The news is just breaking about Cisco’s $3.2 billion acquisition of WebEx (that is some serious change). Cisco’s Chief Development Officer, Charlie Giancarlo, just posted some commentary about the deal.
It’s no secret that Cisco has been maneuvering – especially so in the last year – to move “up the stack”, into applications that take it from its traditional “plumbing” role, into things that matter more explicitly to business users. The company is striving to reinvent itself as a broader ITC (IT and Communications) company, or – even broader – as an “innovation company”, as Charlie put it in his post. In this regard, WebEx will be a nice addition to the portfolio.
Two aspects of this deal grab my attention, as they relate to the “hyperdisruption” megatrends IDC sees driving the future of the market:
- It puts Cisco right in the middle of the “Software-as-a-Service” world. According to IDC’s most recent report, WebEx is ranked #2 in the SaaS or “‘Software On Demand” market, right behind Salesforce.com. WebEx’s applications are currently centered around conferencing and collaboration, which is right in line with Cisco’s “Unified Communications” value proposition, and takes it where we see more of the market moving: to online delivery. But I like to look a bit beyond that: it’s intriguing to think about where Cisco could take the WebEx platform, perhaps evolving it as a broader business application and business services community. Indeed, WebEx has already oriented its offerings around some traditional business application and process domains (e.g., Marketing, Selling, Training, Customer Support). Cisco may not go there – worried about upsetting partners like IBM and SAP. But it’s intriguing to consider the possibilities nonetheless.
- It strengthens Cisco’s SMB portfolio. WebEx’s offerings are particularly targeted (although not exclusively) at the SMB market, which IDC has identified as a critically important market for the future of IT suppliers. IT spending in the SMB market is growing at almost twice the rate of the large enterprise segment, and – perhaps more importantly – it has become the test-bed for the development of new, disruptive online offerings at the center of the future IT marketplace. Vendors who don’t have a strong focus on SMBs will be marginalized in the next several years.
I’ll leave it to the IDC analysts who cover WebEx and Cisco more closely to pick apart the pros and cons [an IDC analysis just went up on idc.com], and to the financial analyst community to determine if the price was too high or not. But in these two important ways – moving its application portfolio online, and strengthening its hand in the SMB world – Cisco’s made a nice move.