Cisco’s Collaboration Sales Drop 13 Percent: Is a Strategy Change Afoot?

Despite the doom and gloom, analysts spot opportunities within Webex

Cisco's Collaboration Sales Drop 13 Percent: Is a Strategy Change Afoot?
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Published: May 18, 2023

Charlie Mitchell

Cisco has reported revenue declines of 13 percent for its collaboration business, which houses Webex.

It is the third consecutive quarter that the business unit has endured a revenue drop, and it only seems to be getting worse.

Indeed, last quarter the drop was ten percent. The quarter before, it was one percent.

Sharing the latest results during an earnings call, Scott Herren, Chief Financial Officer at Cisco, said:

Collaboration was down 13%, driven by declines in collaboration devices and meetings, offset slightly by growth in calling and contact center.

Nonetheless, these figures consider its cloud and legacy business. As such, it is not Webex that is losing ground.

Instead, the problem is that it is not growing as fast as Cisco’s legacy business is shrinking.

Perhaps this is no surprise given the sheer number of cloud communications vendors battling to play second fiddle to Microsoft Teams.

Yet, Cisco has taken action to address the issue. As is perhaps evident in its Microsoft partnership, the vendor is placing more emphasis on hardware, leveraging that core competency, and spreading its influence.

There are also additional steps that Cisco could take. For instance, it may release metrics such as monthly active users to create powerful headlines, as Microsoft does (here is an example).

However, some analysts have called for a more drastic course of action.

Selling Hybrid Work as a Package

Talking to UC Today after Cisco’s previous earnings call, Zeus Kerravala, Principal Analyst at ZK Research, advocated for a change in its approach to selling its collaborations portfolio.

Instead of leading with Webex, Kerravala suggested that Cisco leverage its broader portfolio and pull it through. He stated:

One of the things it hasn’t done a very good job of is to sell the pallet of hybrid work.

Such a pallet includes networking, security, and collaboration, all of which Cisco offers. As such, Kerravala recommends taking a leaf out of the Microsoft playbook.

“If Microsoft is throwing Teams in as part of its productivity suite, there is no reason why Cisco can’t throw Webex in as companies buy more security and networking software,” he said.

“They have to figure that out as a way to play that hybrid work angle instead of trying to lead with Webex all the time.”

Of course, Cisco could continue churning out new AI capabilities and wrestle with the likes of Zoom, RingCentral, and 8×8 to become Microsoft Teams’ biggest challenger.

Yet, as analyst Jon Arnold, Principal Analyst at J Arnold & Associates, recently stated: “UC is not exactly a race to zero, but it’s going to follow the same path that VOIP did.”

Avoiding an Arms Race of Collaborations Features

Despite the limited room for growth in UCaaS, there are other ways for Cisco to counter the decline of its collaboration business.

One could involve changing how it supports customers in developing their hybrid work strategies, which it is starting to do.

“Cisco has the willingness to build out spaces, drag people through them, and show them what is possible,” noted Kerravala.

Indeed, there are now many capabilities within communication platforms designed to improve hybrid work, which businesses simply do not know how to use.

As such, expanding this strategy – and perhaps building in more elements of its networking portfolio –  could drive value. Kerravala added:

Every vendor has loaded their solutions with AI capabilities from transcriptions to translation, but a very small percent of customers use a lot of those advanced features. So the door is open for someone to take a leadership position there.

Following such a strategy could further differentiate Webex, according to Arnold.

“It shouldn’t be about filtering everything through the lens of technology. Hybrid work is so much more than just that,” he said.

“Sure, we need additional features and capabilities. But, to me, this is a little bit like the PBX. It had a million features, yet people only used five or six.

Right now, there is such an arms race going on with all the collab players adding more and more features. I don’t think that solves the hybrid work issue at all.

The comparison to PBX is intriguing. That industry became disrupted by companies outside of the telecom space.

Will the same happen in UC? Maybe not, thanks to the deep market saturation. Yet, there is perhaps space for an innovative company to come out of nowhere and capture imaginations with a better approach to hybrid work.

If Cisco takes the path less traveled and leverages the unique capabilities of its broader portfolio, it could be that brand.



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