Cisco -- particularly since their acquisition of Selsius -- has had a profound effect on the entire CommFusion industry. By and large, the response has been positive: an up-tick in excitement, increase in valuations of companies regarded as likely targets for acquisition, and an accelerated shift towards convergent thinking at all points. After all, if Cisco is there, this stuff must be real. Right?
Unfortunately, there have also been a few fumbles -- by Cisco, and by other players responding to the "Cisco Effect." Lucent, for example, seems to have been moved by Cisco's market entrance to pre-announce their IP Exchange, making later delays of release seem more significant (and perhaps, more unexpected) than they really are.
Cisco, too, has taken a long time making good on plans it announced a while back. When Cisco acquired Selsius in late 1998 they claimed they would have everyone on the Cisco campus converted to an IP LAN voice solution by the first half of 1999. By mid 1999, the plan had changed to full deployment by the end of 1999. It is now early 2000: While Cisco is finally making impressive progress, they are still a far cry from becoming a global proof-of-concept for the technologies they're selling.
Meanwhile, Cisco has shown their marketing muscle to some degree -- in some cases, convincing customers to put off acquiring conventional PBX solutions, in favor of waiting for Cisco's promised offerings. Lucent recently announced lower-than-expected earnings. Could part of this have been due to the "Cisco Effect?"
During the past year and a half, Cisco has continually repositioned and pushed off their promise for delivering CommFusion solutions. While they sold 40,000 IP telephone sets in the calendar Q4 of 1999, those sets will not be compatible with their next generation product. That's why many of us are hearing rumors that Cisco is encouraging customers to delay investments in next generation voice solutions. Many of the systems Cisco is selling (and giving away) are for evaluation.
Still -- if Cisco taketh, they also giveth away. Most of the new players in the CommFusion world have benefited, both from Cisco's influence, and from Cisco's delays.
Challengers Heat Up
Companies like Shoreline Teleworks and Sphere Communications are getting some significant account wins, these days, that might otherwise have gone to Cisco. 3Com/NBX continues to expand their market lead and gain valuable distribution partners.
I recently spent time researching the primary considerations companies have when acquiring CommFusion solutions. The most important thing customers look for is reliability. And as it happens, buyers who have looked at Shoreline's stuff are convinced of its solidity -- they're not as convinced that Cisco's stuff is rock-solid (yet).
Many of Shoreline's wins come from technology-savvy dot.com start-ups like Responsys.com and TheSupply.com, along with more traditional customers like Carrington Laboratories, Coastal Products (now Altivia), Cunningham Communica-tions, and NightFire.
The second consideration is scalability. While Cisco talks about scalability, they have yet to deliver. In the meantime, the challengers are all making major progress: Shoreline, Sphere, 3Com/NBX and Tundo are all delivering scalable solutions today.
Manageability is the third consideration. All the vendors have browser-based management but some are clearly better then others. Shoreline's model of selling direct has driven them to make their system simple enough for an end user to set up and manage with minimal training. If you go to Shoreline's web site at www.shoretel.com/radio/index.htm, they have a radio interview with Karen Castagnera, director of web operations, responsys.com. Karen gives a great testimonial on how easy the Shoreline system is to manage.
Sphere communications has had their fair share of recent successes as well -- gaining business that might have gone to Cisco, had schedules worked out differently. One of the more interesting is the Hacienda La Punta School District in East Los Angeles. In this case, Cisco is providing the backbone ATM switches and Sphere is providing the IP voice/data/video solution to each classroom, an obvious loss for Cisco, who are not accustomed to half-wins.
As an industry consultant, I find the "Cisco Effect" extremely exciting. If you look at how Cisco has entered new markets, they have traditionally hedged their bets by acquiring multiple companies in the same space. Perhaps they'll do so, soon, with LAN based IP telephony: backing up the Selsius purchase with technology from one of these successful smaller players.
Jim Burton is president of CT Link, an independent consulting firm, serving clients in the CommFusion space. He's also Chairman of Circa, an organization that engineers IP phones and brokers partner relationships among IP vendors. And he currently serves as Vice-Chair of the CTI division of the MultiMedia Telecommunications Association (MMTA). He can be reached at 707-963-9966 or via fax at 707-963-9944
