Chambers defends Cisco's wide reach

Cisco is stretched in many directions, with big initiatives in the enterprise, service provider, consumer and small to midsize business markets. Add to this the company's $7 billion purchase of Scientific-Atlanta, and it's a plateful. Network World Editorial Director John Gallant and Managing Editor Jim Duffy met with President and CEO John Chambers last week to talk about why Cisco's reaching so far and how its moves will affect corporate customers.

Can you rank your four lines of business in order of strategic priority and growth prospects?

We think the enterprise network, the commercial/SMB network, the consumer network and the service provider network will completely blur. We've felt for over a decade that those markets would completely come together, with data, voice, video and mobility convergence. We felt that you just couldn't play in one. [We believed] the lines between them would dramatically blur, in part, based on how well service providers executed.

Service provider and SMB are about 25% [of revenue] each, enterprise about 45% and consumer about 4%. So consumer has the potential for the fastest growth. In terms of dollar contribution, the commercial marketplace is where we would anticipate the whole industry seeing the most growth, especially the networking [sector]. The commercial marketplace for us last quarter grew in the mid-20% range, while our business as a whole grew in the low teens.

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Cisco is stretched in many directions, with big initiatives in the enterprise, service provider, consumer and small to midsize business markets. Add to this the company's $7 billion purchase of Scientific-Atlanta, and it's a plateful. Network World Editorial Director John Gallant and Managing Editor Jim Duffy met with President and CEO John Chambers last week to talk about why Cisco's reaching so far and how its moves will affect corporate customers.

Can you rank your four lines of business in order of strategic priority and growth prospects?

We think the enterprise network, the commercial/SMB network, the consumer network and the service provider network will completely blur. We've felt for over a decade that those markets would completely come together, with data, voice, video and mobility convergence. We felt that you just couldn't play in one. [We believed] the lines between them would dramatically blur, in part, based on how well service providers executed.

Service provider and SMB are about 25% [of revenue] each, enterprise about 45% and consumer about 4%. So consumer has the potential for the fastest growth. In terms of dollar contribution, the commercial marketplace is where we would anticipate the whole industry seeing the most growth, especially the networking [sector]. The commercial marketplace for us last quarter grew in the mid-20% range, while our business as a whole grew in the low teens.

We still have about 45% to 50% of our [engineering and R&D] resources focused on service provider. Enterprise continues to be the leading-edge user for much of the marketplace, especially as we make our moves into the data center and with the virtualization of application servers and of storage. We think the network will become the platform that will deliver services, applications [and more] to all four markets.

Should enterprise customers be concerned that you have too much on your plate right now?

When we go into a market our goal has always been to be No. 1 or 2 with, ideally, 40% market share. Our hit rate has been really high, unlike almost all of our peers. Very few of the players in the industry have gotten beyond one or two primary products. We're in the eight to 15 range. So we've had a remarkable track record.

Our natural alignment is toward our enterprise customers. Actually, enterprise points us to what we need to do in service provider, [SMB] and even within the consumer segment. When I [spoke recently] with a large customer, they said they want us to have a security strategy for the enterprise but they want us to have it across service providers and down to the home.

Secondly, many of our ideas have always come from the enterprise side. The Big Three [automakers] pushed us really hard on changing our support model to add the thin layer of consulting. They said 'If we're going to become dependent on you as our preferred player in so many areas, you've got to help us adjust to the new technologies faster. And you've got to tie them together and help us do that. While we might have expertise in some of the areas, we will never have expertise across the board. And while your partners will help us, nobody can help us like you do.'