up until this announcement, Polycom was the primary go-to-market video partner for Microsoft.  With LRS, Microsoft announced three new partners. Then, at Enterprise Connect in March, not only were there no signs of Lync in the Polycom booth (no people to block my view either), but Microsoft actually had LifeSize in its booth. During its Keynote, Microsoft showed seamless integration with Smart for room based video and collaboration. There were no visible signs of a strategic Microsoft/Polycom partnership (I did find a single VVX500 IP phone in the Microsoft booth, oddly none of Polycom’s CX phones made for Lync).

Even worse, Mitel has cozied-up with Vidyo based on their virtualization synergies and Avaya, NEC, Siemens, and ShoreTel didn’t have any Polycom gear in their booths either (they have in the past). Even Digium which always have Polycom phones it its booth is now featuring its own phones (Digium did not exhibit at EC13).

Two Different Pictures

These two companies are providing us two very different pictures of the industry. For the record, I’ve always liked Polycom. I have some of their products on my desk and have for years. But I am getting concerned. Concerned about the misdirection in the announcements (always a bad sign), concerned about talent leaving, concerned that their partnerships are not as strong as they once were, and concerned that they are too focused on hardware in an age of software.

Dave Michels