Cisco (NASDAQ: CSCO) channel partners may be excited about the networking vendor’s acquisition of video conferencing stalwart Tandberg (OSLO: TAA.OL) and the addition of that company’s technologies to their portfolio of products to sell, but Tandberg reseller partners may not get as sweet a deal. Cisco announced plans this week to acquire Oslo, Norway-based Tandberg in a deal worth $3 billion. Tandberg’s video conferencing line of products spans the enterprise and lower-end of solutions in the space while Cisco’s Telepresence offering has gone after the very high-end of the market and its WebEx solution aimed at low-end desktop collaboration.
That means that Cisco channel partners will now have a much broader line of products to sell into many more businesses – something that many view as a big plus.
“To integrate Tandberg’s products so they work cohesively with everything Cisco has will be huge up-sell opportunity for us,” said Mark Hilz, president and chief operating officer at INX Inc., in Lewisville, Texas.
As it turns out, INX, a Cisco Gold partner, already sells Tandberg solutions. But what excites Hilz about the Cisco alignment is the expected integration of Tandberg’s products with Cisco’s broader unified communications platform. Tandberg fills in a gap that’s been missing.
“This brings video to the entire UC and collaboration offering, not just at the high end,” he said, referring to the fact that other than the very high-cost Telepresence offerings, Cisco does not have much to offer – nothing, really – to the midmarket.
While video conferencing technology has been around for years, its recent market penetration has increased for a few reasons – companies have sought to cut down on travel during the recession, and video conferencing over public networks has made the technology more accessible to a wider range of companies.
Cisco partner John Breakey, CEO at UNIX LUMIN in Oakville, Ontario, says the acquisition of Tandberg and the eventual integration of its solutions into Cisco’s portfolio will push video conferencing beyond its current uses something more universal to all users.
As Breakey sees it, executives using telepresence in a boardroom should be able to be simultaneously connected on the same session with colleagues in a small conference room and another set of users simply sitting at their desks.
“Everybody in an organization should have access to video conferencing,” he said, adding that the Tandberg portfolio of midrange solutions will help bridge the gap Cisco has between low- and high-range solutions today. “I don’t see video conferencing as a room-to-room function. I see it as anywhere,” he said.
Cisco clearly voted with its wallet, bringing even more market attention to the technology which has already been gaining momentum.
But Tandberg video conferencing competitor LifeSize notes that Tandberg, which is a strong channel company, has provided its channel partners with margin points in the 20 to 35 percent range. LifeSize CEO Craig Malloy wonders if Cisco will continue with that sweet deal for Tandberg partners. And, not surprisingly, he welcomes discussions with Tandberg resellers who are interested in selling LifeSize’s video conferencing products.
“We do compete against Tandberg on a regular basis, most often in large enterprise accounts,” says Malloy, whose company’s products start at $2,500.
Malloy also notes that Tandberg had ongoing relationships with several Cisco competitors. For example, Siemens just announced an OEM deal with Tandberg. And HP also has a strong reseller relationship with HP.
“All of those folks wake up every day and go to battle with Cisco,” he says. “Their customers are looking for video communications solutions.”
The Cisco acquisition of Tandberg will likely change those relationships and the landscape for video conferencing partnerships.
“Will they cede the video communications market to Cisco or would they partner with another company or feel like they need to own that technology in-house?” asks Malloy.
Former Tandberg CEO and Cisco executive Andrew Miller, who joined Polycom as its new sales chief three months ago is also planning to go after Tandberg's former strategic partners.
"Yesterday, cisco and Polycom and Tandberg were interaoperating with Microsoft OCS and IBM Sametime and with HP," he says. "Now cisco becomes a very strong competitior to several of those companies. Now we are looking at how does Polycom best position itself to holistically compete with Cisco. This deal changes the landscape of strategic partners and the landscape of the competitive marketplace."
And observers are now asking whether Polycom (NASDAQ: PLCM), which has products that address both the video conferencing and voice markets, may be the next acquisition target for a video conferencing-minded cash-rich company. Polycom declined to comment on any merger and acquisition activity. And Polycom recently touted a new high-touch sales strategy to beat Cisco and Tandberg.
Is LifeSize also a target?
“We talk to lots of people all the time about lots of different things,” says Malloy. “There’s really been an increased interest in video communications over the last year. There are a lot of interesting partnership opportunties at various stages that I can’t tell you about today.”
The Cisco acquisition of Tandberg is expected to close during the first half of 2010. Cisco will create a video conferencing division, led by Fredrik Halvorsen who now serves as CEO of Tandberg.
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