Newsmaker: How WebEx went the Cisco route

In Silicon Valley, being at the top of your game in a hot market means you can pretty much name your price. At least that's what seems to have happened to Web conferencing company WebEx.

Last week, Cisco Systems said it would pay $3.2 billion for the company. Cisco plans to integrate WebEx's online collaboration and meeting services into its unified communications business. Subrah Iyar, chairman and chief executive officer, has been with WebEx since the beginning as a co-founder. And through the years, he has established the company as a leader in the Web collaboration market, fending off tough competitors such as Microsoft.

WebEx had already been partnering with Cisco to integrate voice over IP capabilities into its Web conferencing services. So when potential suitors came knocking on WebEx's door, it made perfect sense for the company to talk to Cisco about a deal.

Cisco, which has successfully integrated established businesses from two other large acquisitions, Linksys and Scientific-Atlanta, were more than happy to talk, Iyar said. And the rest, as they say, is history.

CNET News.com caught up with Iyar by phone to get the skinny on how the acquisition came about, and what the future looks like for WebEx under Cisco's umbrella.

Q: How do you see WebEx fitting into Cisco's larger strategy?
Iyar: Cisco has clearly said they want to be a leader in unified communications, and WebEx is a killer application for unified communications. It brings data, voice and video together in a way that users need to do business over the Internet. And it makes Cisco a one-stop shop for collaboration.

We didn't come to this decision from a position of weakness, as you can tell from the premium that was paid.

WebEx is already the market leader in Web conferencing, but will being a part of Cisco help you compete against Microsoft?
Iyar: We don't really run into Microsoft much. Regardless of what their marketing says, Microsoft's product is very hard to use between companies over the Internet. It's used more for intranet conferencing.

But now that Microsoft is integrating more unified communications with its Live Meeting product, were you finding it difficult competing against them?
Iyar: No, we haven't found it difficult to compete. In fact, our business has accelerated over the past several years since Microsoft acquired PlaceWare. And we've continued to grow. Having said that, we needed to think (about) where is the game headed five years out. And we think Web conferencing is going to be part of a category of services, and people will look for a complete suite of services.

So were you thinking that as Web conferencing became an application within unified communications that it would be difficult for WebEx to assemble all the other pieces?
Iyar: I wouldn't say it so harshly, that we didn't think we could pull it off on our own. But several companies approached us. And when someone walks into a room and they have a good vision of the future, and there are some synergies, we have to think about what is good for shareholders, employees and customers. It's a judgment call. We didn't come to this decision from a position of weakness, as you can tell from the premium that was paid.

Cisco agreed to pay $3.2 billion for WebEx, about $2.9 billion when you consider the cash you guys already had. That's a lot of money. Google paid $1.6 billion in stock for YouTube. Do you think you're twice as valuable as YouTube?
Iyar: YouTube had no revenue and no business model. And now I hear Google is being sued by everybody. We are a leader in our space, and we've demonstrated that we can go up against strong companies like Microsoft. We're also in the business marketplace, which requires a different kind of discipline.

If you look backward at our history, people can debate whether it was pricey or not. But it's not about looking backward. It's about looking forward. And my hope is to demonstrate that we will prove that Cisco got us cheap. People will say they were smart to acquire us when they did.

You mentioned that other companies approached WebEx. Who?
Iyar: I can't name them. But I can tell you it was more than one that expressed interest. And we had to think: At what point do we go it alone? Or do we find a partner? And then we had to define what criteria we were looking for in that partner.

Is that when Cisco came knocking on your door?
Iyar: I wouldn't say that Cisco came knocking on our door. We've always had a dialogue with Cisco. We were working with them on integrating voice over IP and other unified communications with WebEx. So we were constantly talking to them.

We actually went to Cisco and let them know there were active parties interested in us. They were surprised. And they said, "We didn't realize you were open to considering that." Once they realized we were interested, it all came to a head. The active interest of other companies definitely accelerated things.

More Newsmakers

[ktrueman]

What about Adobe?

You have to figure that Adobe was one of the interested parties, what with the addition of collaboration features to Acrobat, as well as the increasing use of Flash-based environments for collaboration...

Would have been a nicer fit culturally with an application than with Cisco that is a hardware shop...

[Bevo4138]

Better Fit with Cisco

Cisco is a networking company. WebEx is a communication-over-network company.

I use WebEx frequently with my company, and more often than not, we use the "share desktop" feature to look at other apps. Recording meetings is also great for training purposes. So I would think that being the best on the networking aspect is the most critical, where actual Acrobat type documents and Flash animations are distant secondary and tertiary features.

[Schratboy]

Best fit? More cash.

Cisco continues in its pursuit of end-to-end networking, fork-lift network replacement and promoting never getting fired for buying their stuff.

I think that beyond a certain point all these products and services being bundled together can actually deliver less value to the client. One-stop-shopping aside, I think it breeds customer laziness, not that there aren't raft loads of lazy IT administrators, such that if every conceivable product under the sun is right there, what incentive is there to do the right (and objectively best) thing for the company?

[Dean_Ansari]

Webex is the market leader! what about eAuditorium

Try using Webex and then try using eAuditorium and you will see that whereas Webex is a nightmare to use, eAuditorium is a joy.
Because the user interface of Webex is so unfriendly & getting the Voice to work
is a total headache. And on top of that you pay more than $5,000 per month for a 100 Seats web conferencing through webex.
OTOH, eAuditorium is a joy to use. Because it has all the advanced web conferencing features and its user interface is so easy to use & just feels right.

On top of that eAuditorium is for free, we just pay for support. In fact a 100 eAuditorium
is only $995 for installation support & plus a mere $149 per month for ongoing support,
which is optional. Compare that to more than $5000 per month to Webex for same 100 seats.

So how the Hek can Webex claim to be the market leader!

In case, you want to try eAuditorium you can go here:
http://www.netdive.com/indexea.htm

Cheers :)

[caudio_roma]

Couldnt agree more

We run a Forex trading web site from a small office here in Berlin where about 50 of us from around the world continuously trade currencies.
We needed a web conferencing solution that had great Voice conferencing for free and easy to use Application Sharing.
We 1st tried webex and it nearly drove us insane set aside costing us close to $3000 per month. Then we tried microsoft's live something and
it was even worst than webex and support was even worst.
Then we switched to eauditorium and we couldnt be happier since:
Great voice conferencing, easy to use App sharing and plus it costs us about $1K to install and we pay like $99 per month for support.
I highly recommend eaudo to all, if you want great web conf & low low prices.

[mn39202]

This story really highlights a failure on the part of Microsoft

The only reason that web-based conferencing sites are popular is that NetMeeting isn't secure enough to meet the requirements of most corporate IT departments. What a waste to pay for a service like this when Windows already has a perfectly good tool built in.

[Manfred Levy]

NetMeeting cannot handle more than 2 or 3 people!

Are you serious?
Netmeeting is fine for small meetings between 2 to 3 people, but a desktop PC & its typical bandwith are not setup to handle 50 in a web meeting, set aside 500, set aside 5000 which is our need. For large web conferencing needs you need a server based solution hosted on a professional ISP (datacenter) where the bandwidth is Upload & Download on a 1000 Megabit switch and not on a pathetic DSL or Cable modem at 1Mb/Sec. And there are many other reasons you could not hold a meeting of more than 2 or 3 via Netmeeting set aside the fact that Netmeeing is not for Web meeting, which is what Web conferencing is about. That is you just go to a web site and can instantly enter a meeting without having to download a software such as netmeeting.

[kathy_torez]

Same here, I think eauditorium is the best 2

We too tried many different web conferencing providers to offer Distant Learning for our online university here in Munich, including webex, and finally settled on netdive's eauditorium.
I just wished we had gone with eauditorium from the start, would have saved ourselves lots of money but more importantly would have saved on classes ruined and students lost the
1st year when we tried other web conferencing providers.

Beside eauditorium having best features and being superbly user-friendly, what I specially like about eauditorium is that we got its source code so we can change it's features as we want, saving us ton of money from being locked into a proprietary solution.

So i dont see either how the reporter is claiming "webex is market leader in web conferencing",
from my experience and everyone I have talked to eauditorium is clearly the best
web conferencing solution. I mean with web eauditorium you get the best web conferencing
technology, best user interface and it is free, you just pay for support.
Come on! Give us a break!

[Manfred Levy]

My Vote goes to eAuditorium as well

I agree with assessment of some others here that eAuditorium is by far the best web conferencing solution. Sure in some instances webex & livemeeting are better, but when you want the best web conferencing features, total control of the web conferencing and very low costs & the source code then eAuditorium is hands down the market leader.

I say this from our experience which I will share with you:
We offer online classes to about 5000 students.
We needed a web meeting solution that would integrate with our SQL backend and our
JSP generated front end. We also needed access to the sources code so we would not be held hostage to any software company. And we needed it to be low cost too.

We looked into Webex and the cost for a 5000 Seat was in excess of $0.5Mill up front and
$100K per year in support, Oracle was close to $1.5Mill upfront, Livemeeting only offered
hosted solution. And none of these 2 offered the source code. OTOH, eAuditorium is free to license and we paid for support only which cost only $50K in annual support for 5000 seats and we got the source code for free too under netdive open source license.

Now you tell me: how the hek can webex claim that they are market leader!
For me when it comes to database MySQL is best choice, when it comes to OS Linux is best choice and when it comes to web conferencing eAuditorium is the best choice.