After a long wait, Cisco unveiled their personal telepresence offering, Cisco UMI, targeting consumers and small businesses. For the past few years, Cisco has been pitching their video vision to anyone who is willing to listen. In fact, they are right about the importance of video in the future and a perfect strategy for them. However, their entry into the market will not have the kind of effect which many of us (including myself) were expecting. In this post, I will briefly discuss my reasoning behind this conclusion.
Why is Cisco’s video strategy exciting?
After Cisco launched Cisco TelePresence in 2006, they completely changed the way people thought about one to one meetings. With 1080p HD video and spatial audio, the meetings were exactly like face to face meetings. With more than 2000 TelePresence deployments, Cisco connected many businesses with their remote offices and teleworkers. It saved corporates lots of time due to lack of travel, increasing the productivity and efficiency. However, Cisco TelePresence was very expensive and only big enterprises and high-end hotels could afford them.
The success of Cisco’s TelePresence in the corporate sector raised the expectations for a similar device catering to consumers and small businesses at an affordable cost. Such a device could bring together families, bridging the gap between the loved ones (well, I am sure it is not the case with every family but you get the idea). More importantly, it raised the possibility of empowering the small businesses who are otherwise handicapped by raising airline prices in this sluggish economy. When Cisco announced that they have plans for personal telepresence, many small businesses and individuals (like me who manage business in far away places remotely).
Then, why is Cisco UMI a non starter?
When Cisco announced their personal version of TelePresence yesterday, it was met with disappointment. No, it is not their technology. It is still one of the best video conferencing system for consumers and small businesses. The disappointment is with their pricing. This product costs $599 with a $24.99 monthly subscription fee. This is on top of what you will pay for really high speed bandwidth (needed to carry HD video). Their pricing is a complete disaster.
Just take a moment and think about how Apple introduced iPad. When they introduced a new kind of device for the first time to the market, they priced it just right to get a kick start. When people were expecting a tablet device for $999, they released one at $499. I would even claim that their pricing is one of the big factors in the success of iPad. This becomes all the more important when a company releases a device whose success depends on the network effect.
Cisco is releasing this product at a time when Skype is pushing hard to reach the living rooms through televisions and Logitech announcing a similar HD solution through Google TV at 3/4th of the price of Cisco UMI (and without the monthly subscription). Yes, I do agree that Cisco UMI works with Google video chat but without the widespread adoption of this device, users will lose out on the TelePresence experience. I don’t see a widespread adoption of this device among consumers and small businesses at this price point. Either they should get rid of the monthly fee completely or they reduce the price of the device so low that monthly fee doesn’t affect the buying decision. Otherwise, I see Skype taking over the HD video conferencing market in the consumer and SMB segment. Already, Skype has released a Windows client with support for HD and they will soon be releasing similar ones for other platforms. It is just a matter of time before Skype partners with someone to release a device like Cisco UMI and beat them big time on price.
Even though I love the product, I am not happy with their pricing. I can safely say that it is the general sentiment among the consumers and SMBs who watched the announcement. Unless Cisco takes steps to correct it, they can forget about this market segment and stay happy with the corporate sector till they also realize about the low cost opportunities. What do you think? Do you agree with me that the price point is a deterrent to large scale adoption?