Cisco guns for Microsoft in collaboration market

As Cisco Systems adds more functionality to its online WebEx conferencing service, it's ratcheting up the competitive pressure against partner and rival, Microsoft.

Cisco held a press event Tuesday to discuss how it plans to add more to its WebEx service. As the company includes more software into the conferencing service, it is competing more intensively and directly with one of its major partners, Microsoft.

"As Cisco expands this business, the co-opetition between Cisco and Microsoft will only increase," said Zeus Kerravala, an analyst with Yankee Group. "Microsoft is strong on the desktop and Cisco is taking a lot of these software functions into the cloud."

WebEx is a leading Web conferencing service that Cisco bought in 2007. This was Cisco's first foray into offering a service. And the product has been very successful. As a result, the company has used the service as the foundation for its emerging big business collaboration tools. Cisco has also recently bought two other companies that it plans to feed into the service.

Primarily, Cisco is adding more unified communications functionality to the service it calls WebEx Connect. This is an extension of the Web-based video conferencing service that also includes instant messaging and presence. Using technology from Jabber Cisco will add even more presence functionality. And through the acquisition of PostPath, it will add e-mail into the mix.

Cisco already competes with Microsoft in the unified communications market. In fact, the two companies are strong rivals here. But Microsoft has had an advantage over Cisco with its strong presence on the desktop.

Now Cisco is taking these services into the "cloud," where the company can leverage its existing expertise with WebEx to provide a virtual solution for its corporate customers.

But Cisco isn't just stopping with unified communications. The company is also in the early stages of offering document, spread sheet, and presentation creation and sharing as part of WebEx. These are very clearly areas where Microsoft has a strong foothold and a very strong business. The company's Office suite, which includes Word, Excel, and PowerPoint, is part of its business productivity portfolio. And Microsoft makes a lot of money from this software, about $60 billion of its sales during last fiscal year came from these products.

But Alex Hadden-Boyd, director of marketing for the collaboration software group at Cisco says that Cisco has no intention of going after Microsoft's core Office business. Instead, she said that Cisco is more interested in providing collaboration tools online that groups can use to create and share documents, spreadsheets, and presentations.

"If you look at WebEx Connect today, we already have the beginnings of this," she said. "We have team spaces with shared files and wikis. So we are already well on our way down that road. But we are not focusing on productivity applications or individuals such as re-creating Excel or PowerPoint."

"We are using our existing resources and we have no intention of creating the next Word application for individuals," she added. "We simply are trying to make it easier for work groups to share documents in a team space."

Yankee Group's Kerravala agrees that it doesn't make much sense for Cisco to try to compete against Microsoft's Office products at the desktop level.

"Cisco is not going to take on Microsoft head-to-head on the desktop," he said. "And the reason is simple. They know they'd lose. But Cisco has invested in the cloud and service technology that allows them to approach it differently."

That said, Hadden-Boyd said she does see competition increasing between Cisco and Microsoft in the overall collaboration market. She said the two companies will continue to compete aggressively in collaboration software such as IM and conferencing. Microsoft already offers IM and conferencing and is working on Web-enabling its Office applications.

But Cisco could some day compete head-to-head with Microsoft's email Exchange platform with its new e-mail service from PostPath.

"We could see that as a possibility," Hadden-Boyd said. "We could see businesses using PostPath for e-mail instead of Exchange."

As for the online collaboration market, Cisco and Microsoft aren't the only ones developing solutions. Google also offers document creation and sharing online. But so far those services haven't gotten much appeal outside of the individual consumer market. And it has yet to take shape in the enterprise market.

"Google is the wild card here," Kerravala said. "People are expecting Google to get into the enterprise market. And I see it possibly taking off with a younger kind of worker. But Google has never monetized anything outside its advertising revenue. So it will be interesting to see."