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Will Collaboration Pit Cisco Against Microsoft, Google?

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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. [digg=]

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 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.

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24 Responses to “Will Collaboration Pit Cisco Against Microsoft, Google?”

  1. whether the collaboration will Sisco will affect the market. but of course this competition will be more interesting. even within different domains, software and networks. But google and microsoft will react well to the development of market

  2. most of these players seem to be targeting larger companies. the huge success of SharePoint also seems to come from the mid to large sized business segment. the small business segment is still largely untapped and explored, and thats where software players will gravitate gradually.

  3. Cisco and Juniper eyeing the long tail of consumers for their second act

    I have copied the following from my blog (without HTML formatting).

    Very few companies have excelled in business beyond 25 years only with their first act, a product or a business model. Some companies recognize this early on and some don’t. The networking giants Cisco and Juniper seem to get this and are looking for their second act. You don’t wake up one day and drastically change your business model. It’s a conscious decision based on long term strategy with very focused short term execution that is required to get to the second act.

    Cisco started their “human network” efforts by acquiring Linksys and Susan Bostrom completely rebranded Cisco a couple of years back. Consumerization of the brand was a big leap from an enterprise-centric organization to get closer to non-enterprise consumers. Few days back Cisco announced the Q4 results and John Chambers emphasized that Cisco would invest into adjacencies.

    “..and we will use this time as an opportunity to expand our share of customer spend and to aggressively move into market adjacencies.”

    On the other side of the networking world Juniper recently hired Kevin Johnson as their CEO who was the president of platform and services division at Microsoft. Competing with Cisco has been challenging and Juniper did have their own share of issues in the past but let’s not forget this company started during the dot com era, had a spectacular performance, survived the burst, and kept growing. But now is probably the right time to look for the second act.

    For Cisco, what could the second act be? Other than the obvious long tail of consumer-centric human network strategy I see a couple of possibilities:

    1) Data Center Virtualization:

    The virtualization is a fast-growing market segment that has not yet saturated. The real boundaries of data center virtualization are blurry since it is a conglomeration of server, network, and storage virtualization. Customers don’t necessarily differentiate between managing servers versus backing up data across data centers.

    This is an adjacency that Cisco can tap into with its current investments into data center virtualization switches such as Nexus 7000, strong ecosystem, and great service organization (The service revenue is 20% of the product revenue). In fact this was speculated when Cisco announced this switch.

    This could indeed strain its relationship with vendors such as IBM and make it precarious who OEMs Cisco’s switches in their data centers. Companies with large ecosystem would inevitably introduce “co-optition” when they decide to sell into the adjacencies that are currently served by their partners. They will have to learn walking on a thin rope.

    Virtualization with scale can lead to rich business scenarios. Imagine a network virtualization switch that is not only capable of connecting data centers at high speed for real-time mirroring and backups but can also tap into the cloud for better network analysis. The routing protocols and network topology analysis require massive parallel processing that can be delivered from the cloud. This could lead to improvisation of many network and real-time voice and data management scenarios that otherwise wouldn’t have been possible. Cisco’s partnership with a cloud vendor could lead to some interesting offerings – think of it as network virtualization on steroids.

    2) Network SaaS:

    Network Managed Services has always been an interesting business with a variety of players such as IBM, Nortel, Lucent etc. This could be one of the adjacencies that Cisco might pursue and make it a true SaaS and not just a managed service. I won’t be surprised if Cisco acquires a couple of key SaaS players in near future.

    On-demand and SaaS have traditionally been considered a software and utility play. The networking companies already support the data centers that provision SaaS services but they could go well beyond that to provide Networking SaaS that provisions, monitors, and maintains the networks as true SaaS offering and not just as a managed service. This could include everything from network management, security, and related services. Traditionally SIs and partners have played this role but networking companies could see this as an adjacency and jump into it since it is a natural extension from hardware to data center to managed services to a SaaS delivery. Instead of selling to a service provider who sells services to customers an effective SaaS can turn the model upside down by partnering with service providers instead of selling to them and sell to an ever growing long tail of consumers.

  4. 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:

  5. Habib Ullah Khan

    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).

  6. 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.

  7. 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.

  8. 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.



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