Cisco service targets small business
Teaming with MCI to deliver hosted voice and data.
By Phil Hochmuth, Network World, 11/14/05
Looking to small businesses as its next billion-dollar-a-year opportunity, Cisco this week plans to launch hosted voice/data services based on Linksys gear and delivered via carriers.
With its Hosted Small Business Services (SBS), Cisco is teaming first with MCI to offer hosted services based on small-office network gear - mixed Cisco/Linksys technology branded as Linksys One. The
offerings, including hosted VoIP, messaging, access and firewall services, will be designed for companies with fewer than
100 end users and cost about $1,000 per month. The services will be sold and supported by local resellers.
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Big strides for small net firms
Cisco says its Hosted SBS approach will give small companies enterprise-class network and IT capabilities. But resellers and
carriers - which often compete for these same small-business customers - will have to buy into the program and cooperate for
it to work, analysts and observers say.
One of "the last places on earth where the LAN fundamentally needs a complete upgrade is in small businesses," says Steve
Kamman, senior networking and data infrastructure analyst with CIBC World markets. Hubs and sneakernets are still common network
technologies in small companies, especially outside the U.S., he adds.
The company with fewer than 100 employees has always been a tough nut to crack for enterprise equipment providers, because
these companies often use consumer-oriented network gear. Also, the cost of having to contact so many disparate companies
can squeeze profits.
But IT spending by such companies is hard for vendors to ignore. Businesses with fewer than 100 employees will spend more
than $12 billion on network and telecom equipment this year, according to research firm AMI Partners. Worldwide, small businesses
are expected to account for 24% of all IT hardware and software spending next year, Gartner says.
Cisco plans to announce Hosted SBS as an "Advanced Technology" - joining the ranks of its IP telephony, security, optical,
storage network, wireless and consumer business lines. Each is generating $1 billion in annual revenue, or that is Cisco's
expectation. Cisco's Advanced Technologies contribute about 21% of its product sales, while switches and routers make up most
of the rest. But revenue from the newer products is growing at 25%, compared with 3% growth in switches and 13% in routers.
Cisco's past efforts to get a big piece of the small-business market did not work. "Dumbing down" its enterprise products
came up short, because customers were finding better value from commodity products, says Marthin De Beer, vice president and
general manager of Linksys' small-business group. "We weren't giving [small businesses] what they wanted."
Carriers have also failed at penetrating small business with hosted VoIP and security services, because the offerings have
been complex to install at customer sites, while pricing has not been competitive with traditional hosted Centrex or managed
telephone key system offerings from telecom resellers, says Nigel Williams, vice president of Linksys' channel and service
provider business.
These issues are solved by the lower-cost Linksys gear, which can be set up in less than one hour and configured remotely,
Williams says.
Cisco/Linksys inside
The central piece of customer premises equipment under Hosted SBS is the SVR Services Router. The box includes a non-IOS WAN
router operating system, T-1 and broadband connectivity ports, and a 16-port 10/100M bit/sec power-over-Ethernet switch.
A Session Initiation Protocol (SIP) proxy server, firewall and local DNS and DHCP servers also run on the platform. The SVR
Services Router runs a modified Linux operating system and can serve as a local platform for e-mail and other applications.
For VoIP, the Linksys One PHM 1200 is an IP phone that ties back to a centralized SIP-based call server in the carrier cloud.
For internal calls, the phone uses SIP-based point-to-point signaling, instead of tying back to the carrier network and using
WAN bandwidth. Individual voice mail boxes are stored locally, so they are still available if the WAN link goes down.
