‘Video Everywhere’ Gets Another Boost

Polycom, best known for table top phones in conference rooms, aims to pressure Cisco as the two fight over sales of cheap and easy to use videoconferencing software for small businesses and telephone companies.

The company has announced an aggressive new strategy for telephone companies that want to offer video to small businesses. Polycom already sells software to enable videoconferencing, but it is adding the use of an optical fiber network, which carriers can deploy for the video instead of building out their own system. That means the customers can start selling video services to businesses worldwide, most likely on a subscription basis, more quickly than if they had to build out their own networks.

“We see this as an opportunity to be really assertive in the market,” Andrew Miller, Polycom’s chief executive, said in an interview. “Once the carriers are up to speed, we’ll move to a wholesale model of software and services to support them.”

The optical fiber network that Polycom has is a clever re-use of a onetime Hewlett-Packard product, called Halo, which Polycom bought last year for $89 million. H.P. hoped to offer corporate customers high-definition video through an exclusive global network, but found little interest. Polycom will not offer its network to retail customers, Mr. Miller said.

Polycom’s service, called RealPresence, is meant to improve on Cisco’s Callway product, a video service for small businesses. “Callway makes Cisco conflicted with service providers,” Mr. Miller said. “They are selling equipment to them, but they are also competing.”

Robyn Jenkins, a Cisco representative, said that though it hosts the Callway network, the product is actually sold by its partners. “It’s about what customers want and Cisco has more telepresence offerings delivered via service providers than any other company,” she said. Callway, she said, was a way to provide small businesses with a less costly method of video calls.

Neither Cisco nor Polycom break out their sales of video-related software, hardware or services but both companies have made them keystones of their business. Besides the hardware and software itself, Cisco likes video for the high amount of bandwidth it consumes, encouraging sales of other networking gear. In 2010 Cisco paid $3.3 billion for Tandberg, a maker of videoconferencing equipment.

Mr. Miller, a former sales executive at Cisco, was for a time the head of Cisco’s Tandberg business. Since his arrival at Polycom in 2010, Mr. Miller has promoted Polycom as a telecommunications software company. In the last quarter, revenue on RealPresence were $61 million, or about 20 percent of Polycom’s total revenue. They grew at a 31 percent annual rate. China Unicom and Airtel, a large carrier in India, are already customers. British Telecom and AT&T are also Polycom customers for other software, though not yet for RealPresence.

Mr. Miller also said Polycom was pushing to have its so-called client software, which can receive videoconference calls, preloaded on corporate tablets, personal computers and smartphones. That would mean lots of potential customers, making it easier to sell the service to carriers.

While other companies, notably Microsoft’s Skype business, offer cheap video calls over standard video equipment, Mr. Miller said that the quality of the calls would probably keep Skype a consumer product. A fast-growing mobile video service, called Tango, was likewise an ally, because it bolstered demand for video in the workplace.

“We don’t see them as competitors, because they are not enterprise grade,” he said. “Our competitor is Cisco, which carriers see as their competitor.”