At most major Cisco events, the highlight is John Chambers’ keynote address. He is a charismatic speaker, at home on a platform from which he can articulate his vision of the future and Cisco’s role within it. And at Partner Summit 2013, held in Boston in May, Chambers again took centre stage to weave an aural tapestry of how Cisco and its technologies will enable coming changes in, as Cisco repeatedly emphasizes, the ways that the world “works, learns, lives and plays.”
Chambers’ keynote made it clear that 2013 will be seen as an important point in Cisco’s corporate evolution. He showed that Cisco has been extraordinarily successful in the context of the networking industry, with substantial growth as compared with connectivity product vendors — but at the same time, defined Cisco as participating much more broadly across all IT-related activities, posed to ride the “Internet of things” (IoT) through a rapidly-changing set of customer requirements to overall IT market leadership. Chambers pronounced that Cisco’s objective is “not only to stay [entrenched, with its business partners, as] the number one communications ecosystem in the world, but to become the number one IT system” provider — achieving leadership in each of the 20 product categories where Cisco competes or plans to compete, and “architecturally tying [these categories] together in ways that no one has done before.”
It is an audacious positioning, but Cisco has demonstrated a pattern of not just making but cashing big bets in new areas. In his keynote, Chambers reminded the audience that at one point, “people said we couldn’t spell telephony,” but that Cisco now has 65% share in the telephony market, and that “when we entered the data centre, our competitors said we’d be out in a year,” but that Cisco experienced 70% growth in x86 blade servers last year, and is now the number two supplier of these products worldwide.
These segments, though, pale (at least in Chambers’ view) in comparison to IoT. Reflecting on Cisco’s success in blades, telephony, and markets like mobility, he opined that while near-term growth is exciting, “you always want to be thinking 3 to 5 years out” — and Chambers believes that IoT will drive $14.4 trillion dollars in new customer profit over the next decade, creating an opportunity for and Cisco to become the premier supplier in the IT industry. He went on to enumerate three key business attributes that will help Cisco to achieve its objective of building this leadership position: its track record for success, which builds credibility within the channel and with customers; the opportunity to align more closely with the needs of customers, which he sees as an unmet need in the IT industry; and Cisco’s pairing of an architecture-led approach to IoT with its strength in managing successfully through industry transitions.
Much of the speech was given to analysis of the transformative nature of IoT. Chambers positioned the IoT as the fourth phase of the Internet — following email, e-commerce, and video as a driver of new Internet technologies and consumption models. The notion that IoT will reshape the IT industry (and its customers’ industries) is very important to Chambers’ overall message: he believes that new opportunities for market leadership arise during these types of transitions. “How do you accelerate through the good opportunities, and how do you minimize the damage from the bad?” he asked the audience, replying that IT providers “win in the turns — you win in the inflection points…[and] no one does this like Cisco.”
In Chambers’ view, a successful response to IoT requires suppliers to move away from a product-first approach to market to an approach predicated on an architecture that can span and integrate the many different products and services required to assemble and manage the hundreds of billions of connections that characterize IoT. This, in large part, is the key to his future vision of Cisco — that its success across multiple segments is a prelude to, or preparation for, a broader role as the supplier of the framework technologies: “you have to have an architecture — you have to play in data centre, you have to play in the network, you have to have a philosophy of being agnostic” with respect to attached devices. Chambers anticipates that leaders in specific segments will struggle to exert influence over the broader industry, as industry primacy becomes associated with the capacity to deploy integrated systems spanning multiple segments — a definition that aligns with Cisco’s commitment to expanding from its core switching/routing heritage to becoming an end-to-end supplier of products ranging from networking infrastructure to endpoint telephony and conferencing software, and from servers to security.
There are, of course, several major suppliers of products and services that would view themselves and their partner ecosystems as viable competitors for this broader leadership mantle. Cisco is at least credible as part of this group, but Chambers went further at PS13, noting that “if you’re going to compete against the Cisco ecosystem, you’re going to lose.” “We have never lost a major battle in our major competitive areas and core competencies,” he stated, tracing the history of the communications industry for examples: Cisco’s analysis shows that none of Cisco’s top competitors from 15-20 years ago are still in market; only one exists from the major competitor list of 10-15 years ago; and that top competitors from 5-10 years ago, “great companies like Alcatel-Lucent, Nortel, Ericsson — they are shadows of what they used to be.” Commenting on the more recent past, Chambers observed that Cisco faced competitive pressure from Huawei, HP and Avaya, and “we left them behind in market share as well.”
As Cisco looks to expand its competitive scope, the standards for leadership will become commensurately more stringent. How will Cisco build on its success in networking to differentiate itself within the broader IT community? Chambers believes that the company can enhance its position through a “fanatical approach” to customer success, which he believes is needed to advance not just Cisco, but the IT supplier community as a whole. He pointed out that in many surveys, Cisco is top-rated amongst IT suppliers in customer satisfaction, but with ratings of only 3.6-3.8 on a scale of 5. “The tendency might be to say, ‘that’s really good’…[but the reality is], we’re jointly disappointing our customers. We’re better than our peers, but we are not achieving our goals…We aren’t getting to what’s most important to [customers]: how do they achieve their business goals, with a rapidly-decreasing CAPEX model…how do we make it simple, how do we protect their investments?”
As customers look for leadership, Chambers said, they can look at the “slow lane…of traditional IT” or the faster track leading to where IT “is going.” He provided examples to demonstrate that Cisco’s customers are changing how they do business, and Cisco believes that it and its partners can accede to industry leadership by changing with them — by ensuring, as Chambers said, that Cisco’s ecosystem can “hear what [customers] hear, see what they see, think what they think.”
Netting it out: InsightaaS perspective
Are we, as Chambers might argue, moving inevitably towards a world that connects across a Cisco-centric IT framework? In the long run, it is entirely possible that his view of the IoT will come to pass. It is inarguable that Cisco has been successful in building presence in many segments that are important to IoT, and that its networking products and vision are uniquely aligned with the architectural requirements of a massively-IP-based future. There are, however, at least a handful of obstacles to Cisco’s ascension to unquestioned IT industry leadership.
One such area is software-defined networks. Chambers himself has admitted that Cisco was slow to recognize the importance of SDN (and its integration into the broader architecture, which VMware labels Software Defined Data Centre). Cisco has recently been lavishing attention on SDN, but its approach comes with an important caveat: Cisco is happy to have many firms developing software for the network but is insistent that the network’s core be based on Cisco ASICs (application-specific integrated circuits — in essence, the ‘brains’ of the network). Cisco offers many performance-based reasons why it believes this should be so, but other firms may well insist that SDN, like virtualization in other areas of the network, provide software management across a hardware-agnostic (or at least, heterogeneous) infrastructure.
A second potential obstacle to Cisco’s ambitions is its lack of presence in the device market. Cisco has tremendous presence at the points where user devices connect to machine-based systems and to each other, but it is not present in the hands of its customers. Companies like Apple, Samsung, Microsoft and Google control the interface between users and the network. They may be content to allow interconnection standards to be determined by other firms, or they may look to build on their device, OS and app store success to extend influence deeper into the stack.
A third possible barrier to Cisco’s ascension to market dominance, which might be seen as arising from the first two, is the prospect that IoT, like the Internet we know now, may end up being based on open standards that no one firm can control. In this alternative future, Cisco’s broad presence allows it to compete aggressively in many different segments, but the segments themselves end up as discrete components of a common, global architecture. In essence, Cisco’s role in that market would be very similar to its current position — leader in many different aspects of IT, but not the sole arbiter of how these aspects connect with each other and with customer requirements.
Clearly, there are a range of possible scenarios, including Chambers’ vision of a Cisco-centric future and alternatives in which Cisco plays an important but not predominant role. Regardless of which eventually comes to pass, though, it seems a safe bet that Cisco will be at least an important force in the industry, and an important supplier to its global customers. For Chambers is not sole preoccupied with vision — in his speech, he repeatedly referenced the essential role that a “culture of execution” plays in driving real-world success. In the end, it is the combination of clear foresight and effective sales and delivery — the coupling of vision with sound business practice — that will determine industry leadership. As Chambers urged his audience, “think about ‘everything-as-a-service’ not as a challenge to what we bring together, but how we will lead these transitions. That’s going to determine if we together [Cisco and its partners] can become the number one IT player.”
