Andrew Miller: Polycom will drive the next era of collaboration

When you think about Polycom, the first image that might pop into your mind is the company’s ‘iconic, triangular speakerphone.’ But CEO Andrew Miller wants you to know that Polycom is much, much more than that. In this installment of the IDG Enterprise CEO Interview Series, Miller spoke via Polycom’s high-definition telepresence system with IDGE Chief Content Officer John Gallant about why Polycom should really be known as a software company and about Polycom’s move to the cloud. Miller also discussed the impact of mobility on the visual communications market and why — despite all the talk about video from Cisco Systems CEO John Chambers — Polycom is in a better position to help companies drive the next era of collaboration. He also talked about the powerful partnerships Polycom has built with top-tier service providers and enterprise stalwarts like Hewlett Packard, Microsoft, IBM, and others.

John Gallant: Talk about the overall strategic focus for the company. What do you want IT executives to understand about Polycom?

Andrew Miller: We want them to understand the value of unified communication and collaboration, how this technology actually enhances productivity, becomes a valued asset for business continuity and, at the same time drives, return on investment in terms of the travel and productivity aspects of visual communication. Overall, to understand the collaborative aspects of unified communication and how they allow a company to become more productive and enable business connectivity. That’s really the vision and mission of our conversations with the CIOs in the industry.

Gallant: For many people, when they think about Polycom they tend to think of the different devices, the hardware they use. In September you outlined a new software strategy. Co-founder and Chief Evangelist Jeff Rodman said at the time that Polycom was embracing a more software-centric view of the world. Talk about that software strategy and what people need to understand about it.

Miller: I think one of the myths about Polycom is that people perceive us as a hardware-based company. They know and love this triangular, iconic speakerphone. When you look at this unit [we’re using for our interview], you see camera and screen technology and assume that it is very hardware intensive. But the reality is that 85 percent of the technology that we develop is actually software. We actually are a software company today. Part of this [strategy] is to change the market perception to understand what Polycom actually delivers and how software enables that technology. The other part of it is around our movement into the cloud and our movement as a company from premise-based to cloud-based technology. We want to reset the perception of what really lies underneath the actual componentry that people see and to extend our technology into the cloud and articulate a software vision of how that becomes a reality.

Gallant: Let’s talk about that move into the cloud. How do you see that market shaking out? It’s very early in that from a UC and from a video perspective. How do you see it evolving?

Miller: It is early. Gartner states that 40 percent of collaborative technologies will be cloud enabled in 2012. I think that’s very aggressive. However, we are seeing private cloud deployments accelerating in the marketplace on a monthly and quarterly basis. In fact, one of the largest private video clouds in the world is ICBC, one of the largest banks in the world located in China. There are a number of examples of vertical market leaders that are moving into a private cloud methodology.

However, I think the public cloud perspective will be 2013/2014, as carriers start to stand up private clouds, as they begin to offer what we call video as a service to their constituents.

Gallant: You are part of the Open Visual Communications Consortium (OVCC) with many carriers. What needs to be done by the carriers and how will OVCC drive that?

Miller: The inception of OVCC was to begin a process with carriers around interoperability and open standards. You are right; it is in the very early days. But it is a phased plan of how to bring carriers into a world around interoperability, so that the video call placed from British Telecom to Telstra and into Verizon will actually be transported with complete transparency and interoperability. So the beginning initiative of OVCC is to allow the carriers to utilize software from Polycom to deliver that interoperability and open standards. From there, it’s all around addressing issues in video such as bandwidth and security and open standards with the exact premise and analogy of a mobile phone. No matter what device and who makes that device, you dial a number and it’s agnostic to what the actual physical device is. How do you make a video call transported through multiple carriers with the same type of reliability that you have over the mobile number? That’s really what OVCC is about. I believe that we are spot on as it relates to what customers want: interoperability and open standards. We believe our approach is very different from [that of] our largest competitor [Cisco Systems] and is yielding the respect and distinctiveness inside carriers today.

Gallant: When do you expect video as a service to begin really emerging from service providers?

Miller: There are multiple companies today, albeit smaller companies, that offer cloud-based video services today. An example is a company called 8by8, which uses Polycom technology to power a video cloud that is partitioned to small/medium businesses. I believe it will take carriers between six to 18 months to be able to test, certify, price, package and bundle video as a service to their constituents. I’m talking carriers such as AT&T, Verizon, British Telecom and tier-one carriers. I think it will start with small providers like 8by8 now and it will move over the next 18 months to the larger, tier-one carriers to offer these types of services.

Gallant: So these carriers become a channel for your hardware and software?

Miller: Right. They move from what we call today ‘sell through’. Today the carriers that I mentioned, Verizon and British Telecom and Telstra, we sell Polycom products to their customers today. That will shift over the next six to 18 months to where they will actually procure products from Polycom — “sell to” — to enable them to provide cloud-based technologies to their customers.

Gallant: What does that mean for Polycom’s business model?

Miller: It’s an evolution of the business model. Many companies like Polycom that are traditional networking companies today are premise based. It means a shift in terms of our R&D spend. It means a shift in terms of talent. It means a shift in terms of how we sell and who our partners are. It is a continuing evolution of our business model in a very positive way. It could yield greater gross margin and operating leverage. It will allow us to facilitate a much clearer reach into new markets such as small and medium business and consumer. I think it’s very positive for the industry and our company, specifically. But it is an evolution of our business model to become more software [focused] and a cloud enabler.

Gallant: Sticking with the cloud theme, do you also envision partnerships with major software-as-a-service (SaaS) companies to provide a video collaboration element to their offerings?

Miller: Absolutely, yes, and there are several good examples of that today. In fact, our work with Microsoft around Office 365 and our work with IBM SameTime are examples of integration into enterprise software applications that will be cloud enabled. As we continue building out our API practice at Polycom, you will see us working with companies like salesforce.com or Jive or next-generation, SaaS-type models even, in theory, companies like SAP. So, absolutely, they are in practice today and I believe they will become more relevant as collaboration becomes more relevant in the cloud.

Gallant: Talk about Polycom’s mobile strategy. What are you trying to do for customers and how big an opportunity is mobile? How does it change the landscape for you?

Miller: We are incredibly excited about the mobility story and opportunity for our company. What we’ve done is we’ve taken a kernel of software, the same kernel that we are using today for our telepresence, and we’ve ported that software onto IOS and Android-based tablets either through an application store or native on the tablet itself. The difference between our practice and others is our application is actually enterprise ready, meaning that it’s [based on] interoperable, open standards, it’s secure and it allows the user to traverse a firewall to participate in enterprise applications. I could actually be at SFO airport today in this identical telepresence scenario over my iPad2 or Samsung Galaxy tablet. What this does is untether the user from the corporate office and allow them to become more mobile — whether it’s work at home, a teleworker or mobile executive. We believe that it significantly differentiates us from other software applications that are more consumer-based today such as Skype, as an example. We think it extends our brand, broadens the continuum of usage, and enhances the total cost of ownership for our customers. It allows this explosiveness of smart phones and tablets to now be truly utilized.

Gallant: Let’s talk about your deal with Jive. How do you see this integration with social tools evolving? Will you get involved with other enterprise social tools and will you also get involved with consumer social tools like Facebook or other platforms?

Miller: It’s a very similar analogy to what we’re doing in mobile. With social media, with anything that is text-based chat — Jive, salesforce.com [Chatter], LinkedIn, a lot of the next-generation companies — we can take that same kernel of software and enable that chat session to become video enabled. We acquired a company a few months back by the name of ViVu, which will accelerate the opportunity to video enable text-based chat in any type of social media application, to have a multi-point videoconference whether it’s Facebook, Google. Jive is our first and best example of how that will take place. With the explosiveness of social media and mobility, those are two areas that we are very interested in and we think have the most exciting, total addressable market opportunity for our company.

Gallant: Who are your key competitors and how do you differentiate yourself from them?

Miller: Our largest competitor today is Cisco Systems. We participate in competition with Cisco for a majority of our enterprise opportunities. In the small-to-medium business market, we compete with a division of Logitech by the name of LifeSize. We also see some of the next-generation competitors such as Huawei in Asia now being more visible in markets like CALA [Central America, Latin America] or Eastern Europe. But for the most part today our vision and our focus is [on] a healthy competition with Cisco. We have the largest market share of deployed video end points in the world, and our vision is to be the leader in that marketplace.

Gallant: Cisco CEO John Chambers focuses a great deal on video and talks about video at almost every opportunity. What does Polycom understand about video collaboration that Cisco doesn’t?

Miller: That’s a great question. We have a very compelling differentiated approach. John is a great leader and Cisco is a great competitor; however, our strategy has a couple of attributes that are very different. One is in terms of bandwidth. We actually can facilitate a call such as what we’re on today and utilize between 38 percent and 50 percent less bandwidth than Cisco using a specific software technology called H.264. Seventy percent of video deployment is spent on the network. So if you can save between 38 percent and 50 percent on 70 percent of the total cost, it’s a significant cost savings for CIOs. Secondly, everything that we do is open, standard and interoperable. Cisco’s approach to working with companies like Microsoft or IBM, as examples, [is using] gateway technologies. Our integration into these technologies such as Microsoft Lync provides a very differentiated approach in terms of our interoperability with enterprise software applications. Our focus on mobility is around what I call “bring your own device.” We are agnostic to whether it’s Android or IOS, where Cisco sells their own specific tablet by the name of Cius. So the examples such as bandwidth savings, interoperability, open standards, our mobility strategy are just several differentiators in terms of how we position our company against Cisco.

I will just say finally, in terms of differentiation, the number one request of CIOs is for interoperability and open standards. Cisco’s focus is very proprietary in terms of their technology. We want you to be able to interoperate with your existing investments in enterprise platforms and we think that is a differentiating factor in terms of how customers make their buying decisions today.

Gallant: In June you acquired HP’s high-end telepresence business. What’s been your experience with that piece of the HP business and how is the associated partnership with HP working?

Miller: It’s actually exceeded expectations. We did the deal for three reasons. One, we acquired the Halo business, which was 38 customers at 255 sites around the world, so we can now [market] Halo to Polycom’s customer base. Two, we have an exclusive sell to HP and they are the largest computer company in the world to sell into for their usage. Third, probably as important is we have exclusivity for HP to only sell Polycom technology to their customer base through their channels. So Halo’s ‘sell to’ and ‘sell through’ is a very important aspect for our company and we are actually ahead of schedule with each of those three components.

Gallant: Ahead of schedule meaning sales are exceeding your expectations?

Miller: We provided guidance that our sales are at expectations. We are ahead of schedule as it relates to our facilitation of HP’s high touch [sales team] and channels in terms of their readiness to sell to the HP reseller and partner community.

Gallant: Did that Halo gear overlap with your high-end system? Has there been integration of those systems or will the Halo line eventually go away?

Miller: One of the most pleasing attributes of this transaction is that customers that were kind of bound to the Halo network are now able, through our technology, to be interoperable with Polycom technology. So we will continue with the Halo products and services but we will begin integrating Polycom technologies into those to provide a choice to customers of continuing with Halo platforms or integrating with Polycom platforms going forward.

Gallant: What’s the fastest growing piece of your business?

Miller: It’s interesting because a lot of people talked about the demise of the high-end, immersive rooms as the [market] becomes saturated. The reality is that is still a very accelerated growth market for us — what we call “telepresence immersive.” It’s less than a 10 percent penetration rate, so there’s quite a bit of run rate there. Both the room systems market, or what we call the group systems market, and PC personal devices, which is the desktop, are accelerating. We will grow this year between 20 percent and 23 percent percent year over year. Each one of those elements — the immersive rooms, desktop and room systems — are growing at a fairly analogous clip to that 23 percent.

But the fastest growth rate is our network infrastructure, called the Real Presence Platform. That is the brains that drives the immersive telepresence, the end points, the interoperability; it drives the connectedness, the high-end presence, voice and video.

Gallant: I wanted to discuss customer adoption factors. In the past, adoption of UC and collaboration tools was often driven by external factors; the economy is bad, the 9/11 tragedy, SARS or something like that. But is that changing? Are there other, broader factors that are driving uptake of these technologies?

Miller: Even two years ago, many companies were operating on ISDN, technology was standard definition [video} and there was very little interoperability of other technologies. If you fast-forward two years, now all of the technology is high definition. It runs over IP or even wireless 4G or LTE. From a technology perspective, it’s TV-like quality and very versatile and that’s been a major change. So our customers have moved away from just looking at this as [just] return-on-investment. Two years ago it was hotel rooms, how many airplanes, how many rental cars [can I save], put into a formula around return on investment.

Now with unfortunate incidents like Japan, with SARS, 9/11 or the Icelandic volcano, it’s created a mentality of ‘how do I conduct my business with committed business continuity using this type of technology?’ It’s around business continuity and it’s around how I can be more productive. So we’ve moved away from ROI to a much more business continuity/productivity perspective. Technology has moved from dedicated rooms to mobility. Technology has moved from standard def to ISDN to IP-based. We really are at the tipping point of a visual society and we can feel that in our business today.

Gallant: What do you think it will take to get us to the point where people, say co-workers, doing their normal day-to-day activities start to use video as they might use the phone or email?

Miller: A couple of things. I think the Millennials and the next-generation workforce that grows up on Skype or FaceTime will require visual participation versus audio. I don’t think a lot of twenty-five-year olds are going to be dealing with a lot of audio conferences going forward. The Millennials will be very visual in terms of their work/life balance. Also, there’s ease of use — the ability to utilize a smartphone or a mobile app or a social media application and with a single click be able to bring in another user. If you look at the work we’re doing with Microsoft on the desktop, it’s basically point and drag and an IM presence. So that exists today and I think that that will even get more refined. The ease of use is just as simple as making a mobile phone call. I think, finally, the cloud will enable customers that could never afford a premise-based application to use video-as-a-service with a price point that is extremely cost effective.

Gallant: Talk about the role of the Polycom Open Collaboration Network. What are the goals of that effort and what is the impact on the business?

Miller: We started the Polycom Open Collaboration Network with seven partners just under two years ago. It now represents 23 percent of Polycom’s overall revenue. These are partnerships with companies such as IBM, Microsoft, Hewlett Packard, Juniper, BroadSoft, Avaya and Siemens, who all had one issue and one goal. The issue was that they didn’t have a video collaboration engine inside of the company, so they partnered with Polycom. The other issue was that they were all competitors against Cisco Systems. So, fast-forward a year-and-a-half, [this represents] 23 percent of our business, key relationships with IBM, HP and Microsoft, to extend our reach globally. For example, Microsoft is 90 percent of the enterprise office market. It’s a perfect opportunity for us to integrate and interoperate. Those partnerships are very, very valuable to Polycom today and going forward.

Gallant: Just so I understand, that 23 percent of revenue is revenue that comes to you through deals that are introduced by those companies?

Miller: Right. It comes in three flavors. One is direct revenue where they are actually procuring product from us. Secondly, it’s what I call influence revenue, which is Microsoft will bring Polycom into an opportunity that we were not in before. That sale is a direct result of their influence. The third way is OEM, which is where we manufacture technologies that will then be sold by that partner.

Gallant: Can you talk more specifically about where you see the Microsoft partnership going? That’s been an important one for you.

Miller: I’ve always stated that our relationship with Microsoft is unique. We license software to Microsoft for their high-definition desktop technology. We build specific technologies, our CX line of video and voice technology, for Microsoft. We have a very compelling joint to go-to-market program with Microsoft. Microsoft depends on Polycom for expertise in unified communications; we depend on Microsoft for the customer base and the extended reach. Partnerships have to have a two-way requirement and we have that with Microsoft and have seen great results. It’s a huge competitive differentiator against our largest competitor.

Gallant: Could you explain your acquisition strategy? For example, you mentioned ViVu before. What is the role of acquisitions at Polycom?

Miller: Clearly, we acquire where we can buy versus build unique technologies and [speed] time to market. If you look at the last six months, we’ve acquired three companies, including the HP Visual Collaboration group. We’ve acquired Accordent Technologies, which is content stream and storage, very cloud based, and then ViVu, which will accelerate our social medical applications. HP is around market share and go-to-market strategy, ViVu is tuck-in technology to allow us to expand social media, and Accordent is an extension of our technologies to allow storage content and retrieval. They are, I would say, small to medium acquisitions that will allow us to not only enter markets but to have a competitive advantage from a time-to-market perspective.

Gallant: As CEO, what keeps you up at night? What worries you most?

Miller: I think what worries me most is just that when you are growing 23 percent year over year, it’s all around scalability. It’s about making the right decisions that you can actually execute on. In other words, there are so many opportunities – mobility, social media, collaboration and partnerships – it’s about making the right choices around prioritization that fit into your business model and into your P&L. What keeps me and our leadership team up at night is just the relentless focus on prioritization and execution.

Gallant: You’ve got 30 seconds with a senior IT executive. What do you tell them about Polycom?

Miller: I tell them that we’re a leader in unified communications, that we have a very differentiated, best-in-class approach in terms of how to increase productivity and drive business continuity, that this technology is a productivity tool that will not only yield results today but be a platform to grow all of the attributes of next-generation technology like mobility, like social media, with a partner you can trust for today and for tomorrow.

This article, “Andrew Miller: Polycom will drive the next era of collaboration,” was originally published at InfoWorld.com. Follow the latest developments in business technology news and get a digest of the key stories each day in the InfoWorld Daily newsletter. For the latest business technology news, follow InfoWorld on Twitter.