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Summary:

Cisco has been dominant in all types of networking devices for more than two decades, so its move into adjacent markets in order to expand its footprint beyond networking made perfect sense. What’s surprising is how flat-footed and weak the counterattacks from the competition have been.

In the networking ring, there is no dispute — Cisco is the champ. It’s been dominant in all types of networking devices for more than two decades, so its move over the past few years into adjacent markets in order to expand its footprint beyond networking — into blade servers, consumer products, video servers and services (such as via its acquisitions of Webex and ScanSafe, respectively) — made perfect sense. What’s been surprising, however, is how flat-footed and weak the counterattacks from the competition have been.

I’ve observed three distinct approaches being taken by Cisco’s competitors: One, trying to match the company punch for punch; two, teaming up with a common enemy; and three, jabbing repeatedly at a perceived weak spot.

Punch for Punch

In the match-punch-for-punch camp, we have three companies: Hewlett-Packard, Juniper Networks and Huawei. Hewlett-Packard, with its recent acquisition of 3Com, is trying to wail away at Cisco’s core – the enterprise networking market — with a formidable set of networking product lines, which can nearly match Cisco when it comes to routing, switching, wireless LAN and security appliances. But without a coherent end-to-end marketing strategy aimed at the enterprise customer, and some near-perfect sales execution, HP-3Com will stumble.

Same goes for Cisco’s traditional competitor in the service provider market, Juniper Networks, which bolstered its lineup of enterprise offerings last May with an eye to Cisco, and Chinese networking giant Huawei, which is trying to match Cisco’s offerings after selling its share in its failed Huawei-3Com joint venture back to 3Com. The enterprise isn’t looking for lower-priced point solutions, but a long-term strategic networking plan — a plan that has traditionally come from Cisco.

Teaming Up

Meanwhile, Cisco’s foray into the blade server market has prompted two principal incumbents — IBM and Dell — to join forces and ink deals with Juniper. And last week, another traditional enterprise networking vendor, Polycom, also teamed up with Juniper in the wake of Cisco’s acquisitions of ones of its rivals, Tandberg.

But fighting as a team can be difficult to do, especially when one member is trying to play on multiple teams. There can be divergent marketing messages, channel partner conflicts and much finger-pointing when solutions fail to perform or interoperate as expected.  Can the teams of Juniper-IBM, Juniper-Dell and Juniper-Polycom beat up on Cisco?  Juniper’s involvement in all three will make that a challenge.

Repeated Jabs

The last strategy, that of jabbing repeatedly at a perceived weak spot, isn’t intended to take Cisco down, but rather to weaken it further, loosening its grip on a specific market and hopefully capturing the attention of an even bigger Cisco competitor at the same time. Two specific areas of weakness for Cisco are application acceleration and next-generation 10Gigabit ethernet LAN switching.  In the fight for application acceleration there is Riverbed, F5 Networks and Zeus Systems, while two next-generation LAN switching companies to watch are Force10 Networks and Arista Networks.  None of them will single-handedly overtake Cisco in these arenas, but they have and will continue to cause Cisco pain by luring over its enterprise customers with the promise of high performance and features. If one of these companies were to be bought by a larger Cisco competitor, the fight could get more interesting, but it would take more than one acquisition to make that happen.

While a decade or so ago, Cisco would have been the winner by a knockout in the second round of any of these fights, today, it might just take the company until round four. All of its challengers — new and old — need new ringside coaches.  Their current fight plans cannot match Cisco punch for punch, team fighting will be difficult and clumsy, and you don’t win a heavyweight fight with jabs. As evidenced by its latest quarterly results, at least for now, Cisco continues to reign as champ.

  1. I find it weird that no reference to Ericsson is there. Though it has more overlap of product/services with Cisco than Huawei or IBM.

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    1. I was more focused on the enterprise networking market that is Cisco’s strength. I don’t see Ericsson/Redback as having a complete end-to-end story across enterprise and service provider products. Am I missing something there?

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      1. Ericsson/Redback (Redback now being called “Ericsson Packet Networks”) doesn’t focus on the enterprise space – rather, the service provider (just look at their current product lineup). However, you never know, with the new brand name, they could be well on their way to (re)design some of their low-end products (ex: SmartEdge 100) to get a piece of the market they’ve long not focused on. Ericsson itself, imho, will continue to focus their efforts where others really don’t – large scale wireless (excluding Huawei).

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  2. worst and least insighful article on comm tech, ever.

    ***t sandwich

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  3. Here we run hp procurve switches. Do everything that the cisco versions do at about half the cost. Same amount of ports and backend bandwidth.

    HPS problem is their marketing. Not the hardware itself.

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  4. Always surprised that more people don’t use HP Procurve gear. It’s feature comparable to Cisco’s enterprise line and much cheaper. I the problem is rampant Cisco fanboyism.

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    1. @majortom and sun4m – Agreed. HP need better enterprise networking marketing to bolster their server marketing. They also need to take advantage of the 3Com channels overseas. And they need both quickly. Else expect Cisco to continue their dominance regardless of a quality offering from others.

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  5. Keeping it Real Friday, February 5, 2010

    I am sorry. The author of this article is definitely in the dark ages and probably has never done a true evaluation of networking gear in your life! How is that Cisco cool-aid treating you?

    Let me start by agreeing with you and stat the obvious. Of course Cisco market share is #1, and they are the 10K pound gorilla. They took this spot form IBM 12 years back by being innovative, buying the market with cheap promotions, and finally training everyone on IOS at birth. Today, the innovation surrounding networking is gone, and the only way they can grow is to look into other areas of business. The problem is, by taking this approach, they have taken their eye of the ball when it comes to their core business. If you think that Cisco still builds the best networking gear, innovative gear, or integrated solutions, then you need to get out more! Just because it has the Cisco name on it doesn’t mean that it all fluidly works together.

    Cisco used to the build good gear, when it was competing against Bay Networks 3Com, Riverstone, etc.., Now a days they just rehash their 10 year old technologies by slapping an E on the end, or putting in a little faster processor. Oh wait there is the new ASR 1K, which is supposed to be the best thing out there. Ever checked the blogs on that box. Wow, what a treat it is. COME ON PMC or Brodcom, help them out here.

    The best look into the old innovative Cisco is their approach with UC or their new UCS platform. I am guessing that the Gen 1 UCS will sell very well, but will then be ripped out almost as much as their Gen 1 Avvid gear was. I do believe that by Gen 2 they will figure it out and most likely will start to give IBM, HP, and Dell a run for thier money.

    This old innovative approach to UC and the Server market may lead them to dominate these market segments, but not without deteriorating their networking dominance. All good things eventually comes to an end, and I feel that their dominance will definitely be broken over the next few years by one, if not a combination of a couple, of the competitors you mention.

    You know a company has hit it’s peak when the old IBM & AT&T saying applies. The saying I am referring to is, “You will never get fired for buying Cisco.”

    The ironic thing is that people who want to take advantage of the best technology, tend not to buy Cisco. They definitely consider it in their evaluation, but they are buying less and less. For example, the countless Web 2.0 companies you write about on your blog tend to buy every other piece of gear you mention but new Cisco gear. There are always exceptions to the rule, but these are the folks you are smart about how they spend. They understand that there is better gear out there that lends them a better ROI, scalability, and resiliency. The days of the Monolithic IOS is over.

    Many of you mention HP… Great for a small corporate networks, but how many large data center builds do you see them in? If their gear was as so great, then why don’t you see them in production DC environments of companies like Facebook, Google, Salesforece, BofA, etc…

    Regardless, I typically enjoy reading this Blog, but today, after this hogwash, I will be more cautious about what I end to believe.

    Next time, please take the time to read more about the competition you mention, and take finance 101 class to understand that Cisco’s growth in the networking business is flattening out compared to previous years. In comparison, their competitors are growing at a much faster rate. Cisco still is number one, but with HP in 2, and many others gaining fast, I am sure we will see this change in the next few years!

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  6. Arista was the #1 winner in 10GE Sunday, February 7, 2010

    Arista beat out “market leaders” such as HP, Cisco in independent 10Gigabit Ethernet testing.
    http://www.networkworld.com/slideshows/2010/011810-ethernet-switch-test.html?ts0hb&story=10gtest#slide1

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  7. [...] Is Competition Starting to Eat Into Cisco’s Core Markets? By Om Malik Feb. 22, 2010, 9:33pm PST No Comments        0 Cisco Systems, no matter what happens, always seems to find a way to move forward. It grows its revenues and squeezes out profits even when the world is falling apart, thanks largely to its near-complete domination of its two core businesses, routers and switches. But it seems the 2009 recession, increased competition and the presence of low-cost hardware providers has started to cut into company’s seemingly unassailable position. (Related: Cisco vs All Comers) [...]

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  8. [...] Is Competition Starting to Eat Into Cisco’s Core Markets? By Om Malik Feb. 23, 2010, 8:05am PST No Comments        0 Cisco Systems, no matter what happens, always seems to find a way to move forward. It grows its revenues and squeezes out profits even when the world is falling apart, thanks largely to its near-complete domination of its two core businesses, routers and switches. But it seems the 2009 recession, increased competition and the presence of low-cost hardware providers has started to cut into company’s seemingly unassailable position. (Related: Cisco vs All Comers) [...]

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  9. Gentlemen,

    Although Cisco is the obvious 600lb Gorilla in the room, one manufacturer was not mentioned that I think deserves to be is Alcatel-Lucent. Brad Reese recently posted a story on networkworld.com regarding the rise of AL to #2 in the SP market. http://www.networkworld.com/community/node/57868.

    Additionally, I think if HP does a better job of marketing, they could take a substantial bite out of Cisco’s market share on the enterprise market side.

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