If they are going to battle Microsoft, they better be on their toes.
"WebEx has an inherent limitation: It's a proprietary technology. That may seem like a competitive strength, but it's a limitation when you see the bigger picture of portal technologies integrating," says Paul Ritter, an analyst with the Yankee Group.
What Ritter — and most other observers I spoke with — is talking about is the belief that, in the future, Web conferencing will exist not as a stand-alone product, but as part of a larger product suite or application. WebEx, however full-featured it may be, uses proprietary software and doesn't mesh into a full-featured product suite the way IBM's (IBM: Research, Estimates) Lotus Sametime, for instance, works with the company's WebSphere software platform.
Thankfully for WebEx and its investors, however, the first version of Microsoft's product isn't a category killer. WebEx has a little bit of time before it must address Microsoft's threat head-on, but the window will close fast.
That sounds like a problem, but the bright side is that so far WebEx has made some very good moves.
WebEx has made enough smart moves and strategic partnerships that it should be able to maintain its strong position for the short term.
First, it struck partnerships with companies such as Yahoo! (YHOO: Research, Estimates) and AT&T (T: Research, Estimates). AT&T sticks its label on the service and resells WebEx to its own customers. These kinds of large-scale deals, which in many cases are multiyear arrangements, account for nearly half of WebEx's revenues.
WebEx investors are probably hoping Microsoft will eventually give up and just buy them out.