Cisco clarifies software opportunity

No plans to “break IOS into segments,” Chambers says

Cisco is looking to become a software company but not by breaking IOS

ANAHEIM, Calif. -- Cisco Chairman and CEO John Chambers this week clarified the company’s strategy to grow into more of a software company.

Instead of deconstructing its traditional IOS operating software and selling specific features as individual packages, as was understood from last year’s Networkers conference roundtable, Chambers said Cisco simply wants to begin to develop software as a business. It has the ingredients with its unified communications, collaboration and Web 2.0 portfolio, bolstered most recently by the $3.2 billion acquisition of conferencing specialist WebEx.

“We have the view that we have to become a software company,” Chambers said during a wide ranging roundtable session with reporters at the Networkers conference here. “But we’re not breaking IOS into segments.”

Last year, Chambers said the company needs to evolve its software strategy in order to alleviate customer confusion, foster choice, and not have software sales tightly coupled with hardware. This was interpreted as a plan to decouple IOS from hardware and sell it as separate packages.

Chambers this week said that was a misunderstanding. He also said WebEx presents a business model that has the potential to allow Cisco to expand beyond its traditional markets.

“The impact is in expanding into areas we would not have gone into otherwise,” Chambers said, without elaborating.

On other matters, Chambers said the U.S. definition of broadband needs to start at 100M to 1Gbps rather than the kilobit rates now considered lowest tier service.

“That’s dial-up in Asia,” he said of the kilobit rates offered as broadband in the United States.

He said 100M to 1Gbps service needs to be broadly offered in the United States in the next five to 10 years.

Chambers also said spending in the U.S. enterprise market, which has been challenging for Cisco in recent quarters, is reaching a point where the company will realize a “soft landing.” Cisco reports fourth quarter and full year 2007 results in a couple of weeks.

He said Cisco can play a “huge role” in green IT and data center initiatives, He said it is one of Cisco’s 19 priorities for the next year and that the network can be the enabler of power conservation in the data center, home and other areas.

Cisco also has an internal initiative underway to transform its relationship with customers, Chambers said. As an example, he said customers are asking Cisco to expand its consulting and professional services expertise.

“We have an internal code name for it,” Chambers said of the “next-generation” customer relationship effort. “We’re going to look at changing customer relationships.’

Regarding his plans for the next three to five years, Chambers said he plans to stay with Cisco and direct its “very aggressive” ambitions over that time period. He said he’s honored by suggestions that he run for high government office but that’s unlikely for the time being.

“People who have been successful have an obligation to give back,” Chambers said. “But I’m really committed to this company. Besides, it’s fun.”

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