Cisco ups ante with Webex buy

Cisco’s sparring with Microsoft over the unified communications space has reached new heights with its latest acquisition. Gartner analyst Neil Rickard talks to IT Weekly about the implications.

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By  Administrator Published  March 21, 2007

Cisco’s sparring with Microsoft over the unified communications space has reached new heights with its latest acquisition. Gartner analyst Neil Rickard talks to IT Weekly about the implications.

With its US$3.2 billion purchase of web conferencing solution provider WebEx, Cisco has turned up the heat in its battle with Microsoft for leadership in the unified communications space.

The networking giant announced last week its intention to buy the US web conferencing company in a cash deal that is expected to close later this year.

WebEx is a subscription-based web service, which helps corporate customers to hold meetings and exchange information over the web.

The purchase is a significant one for Cisco, which is currently seeking to move beyond its core business of switching and routers, being its biggest since its US$6.9 billion buy of cable television technology company Scientific Atlanta in 2006.

By acquiring WebEx, the leading company in the web conferencing market, Cisco has leapfrogged rivals Microsoft and Citrix, significantly strengthening its position in the unified communications space, a key focus for the company.

“The number one issue will be about collaboration. Collaboration is about unified communications and how to communicate with people in ways that they are most comfortable with,” Cisco chairman and CEO John Chambers said at the VoiceCon conference held this spring in Florida, US.

“It undoubtedly will intensify the competition,” Gartner Research vice president Neil Rickard said. “There are certain areas that are Cisco’s home territory and certain areas that are Microsoft’s home territory, but there is quite a bit of space outside of that which is up for grabs and each side would like to grab it to bolster its position so this certainly puts Cisco firmly in the collaboration and web conferencing space in a big way.”

What is unusual about the purchase, Rickard said, it that it takes Cisco outside its traditional business model, something the networking vendor has so far been reluctant to do despite venturing into new business sectors recently.

“This is a different business model and I think it shows how urgent Cisco believes the whole unified communications space is and its need to move quickly to seize territory in this space as Microsoft comes charging in the opposite direction,” Rickard added.

Cisco and Microsoft have been competing for some time for market share in the unified communications arena.

Just this week, Microsoft announced plans to launch a computer controlled phone system, Response Point, targeted at the small business sector.

And this follows last week’s announcement that it had bought voice recognition technology company Tellme Networks.

The software giant has also been making its own overtures into the telephony market. It revealed towards the end of last year its plan to develop its corporate instant-messaging software into a program that can also manage telephone functions.

Cisco, meanwhile, bought XML gateway provider Reactivity and social networking company Five Across earlier this year. It also unveiled its TelePresence solution, a remote communications tool enabling virtual meetings, in October last year.

The competition between the two technology giants is definitely at fever pitch at the moment, Rickard said.

Rather than there being an outright winner, however, the battle will be more about how the collaboration and communication tool space is carved up, according to Rickard. “There is room for both players [in the market],” he said.

Cisco’s purchase of WebEx may, however, complicate its relations with another player, IBM, Gartner warned in an advisory note.

The networking vendor recently said it would resell IBM’s SameTime Web-conferencing product – which is competitive to WebEx – and agreed to work jointly with IBM in developing an Eclipse-based unified communications client, which would compete with a similar initiative currently underway at WebEx.

Another complication of the deal, according to Gartner, is WebEx’s integration with Cisco’s other web-conferencing products. Cisco also owns the Unified MeetingPlace web conferencing solution.

Gartner said it expects Cisco to merge the strong voice-conferencing capabilities of its Unified MeetingPlace’s web conferencing product with WebEx’s superior web conferencing.

On the plus side, the purchase will enable Cisco to move into the Saas (software as a service) model, Gartner said.

WebEx is known for conferencing but has been broadening its position to serve as a SaaS platform for other collaborations services (such as e-mail, team spaces and instant messaging) and for third-party application providers targeting the SMB (small to medium size business) segment.

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