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Polycom in Aggressive Asia-Pacific Expansion

August 8, 2011 | William Zimmerman
Its momentum is a result of a number of investments that it has made in the region, particularly in China, reports VICTORIA HO

POLYCOM CEO Andy Miller comes to Asia at least six times a year. This because 24 per cent of the company's revenue - and growing - comes from the region, he said.

Polycom's second quarter of 2011 saw the Asia-Pacific contribute US$87.1 million. This proportion is ticking up gradually; in the second quarter of 2010, the region contributed 22 per cent, or US$64.5 million.

While most tech companies see business contribution from Asia hovering at about 10-15 per cent, Polycom's momentum here is a result of a number of investments that it has made in the region, particularly in China.

Mr Miller, previously the CEO of Tandberg, told BizIT that Polycom has taken an aggressive stance in the emerging market in recent years. It bought Chinese video networking company DST Media in 2005 and has continued to grow its assets there.

'We've been very organic. There are no expats that we've parachuted in to run China,' he said.

And in spite of facing off against strong local competitors such as Huawei and ZTE, Polycom has clinched a 38 per cent market share in the country, he noted.

Polycom's story in the broader region of Asia is similar, where it has a 41 per cent combined market share, and is seeing a 'high 20s, low 30 per cent' growth rate, said Mr Miller.

He attributes the take-up rate of video- conferencing in the region to the higher rate of intra-region business conducted here, as compared to within the US.

Vertical oriented

The take-up in the US is more vertical oriented, while the Asia-Pacific tends to focus on connecting its various financial centres for day-to-day operations, he said.

Mr Miller himself has seen video-conferencing's benefit to his work life. He said that he travels about 30 per cent of the time, compared with 75 per cent previously, now that he has face time with customers often over high-definition streams in custom-made rooms.

These high-end Web chat studios, also known as telepresence rooms, strive for verisimilitude by incorporating a full-sized video wall of the chat partner and stereo sound. This helps group conferences feel more real as voices are projected in the direction of where someone on the other side is speaking from. But beauty comes at a price. The rooms, when they were first launched around end-2007, came with a price tag of as high as half a million dollars. HP's Halo studio costs US$549,000 per site, Cisco's costs US$300,000 per site, and Polycom started at US$200,000.

This is all becoming more accessible to companies, said Mr Miller. Polycom just acquired HP's video collaboration business unit for US$89 million, which includes HP's Halo portfolio.

'Rumours of declining sales for large (telepresence) rooms is false. The price points are going down, and the technology in the rooms are more modular and smaller in scale, making it more affordable,' he said.

Rising demand

While demand continues to rise for simpler, personal systems, 'there will always be a place at the executive or board level for the high-end, immersive experience', he said. It's taking that experience down to a smaller scale that will do the trick for the small and medium enterprise (SME), he added.

On the HP acquisition, he said that the company's installed base of 255 sites and 35 customers is small, but consists of some very large clients within such as Nokia and KPMG. Buying HP added only 3 per cent market share to Polycom's 39 per cent of the high-end telepresence market. 'But we wanted those prestigious customers,' he said.

Mr Miller believes that the rising demand for video-conferencing is here because video chats have finally become common as a means of communication. 'When I was a kid, I went to the 1960-something Worlds Fair. The future technology showcased was a video phone, and that took decades to become reality because broadband was not readily available,' he recalled.

Today, laptops and tablets often come with front-facing cameras embedded. Skype and other free video-chatting protocols have become available, allowing video-conferencing to be vastly more affordable and widespread, he pointed out.

'All the things we wanted to happen are happening now.'

LifeSize CTO Casey King agreed, saying that the consumerisation of video-conferencing has pushed up enterprise demand. 'The video-conference space isn't niche anymore,' he said, noting that Web chats are not restricted to deskbound PCs or even the high-end rooms anymore.

As a result, the Web conferencing provider, which was acquired by Logitech in 2009, is seeing an increase in demand from the SME sector. In response, it has rolled out a hosted service called LifeSize Connections, which it hopes will dramatically lower the barriers to adoption from smaller firms, said Mr King.

Polycom, too, recently rolled out a similar cloud service called RealPresence Ready. Mr Miller said that the global market potential for video-conferencing remains vast. 'We believe that the market is only 10 per cent penetrated. There's a large runway in terms of opportunity.'

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