Cisco video conferencing: Now in 75% of the Fortune 500April 7, 2011: 3:31 PM ET
As John Chambers rebuilds Cisco, enterprise video conferencing is probably one business he won't have to muck with. Now, about Umi...
FORTUNE -- Over the past few years, networking giant Cisco Systems (CSCO) has aggressively entered markets as diverse as camcorders, set-top boxes and videoconferencing tools. The result? A company that many say has lost its focus. That's partly why, earlier this week, CEO John Chambers sent out a company-wide memo acknowledging that the tech company has "disappointed our investors" and "confused our employees." He also said Cisco would "address with surgical precision what we need to fix in our portfolio."
Cisco's wide portfolio definitely has its share of clunkers. But the company's high-end videoconferencing solution, TelePresence, has amassed an impressive customer base of banks, governments and multinational technology companies. I recently caught up with Guido Jouret, CTO of the company's Emerging Technology Group, to find out how TelePresence (and its not-so-promising consumer-facing cousin, Umi) is faring. Here is an excerpt from our conversation.
Fortune: Can you give me a sense of how TelePresence units are selling?
Jouret: About 85% of the Fortune 100 have deployed Cisco TelePresence, and 75% of the Fortune 500. TelePresence growth numbers are between 35%-50% per year, so it's definitely helping Cisco overall in terms of growth. We're not in this business so that we lose money on the video but make it up on the routers. That is not the intent. We think these are interesting, high growth markets in their own right. It just so happens that for every dollar we sell of video endpoints we typically will also sell between $3-$5 of networking. And that's fantastic. TelePresence drives synergies back to our core business but it is also in itself a lucrative market.
You recently announced that TelePresence and Umi [a cheaper videoconferencing product for consumers] will be interoperable. Was this the plan from the get-go?
The hardware and software for Umi was actually designed by a subset of our business TelePresence team. But initially we thought that these would be separate markets with separate requirements. We thought that for the consumer version it's all about the video, not the document sharing. And that for businesses that would be a bit of a showstopper -- if I can't show you my spreadsheets, that's not going to be feasible. So given that there were some limitations and things we couldn't offer on the consumer side we initially thought these would be separate markets. But our customers basically said no, you have to make these things work together, so that's what we announced just a few weeks ago. But TelePresence and Umi were designed from the get-go with the same basic capabilities. So when people said they want interoperability we didn't have to redesign anything. We just basically flipped the switch in our cloud.
Umi was branded as a consumer product. Were you surprised to see demand coming from the business side?
I think we underestimated the demand from corporations who wanted to have a consumer offering. Originally, we thought people would want the exact same feature set in the office and in the home. But a lot of enterprises have a significant population of workers that are working from home either full-time or part-time and for them this makes sense. They also use WebEx so they can use Umi for video and audio and launch their collaboration tools to share documents. The other thing we're hearing is that there's a lot of interest from small and medium businesses.
You recently dropped the price of both Umi units and subscription fees. That's good for consumers but there's also been criticism that this is a sign Umi hasn't been selling well. Why did you drop the price?
We dropped the price of the cost of the unit by $100 and we also reduced the subscription fee from $25 to $9.99 per month. Fundamentally we think that we can grow this market more if we make it more affordable. It's always this way if you think about all the consumer technologies, like game consoles and PCs. Prices typically go down, they don't go up. You take advantage of volume in components and redesigning for lower cost -- we're going to take advantage of the same dynamic. With consumers it's all about getting to the largest possible numbers first. Our ultimate goal is not that Umi itself from a device perspective is going to be a big money spender for Cisco. What we want to do is to deliver this disruption in services. We want high-defintion video to be available in your home. We want to enable a platform for next-generation services. So part of the price drop is just to get to a larger number of deployments. We've gotten criticism for the price but we haven't gotten any criticism for the quality or simplicity of the product.
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