The Tech Sector had a rough month in May. Kevin Kelleher of CNN Money asks (but doesn’t answer) the question Why Are Blue Chip Tech Stocks So Blue?
Exhibit A, of course, is the Facebook (FB) IPO, which in its first trading days has lost a quarter of the value that Wall Street’s supposedly smartest underwriters thought it was worth. Facebook has pulled down other recent web IPOs as well: Groupon (GRPN) is down 15% since Facebook listed and Zynga (ZNGA), which relies in good part on Facebook for revenue, is down 29%…Dell is down 23%, Cisco is down 19%, and Oracle (ORCL) is down 11%. Hewlett-Packard (HPQ), Microsoft (MSFT) and Intel (INTC) have all dropped 8%. IBM (IBM) is among the few tech giants that has outperformed the Nasdaq, falling a mere 6%.
UC isn’t much better. Polycom, Mitel, Aastra, ShoreTel, even 8×8 are all down over the past three months. I have just one theory to offer as an explanation:
One of the reasons the PC industry took off in the 80s was because IBM, HP, Dell, Microsoft, Compaq, AST, and so many more were all in agreement. Very few alliances exist within the UC industry – traditionally, the industry has always been independent, but UC systems are not deployed independently like the PBX was. Instead of working together, every vendor is a competitor. This lack of alliances are like a low tide, causing all boats to drop. Consider the following:
Microsoft: Microsoft used to be every UC vendor’s friend. Microsoft had the corporate desktop, and every UC vendor wanted to be the other corporate desktop – the phone. They all worked closely with Microsoft – from Active Directory to Exchange integration to click to dial. Nortel and Mitel both considered Microsoft a strategic partner. First Microsoft added voice capabilities to Exchange, butting up against the voice mail solution. Then Microsoft added PSTN to OCS and things really changed. Now the term is “co-opettion.” Which means we agree to conceal our hatred openly in the name of more sales. While the UC vendors are working to integrate with Lync, they never want to bring it up. Microsoft is building momentum around its own ecosystem known as the Open Interoperability Program.
HP: HP has been working hard on its mission of self destruction for over a year – but at one point represented the strongest alternative to Cisco – logically, any non Cisco UC solution was a perfect go to market partner. I know for a fact that Mitel and HP enjoyed a strong partnership. But HP seems to be alone now, or if with anyone – its Microsoft – but weakly. I don’t see HP mentioned much by the non Cisco UC vendors. Juniper and Polycom got some traction, but it seems like most of the UC vendors just don’t talk much about networking any more. Since Avaya acquired Nortel’s networking capabilities – HP and Avaya’s relationship lost some sizzle. HP exited (ran from) its video business. It was the last of three partners to license and manufacture Lync phones. It produces an SBA for Lync, but it’s so specialized and expensive that it isn’t a viable alternative to Audiocodes or NET. HP ended up acquiring 3Com, but showed no interest in its NBX line. I am not even sure if anyone wants HP as a partner at this point.
Polycom: Polycom was another logical partner for the non-Cisco UC players. After Cisco acquired Tandberg, Polycom became everyone’s best friend. Personally, I predicted Polycom would be acquired a few years ago – Siemens Enterprise was my guess and Avaya was also a strong contender too. But various reasons and personalities kept Polycom independent. Avaya has since acquired Radvision which filled the hole technically, but didn’t grab a huge base. Now Polycom is urgently working to adapt its business from big room systems to smaller software based solutions. Melanie Turek of Frost just recently wrote “So although Cisco and Polycom remain the market leaders, we expect other, less traditional vendors to disrupt the market in the years to come.” For alliances, it’s bad news as just about every UC vendor has now licensed or developed software based video solutions.
VMware: VMware is a logical partner as that company is growing in the datacenter, and most of the UC vendors are jumping on the virtualization bandwagon. VMware seems to be working closely with Mitel, but it isn’t an exclusive relationship. UC servers that support virtualization on VMware have grown from zero to almost all in the past five years or so, although huge differences exist among the levels of integration, what can be virtualized, managed, etc. The UC vendors are the ones having to educate and differentiate as VMware does the Neutral Shuffle.
IBM: IBM has failed at voice alliances with nearly every attempt. Its current strategy is to position Sametime as a front-end to any UC vendor – admirable for IBM, but not particularly popular with the UC vendors. Prior to this strategy, it was working closely with Mitel, ShoreTel, NEC, and Broadsoft with its Foundations product which it unceremoniously killed after major investment (especially from ShoreTel). It was the Foundations product that killed the Cube product which involved a partnership with Digium. For a fuller history of IBM and voice – see Can IBM Do Voice?. IBM is doing well, and now leads with its social networking solutions. Social, UC, and Collaboration will all merge (or collide) over the next few years so more drama to come.
The Carriers: The carriers were historically common partners for premises equipment vendors – and some still are. Both needed each other – equipment needs carriers and carriers need equipment. But that symbiotic relationship isn’t so healthy these days as most carriers and most premises equipment makers are getting into hosted solutions – eliminating the need for that partnership. In some cases, where the carrier is utilizing the equipment of a given vendor to create the hosted offering, a co-opettion state exists, but that’s generally only with one vendor. More likely, the premises and carriers are/or will be at odds with each other.
Mobile: The UC vendors are doing their best to ride the coattails of the rapidly growing mobile sector. But realistically, there just isn’t much to latch on to. Neither Apple nor Google seem serious or interested about the enterprise UC space. RIM is, but no one cares. There is nothing from the mobile sector that is pulling enterprise UC solutions. Many of the vendors are pushing FMC integrated solutions between cellular and wifi – ShoreTel, Cisco, Aastra have some compelling solutions here, but are generally on their own to educate the market – getting little assistance from the carriers or device manufacturers.
The Remaining Big Boys: I’ve covered most of the obvious players – but these four: Apple, Facebook, Google, and Amazon deserve a bit more. Apple and Facebook are bypassing enterprise IT. Apple is selling devices to enterprises largely though its retail outlets and Facebook is talking to enterprise marketing departments. A UC enterprise focused partnership with Facebook or Apple seems unlikely at best. Google, as mentioned above, doesn’t seem too serious about enterprise UC – though could shake things up if it so desired. Siemens Enterprise has done an impressive job integrating to Google Apps, but it’s unlikely Google has noticed. Amazon could be a strong partner as the company is targeting enterprise IT and most UC vendors are embracing private clouds. Siemens Enterprise had a head start here years ago, but nothing ever came of it – presumed long abandoned. Amazon could be a strong partner, but it is likely it would follow VMware with the Neutral Shuffle- unless it feels compelled to specifically align against Microsoft.
Sun/Oracle could be a compelling partnership. Mitel had strong integration with the Sunrays and supported its server software on Sun Servers, but Oracle wasn’t too interested post Sun acquisition. Salesforce.com could be a compelling alliance partner, but it is A) primarily focused on SMB (don’t say that to them) and B) not likely to align or promote a premises based solution. The company does offer a rich CTI toolkit, and several providers get some love on its site, but it is not exactly a who’s who list of UC premises players.In addition to several UC hosted providers, Salesforce.com actually integrates with Apple’s Facetime for video communications.
Instead of strong go to market alliances, we have all competitors – competing, obfuscating, and use FUDing solutions that don’t have a self interest alliance. The customers are caught in the crossfire and combined with a weak economy makes the existing TDM look pretty darn good. Nobody gets fired for stretching the life out of an existing asset when cash is tight.