Thursday, May 19, 2011

Microsoft snatches human-powered network from Cisco in Skype acquisition

Microsoft's acquisition of Skype comes at a noteworthy time. Last week, amid the breaking news and coverage about the deal, another major technology story took a new turn. It was headlined by Cisco.

The company announced that it plans to continue its massive restructuring, shut down underperforming business units, and cut $1 billion in expenses by fiscal 2012. That also might include laying off up to 4,000 employees, potentially the biggest layoff in the company's history.

This comes on the heels of Cisco folding its Flip video camera business in April as part of its restructuring of its consumer unit. It's a change that holds new significance now that Microsoft has acquired Skype.

In my opinion, the Microsoft-Skype deal has moved the center of the human-powered network to Redmond. Microsoft has taken Cisco's position in the market in one fell $8.5 billion swoop.

Think about it. Microsoft has historically been the data and document titan. Skype adds voice and video to its offerings, and Lync will be the connector that brings it the enterprise. Taken together, Microsoft has created the human-powered network that Cisco never was.

This is part of a broader trend in history where it used to be about hardware. That's largely how IBM started out with its 5150 PC. And then it became about data and software. Today it's about people. I think Cisco recognized that to some extent (mostly a marketing extent), and that's why it focused around the human-powered network. But in reality, that was just a slogan. Cisco never lived up to it. Like IBM and its 5150, Cisco was always about hardware.

It only cared about video because it pushed bytes down the pipe and made everyone upgrade their infrastructure. Cisco never really cared about the form factor or collaboration. It's really just the "router-powered network."

In a sense, Google is also in a similar camp as Cisco. Google should have been the human-powered network. It could have diversified away from its tremendous concentration on advertising, but it's still all about search. Google is a one-trick pony like Cisco.

Microsoft, however, with its addition of the Skype puzzle piece to its portfolio, has become the de-facto human-powered network. It's historically been about data and documents. With its Skype acquisition, coupled with its very robust partner network and unified communications strategy, it's realizing that next-generation software platforms are not just about documents. They're about people.

Microsoft's partners have an important role in this. For instance, ProtonMedia is a Microsoft Silver Unified Communications Partner. In developing ProtoSphere over the past several years, our guiding principle has been to build the virtual office for Microsoft Office.

At ProtonMedia we have understood for some time that content without context is meaningless. By inserting an avatar-mediated layer on top of SharePoint, Lync, and Office, we are inserting context (you and your peers) right into the middle of your workflow. This provides meaning and context to your work.

We see Microsoft's acquisition of Skype as offering the broader Microsoft partner community yet another great tool which will allow people to create context. In fact, Microsoft's long-term respect for the software developer, as well as its ability to partner with both small and large companies alike, have been key to Microsoft's longevity in the tech business.

Cisco, on the other hand, has never found a way to partner creatively with small companies. I believe that is a cultural challenge Cisco will need to overcome if its plans to compete long term with the new playing field that has emerged around this blockbuster deal.

So in one week, we see Steve Ballmer and John Chambers, the two mighty horsemen of technology, jockey for success. One slips on the reins while the other gains ground. Will this be a photo finish? It's too early to say.

But for now it appears Ballmer has gotten the roses while Chambers seems to be caught in the thorns. Either way, I am happy to see one of them had the courage to throw away their cane, spend a little cash, and get running again. The entire tech sector applauds you, Mr. Ballmer.

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