Ullal departure sign of Cisco transformation

The departure of Jayshree Ullal this week is another indicator of Cisco's transformation from a networking company in to an IT company, according to one analyst. The recent exodus of top executives from Cisco - Ullal follows Chief Development Officer Charlie Giancarlo and Senior Vice President Mike Volpi out the door, both of whom were considered potential successors to CEO John Chambers -- is due to a number of obvious factors: hitting the career ceiling, cashing out on a flat stock price, and professional inertia among them. But a less apparent cause may be a philosophical change within the company itself.

Cisco is morphing into more of an IT company and this transformation necessitates a changing of the old networking guard, according to Zeus Kerravala, an analyst at The Yankee Group.

"You see a change of guard happening at Cisco, and it's needed," Kerravala says. "This is less about a market transition and more about a company transition. In order to get to be an IT company, Cisco needs some new leadership."

The leadership change won't extend as far as the CEO's office; Chambers already has the overall IT background having come from IBM and Wang.

But his inner circle is ripe for turnover and it may accelerate now that HP is bidding for EDS. You can bet that Cisco is watching that $14 billion marriage intently, ready to scoop up some IT talent that shakes out of the massive combination of the IT systems and services giants.

Indeed, Cisco stated in its latest quarterly results that it is looking for its services business to contribute $8 billion in annual revenue - one-fifth of the company's overall sales.

The change in culture and direction at Cisco also facilitates a change in the way it views its ecosystem partnerships as well, Kerravala says. Cisco sees itself as the center of that universe with ecosystem partners surrounding and supporting it.

The company must now adopt a support role of its own and follow the lead of its IT ecosystem partners as it charts a new course beyond its traditional networking boundaries.

"Cisco has a history of growing up with an ecosystem around it to support it," Kerravala says. "Traditional IT is ecosystem led. It integrates into what they do. It's a different mindset."

That's why it's important for Cisco, as it boasts frequently of its ability to, catch this market transition. It must dance all the dances at the HP/EDS wedding if it hopes to grow beyond its old but fulfilling relationships with the Ullals, Giancarlos and Volpis.

"When HP/EDS finishes, the total number of employees will be less than the two separate companies - it will be a place to get talent from," Kerravala says. "The more tightly integrated computing and networking become, the more it is required for Cisco to have that talent."

Frank Dzubeck, president of consultancy Communications Network Architects and a longtime Cisco watcher, believes Ullal's departure was more out of frustration with recent operational changes, such as the establishment of the Cisco Development Organization (CDO). Formed late last year, CDO is a council of development managers chartered to oversee Cisco's technology initiatives and its ability to deliver more integrated products to customers.

"The problem is simple," Dzubeck says. "The operations structure does not fit people's way of managing."

Dzubeck says the CDO council is a loosely coupled structure as opposed to a closely knit matrix structure favored by Ullal and perhaps other Cisco managers. He says the committee driven council is lengthening the time to market for Cisco products.

"The development timeframes are not in synch with the rest of the industry," Dzubeck says.

Though he dismissed the notion that Ullal's departure is indicative of Cisco's transformation into an IT player, Dzubeck did say it was "an end of an era."

"She was the last of a generation" of networking operations executives brought on in the early 1990s, beginning with Cisco's acquisition of LAN switch maker Crescendo Networks in 1993. "This is the passing of the baton."

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