Those five areas are switching and routing, the data center, collaboration, video, and architectures for business transformation. In the past year Cisco has done six acquisitions, with half of those occurring in the past three quarters while it was handling its restructuring. As we have documented, Cisco’s previous forays into M&A have helped the company spread its bets on emerging technology around, but they haven’t always helped it boost its bottom line. Cisco also had seemed to lose focus in previous years, letting other firms come into its market and take share.

Based on the financial results at the end of Cisco’s fiscal second quarter of 2012, the company has $46.7 billion available in cash and cash equivalents. It is profitable and is generating cash as well after completing its reorganization, which has cut $1 billion off its annual run rate. In response to questions about M&A strategy on the call, Chambers said that the acquisition strategy remains the same, buying companies with about 100 engineers and products close to coming to market that Cisco customers tell the company it should buy. He pointed to the acquisitions of Tandberg and Starent as good examples of deals and said that of all the large players out there making acquisitions only Oracle had a similar success rate as Cisco when it came to integrating deals.

If Cisco is back in the shopping mood, we have a few suggestions for places where it should start. It should go all-in on the cloud, which seems like where Cisco wants to focus anyhow.

Since software-defined networks and OpenFlow are clearly an emerging area in the networking space, Cisco should shell out money for a player in this space. Big Switch would be a good bet, as it is trying to create an ecosystem using open-source controllers and then focusing on building services and applications on top of that platform. The model is different for Cisco, but the focus on enterprise applications and services is one that would benefit Cisco and lead to higher margins.

As clouds are deployed, monitoring and tracking websites and application performance from within the network are important for Cisco and its enterprise clients, which is why New Relic could also be a good pick for the company. New Relic’s SaaS-based software monitors performance and tracks issues back to the data center to help enterprises or website owners pinpoint bottlenecks and problems.

If Cisco wants to go big, my colleague Derrick Harris suggests that NetApp might be a good buy, because it reduces Cisco’s reliance on EMC, a relationship that is rumored to be on the rocks. If it is not NetApp, any storage vendor with a strong virtualization story and promise in the enterprise would help bolster Cisco’s burgeoning server division as well as its storage networking lineup.

Given the array of startups bringing both intelligence and performance improvements to different areas of the network, there are plenty of opportunities for Cisco to pick up new customers, technology and market share by buying a startup or established company. Who do you think Cisco should snap up?

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As luck would have it, I ended up having a coffee with Lewis Cirne, founder and chief executive officer of San Francisco-based software company, New Relic. In his past life, Lew — as he is affectionately known in industry circles — had started Wily Technology and sold it to CA (Computer Associates) in 2006.

A regular presence at our Structure events, Lewis is a font of wisdom and as an entrepreneur it is always enjoyable to talk to him, and learn from him. During our conversation last Friday at Crossroads Café in San Francisco’s SOMA district, Cirne offered some insights that are particularly important for startup founders embarking on their entrepreneurial journey.

Our conversation centered around the importance of transparency in a startup. We were talking about how many of us first-time entrepreneurs — when it comes to raising money from venture funds –tend to fall for the celebrity associated with brand names.

Instead, we should be asking ourselves some tough questions, including about your ability to talk to an investor openly, especially when it comes to bad news. “When it came to picking an investor, that was the number one thing,” Lew said. Why? Because startups don’t follow a linear path. They are unpredictable and things — more often than not — don’t work according to plan. When that happens, can you be transparent with your board member?

Josh Silverman, former CEO of Skype told me in an interview that company employees take their cue from their leader, and a confident leader instills confidence in her troops. Similarly, a founder or a CEO who is unable to be transparent with his board will make excuses. He will cut corners and create a company culture based on fear and deceit.

One doesn’t have to look too far. Look at the phone hacking scandal at News Corp’s UK division, where it is becoming apparent that the entire company was taking its cue from the firm’s leaders, including Rebecca Brooks, who was arrested earlier this weekend. As a telecom reporter I saw bad behavior at Enron and the old Global Crossing, where the rot started at the top.

“If you have a culture of hiding, it is perpetuated in the company and has an impact on the business, and leads to erosion of trust,” Lew said, and that one decision leads to corrosion of the company culture. Why? If you are unable to be transparent with your investors, then you are also not being transparent with your employees, who in turn would be fearful of giving you the bad news. This leads to a culture where everyone is trying to sweep things under the rug.

Lew isn’t the only seasoned entrepreneur who has made similar arguments of keeping a culture that is open and based on transparency. A lot of companies tend to hoard their data or their metrics, worried that the bad numbers are going to erode confidence in the company. But I personally think that is defensive thinking – if your team cannot handle bad news, then it cannot figure out a way to work itself out of a hole. You lose either way. By being open and transparent, you trust your team members to not only do the right thing, but you are also including them in the process.

Sharing information means that the team is less likely to be influenced by what they hear from the outside world. More importantly, you are building a culture of trust and respect. And that in itself is transformative for a startup!

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From GigaOM Archives: A video chat with Lew Cirne

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This is a profound shift in IT. Cirne’s prior company, Wily Technology, had all the trappings of a typical enterprise software company: lots of knobs and dials, complex on-site installations, high prices and lengthy sales cycles.  Still, for customers deploying J2EE app servers, Wily’s products helped them find and fix performance issues that otherwise would have taken months to resolve. Wily did a great job back in the day; but things have changed. By moving to a cloud-based platform as a service the deployment model can now be dramatically simplified. New Relic illustrates a powerful trend: the consumerization of IT.

In the last 10 years, the web has brought us countless innovative technologies which enable consumers to get things done simply and without fuss, whether it’s finding information, buying goods and services, managing finances, sharing documents, communicating with friends, finding a job, setting up meetings, backing up a PC, or any number of other activities.  So why, when you go to work in a typical large company, are the applications so bloated and complex?  Why can’t we get the kind of simple, one-click deployment of applications and infrastructure that mirrors what’s going on in the consumer world?

Open source has gone a long way toward putting power back in the hands of developers, who can download, install and deploy software without having to go through any kind of convoluted sales or budget approval process.  You want MySQL?  You can download and install in 15 minutes, and you don’t have to talk to anyone to do it.

Software as a service (SaaS) takes this to an even broader audience, enabling employees to get the kind of lightweight, consumer, self-serve capabilities in their job without even having to run their own servers.  Platforms like Amazon AWS, Heroku, Makara, RightScale and others put this same kind of SaaS power in the hands of developers.

It’s a pretty compelling message.  Why buy and manage complex infrastructure or applications when a simpler approach will get results faster and cheaper?  Sure there are cases where you may want the capabilities of a public cloud running in a  secure, private environment; Eucalyptus, which implements the Amazon AWS API, could fit the bill in such a case.

No doubt, much of the simplification in from SaaS comes from the fact that it does less.  Salesforce.com has never had the bells and whistles of Siebel, but it also doesn’t take a year to deploy.  Users of Box.net are probably OK with giving up some of the functionality found in Sharepoint.  But does anyone really need every last feature that’s gone into latest Enterprise software upgrade?

My view: ease of use trumps a long feature list any day of the week. There are both techological reasons as well as sociological and economic reasons for why organizations are seeking greater simplicity.  Part of this stems from the fact that complex enterprise applications grew beyond the ability of most organizations to successfully adopt.  The cost of implementing a heavy-weight, custom solution got in the way of ever achieving the benefits. I think many organizations that were oversold on enterprise software in the 90s have now realized that agility and ease of use may be better, even if it means adapting the business to more standardized, or even simplified, processes.

As it turns out, the web-based browser user interface, while constraining, actually has the benefit of keeping things simple.  That’s exactly what’s needed to enable rapid adoption of technologies: Keep it simple, stupid. The rise of open source, as well as SaaS, has been part of a “back to basics” approach in software that has put usability of the most important capabilities over the breadth and complexity of having every feature imaginable.  In other words, delivering the 80-percent-most-common features can lead to much greater adoption than trying to have every last bell & whistle.

After all, look at the success of Apple’s iPad. You can argue all you want about open vs. closed, or integrated fragmented. The bottom line is: Apple sold 4.2 million iPads last quarter by delivering a powerful but easy-to-use device. Now they’re bringing that same type of iPad interface to the Mac with the arrival of the Mac App Store in the coming months and the Lion OS in 2011. Apple, perhaps better than any other vendor, has captured the most common use cases with their products.  They don’t try to get every feature into their products.  They are rigorous in determining the essential feature set so the products remain easy to use. In fact, Apple has raised simplicity of design into an art form for consumer electronics.  Because of Apple’s elegant designs we don’t even think of the iPad or iPhone as computers. Why shouldn’t IT get the same kind of ease of use as the iPad?

Perhaps these examples of ease of use will inspire other ideas that could be applied in IT. What do you think?  What areas of IT do you think are ripe for consumerization?  Let me know your thoughts by posting a comment below.

Zack Urlocker is an investor, advisor and board member to several startup software companies in SaaS and open source. He was previously the EVP of products at MySQL responsible for engineering and marketing. He is currently an executive in residence at Scale Venture Partners. You can read more of his observations at www.theopenforce.com.

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Lew Cirne, the founder of Wily Technology, has created New Relic to do for Ruby on Rails what Wily did for Java 10 years ago. In a nod to the current business environment, New Relic will deliver its Ruby on Rails application management software as a service rather than as shrinkware. Cirne says the fact that the Ruby language ad the Ruby on Rails platform made it a nice target for possible enterprise adoption.

However, the market had changed in other ways and I question if Ruby will gain the same level of prominence that Java has. When Java came out, Sun and IBM pushed it, whereas Ruby and Ruby on Rails has grown very much from the bottom up. Cirne likens Ruby’s rise to the type of adoption that Linux managed to achieve without a corporate backer, but I don’t know if the existence of the Rails framework will make up for the fragmented market.

Today’s programmers can build in PHP or Python. Earlier this month Google launched its Google Apps Engine with support for Python rather than Rails Ruby. So while New Relic may create value, it may not be able to achieve the type of success that Wily managed to grab by focusing on Java.

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