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Summary:

Cisco Systems (CSCO) reported its fiscal fourth-quarter 2008 financials last week, but while the San Jose, Calif.-based networking giant beat Wall Street estimates, thanks to the hurdle posed by the law of large numbers, it forecast more modest growth going forward. “The market is clearly in […]

Cisco Systems (CSCO) reported its fiscal fourth-quarter 2008 financials last week, but while the San Jose, Calif.-based networking giant beat Wall Street estimates, thanks to the hurdle posed by the law of large numbers, it forecast more modest growth going forward. “The market is clearly in transition, and we will use this time as an opportunity to expand our share of customer spend and to aggressively move into market adjacencies,” CEO John Chambers said in statement.

The question is, what are those markets adjacencies? After all, in order to move the needle, Cisco needs to find as-yet untapped markets that it can serve. Such a challenge comes at a particularly difficult time: The telecom market has consolidated in the hands of a few carriers, new opportunities are few and far between, and the overall trend is towards hardware becoming a service.

Therein lies Cisco’s solution: It needs to start thinking like a software company, one that assumes that “the network is the corporation.” If it does that it will see that one of the biggest potential areas for growth lies with the (seemingly boring) infrastructure found in data centers, since (as a reader points out) the growing popularity of cloud computing means corporate data centers will increasingly start to look like Internet data centers. Cisco has already recognized that as the “network” continues to become the focal point around which our digital personal and work lives revolve, the opportunity to make money will be immense. That’s why Chambers never misses an opportunity to talk about “collaboration.”

For instance, in the press release announcing the company’s latest numbers, he said: “We believe we are entering the next phase of the Internet as growth and productivity will center on collaboration enabled by networked Web 2.0 technologies.” But Cisco isn’t the only one with this vision — Microsoft (MSFT) and Google (GOOG) are thinking along these lines as well, and are much further ahead in the game.

In a recent interview with BusinessWeek, Manesh Patel, chief information officer of Sanmina-SC, an electronics manufacturer with $10.7 billion in sales said, “We have project teams working on a global basis and to help them collaborate effectively, we use Google Apps.”

Meanwhile, while many have focused their attention on Microsoft’s suite of “office apps,” the company’s online collaboration strategy is actually centered around SharePoint, which offers a way for companies to share information and services and is well on its way to becoming a billion-dollar business. “The spectacular growth of SharePoint is the result of the great combination of collaboration and information management capabilities it delivers,” Microsoft Co-founder Bill Gates said back in March. “I believe that the success we’ve seen so far is just the beginning for SharePoint.”

We’ve been saying for a while now that Microsoft and Cisco were going to butt heads. As GigaOM writer Allan Leinwand pondered last fall:

So could a Cisco social networking platform aimed at the enterprise market enable messaging, interaction and collaboration and, by extension, be a wedge against Microsoft and their current lock on the enterprise IT messaging market?

In order to fulfill Chambers’ desire to be a collaboration king, Cisco has to compete with these guys aggressively. The problem is that it doesn’t have either the software or the web DNA of its fellow tech behemoths. It has made some hesitant steps. It bought WebEx to move deeper into web conferencing, nabbed Tribe.net in order to get a closer look at social networking, and acquired Five Across in order to beef up its content management skills.

Ideally, Cisco would develop a suite of applications that pivot around WebEx, which they could do by offering to work with all comers, big and small. Acting as a neutral player that delivers best-of-breed web services would give Cisco that best shot at effectively competing with Google-only and Microsoft-only solutions. At this stage, however, it just might not be enough.

This was originally published on BusinessWeek.com.

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  1. Om, out of self-interest, I am pre-disposed to want to believe that Cisco will move aggressively into these areas, but experience suggests that selling products with a bow around them, such as networking gear and even web conferencing systems, is very different than providing solutions that integrate with proprietary software systems.

    Whereas Microsoft has a highly evolve VAR channel and Google seems better positioned in this arena to serve small businesses and workgroups, Cisco’s forays into social nets feels more like science lab than mission critical, product-ized offering.

    Plus, some of the learning curve from when they were going toe-to-toe with Nortel many years back was that Nortel made big bets in CRM and customer support systems, Cisco didn’t, and the diversion certainly was one of the factors that took Nortel off track.

    Granted, different times, and I am not up to speed on state of Cisco VARs in being able to be the glue in such an undertaking, but it feels out of step with their carrier/enterprise strongholds.

    Cheers,

    Mark

    SnappVille 3.0: Connect, Communicate, Collaborate
    http://www.snappville.com

  2. Chris Anderson Sunday, August 10, 2008

    Cisco knows hardware. I could see them providing an Amazon ec2 competitor.

  3. After having a look at sharepoint numbers and sharepoint communities and blogs. it is taking off like wildfire… good luck on cisco or google going against Sharepoint right now that it is booming.

  4. If Cisco’s best shot may be a sweet of collaboration applications that pivot around Webex, why no mention of virtual worlds?

    When Chambers did a Q&A in Second Life a few weeks back, among other things he said “I think that what you are seeing is the very front end of a very large wave of opportunities”.

    With his head of networked virtual environments jumping ship to start a tech consultancy recently they may be a bit lost for a while, but I’d bet that this is a prime area of consideration for them right now nometheless.

  5. Cisco’s next move: online collaboration? — Channel Marker Monday, August 11, 2008

    [...] possible area, suggested by GigaOM’s Om Malik, is online collaboration. Malik posted last night that “Cisco needs to start thinking like a software company.” [...]

  6. » Let the good times roll > Blog Home Monday, August 11, 2008

    [...] watching: “collaboration” as the next great driver of technology adoption. As GigaOm points out, John Chambers of Cisco “never misses an opportunity” to talk up collaboration: [...]

  7. Habib Ullah Khan Monday, August 11, 2008

    Cisco has a formidable channel – Only Microsoft’s comes as close. And Cisco’s channel is increasingly made up of ocmpanies that are stuttering twoards being System Integrators and solution providers. So the willingness to hear the message when the Messiah calls will be there.

    Cisco needs to however not just acquire. It needs to somehow acquire and integrate ins such a way so as to change the game. It has faced smaller competitors all its life. Its facing giants in their turf now. This next shift into wherever is Cisco’s greatest challenge yet. I think Cisco has plans for cloud computing and delivering Applications through it. This battle will come and its a long time planning. The day John Chambers asked the head of his Services organization Wim Efrink to move to Banglore was the day Cisco started preparing for the fight. Make no mistake they will give this a good shot. For starters one should be aware of a small innocent software as a service trial Wim is owning (Read his blog).

  8. Here’s a snapshot of Cisco’s future SMB offering.

    Linkys + Webex + SugarCRM (to be acquired)

  9. John Earnhardt Tuesday, August 12, 2008

    We’ve been talking about collaboration for a long time at Cisco.

    And, while you say, “the network is (the) corporation”, we prefer to say that “the network is the platform.” And, when you write, the ““network” continues to become the focal point around which our digital personal and work lives revolve” is just another way of stating that.

    To view a video from last year of Chambers talking about Cisco’s role in collaboration, see here: http://blogs.cisco.com/collaboration/comments/video_john_chambers_on_collaboration_innovation_and_teamwork/

  10. I’m surprised no one is talking about Webex’s collaborative platform – Connect – http://www.webex.com/smb/cisco-webex-connect.html. Is it not at the heart of this discussion?

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