Lifesize Prepares for Life as Independent, Private Company

CEO Craig Malloy says the video collaboration vendor's transition to a subscription-based cloud model enables it to meet changing customer demands.

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Lifesize officials have spent the past two years essentially reinventing the company's business model, an effort that has seen the video and Web conferencing vendor transform from a seller of systems to a cloud-based collaboration provider.

The transformation wasn't easy and wasn't without pain. Lifesize, as a division of publicly-traded Logitech, saw its financial numbers take a hit, and the company cut the workforce in half. At the same time, the vendor had to continue competing in a rapidly changing market that was seeing an influx of new rivals and new business models.

"We basically were [removing] the old business and, in its place, installing this cloud system, and doing it while being a public company," Craig Malloy, founder and CEO of Lifesize, told eWEEK.

To add to the already complex scenario, Lifesize officials in March 2015 also began planning the process that would lead to its spinning out of Logitech and becoming an independent private company. That officially happened just days after Christmas, when Logitech announced that Lifesize was being spun out and that it had raised $17.5 million from new investors Redpoint Ventures, Sutter Hill Ventures and Meritech Capital Partners. Logitech retained a 37.5 percent stake in the company, which had changed its name from Lifesize Communications to Lifesize Inc.

Malloy founded Lifesize in 2003 as a video conferencing vendor that competed with the likes of Cisco Systems and Polycom, both of which had built their businesses on the strength of their hardware systems. Lifesize did as well, and Logitech bought it for $405 million in 2009. Malloy left the company in 2011, eventually founding a startup that makes online training software.

However, he returned to Lifesize in early 2014, believing that a shift in the video and Web collaboration space was underway toward more cloud- and software-based solutions. He rapidly began reinventing Lifesize to meet that demand, rolling out Lifesize Cloud, a software-as-a-service (SaaS) offering, three months after he returned to the company. The vendor has since been building upon its portfolio, offering a combination of a broad cloud-based platform that is scalable, affordable and includes such features as analytics, support and training, and conference room systems that offer low costs and high availability.

The portfolio helps Lifesize differentiate not only from Cisco and Polycom, but also smaller competitors like Blue Jeans Network, Vidyo and Zoom Video Communications, Malloy said. Cisco and Polycom also are building out their cloud-based offerings.

The transformation wasn't easy. Logitech's video business, which was anchored by Lifesize, saw drops in its revenue. At the same time, Malloy and other executives had to work with partners to help them handle the transformation to the subscription-based Lifesize solutions, and over the course of the past couple of years, the company cut its workforce from about 550 to 250 to reflect the new business model.

"It wasn't a pleasant experience," the CEO said.

Still, for the company to thrive, the move had to be made, he said, and trends in the industry haven proven him out as collaboration technologies make their way to the cloud. IHS Infonetics analysts in December 2015 said revenue for last year in the worldwide cloud video conferencing service space will increase 25 percent over 2014, reaching $281 million, with businesses opting for the flexibility, agility and cost savings that cloud-based offerings provide. Soon most of the revenue growth in video conferencing will come from cloud services, the analysts said. BroadSoft, which offers unified communications-as-a-service (UCaaS) products, found in a survey that cloud UC market penetration will jump almost six times between 2015 and 2020, when it will account for about 41 percent of the overall UC space. It has about 7 percent of the market today.