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Network World - Think software-defined networking will change the industry? You’re thinking way too small, according to Cisco CEO John Chambers. In Cisco’s strategy, SDN is just a single element in a holistic architecture that brings intelligence, programmability and application awareness to every facet of your infrastructure and spans the data center to the cloud. In this installment of the IDG Enterprise CEO Interview Series, Chambers spoke with Chief Content Officer John Gallant about the power of Cisco’s Unified Framework and how delivering on that vision could make Cisco the number one IT company overall. No small ambition there.
Chambers also explained the role the much-talked about spin-in venture Insieme plays in that strategy and why competitors will struggle to keep up with Cisco’s architectural play. He also talked about what IT leaders should be doing to drive the Internet of Everything and why customers should expect big changes in the network and IT vendor landscape in the years ahead.
What’s your feeling about the overall economic state of IT in the U.S. right now?
John, anything I say should not in any way imply how our current [quarter] is going or how the next quarter looks. I assume this [article] will come out in front of my earnings, so I’ve got to say that even stronger.
If you look at our last quarter, it was a very good quarter, and I’m using us as an example, from a share of wallet perspective, a market share perspective, and execution vs. our peers, and yet it was only a growth of a little bit over 5%. The market is tough, and most of the gains that are occurring in the market are share-of-wallet gains.
When some groups came out and [stated] that IT spend would be at the 6% or 7% level for the year, I asked 20,000 customers at one time what they thought, and nobody, almost no one, is seeing that. Part of the reason is that we’re in an environment where people are not taking as much business risk, but part of it is that IT companies have to translate what they are selling to be in the customers’ top business goals. There’s a void there. That’s the transition.
Most people would have said two or three years ago that we’re a network player. I think you and your peers would now place us in the top five or six IT players in the world, and we think there’s a chance to become the No.1 player. And it’s because no one is taking the key concepts, whether it’s the Internet of Everything or the transition of cloud and SDN [software-defined networks] and mobility and BYOD, to solve [customers’] business challenges. We’re going to try to take advantage of that void and move not just our space in the top five or six, but to become the No.1 player. I give us 50/50 odds we can pull this off.
You mention a lot of big trends there between Internet of Everything and cloud and SDN. What’s the key takeaway for these IT shops, the IT leaders?
They’re two-fold. First of all, in an IT environment, if you’re being measured by your expenses and OPEX, as opposed to what business results you’re producing for your company, you’re going to be playing defense the rest of your career. It’s how you say: Here are the top objectives of the company and here’s the way I can accomplish those and the ways I just cannot. This is where the business units begin to make the decision in partnership with IT. I would argue in talking to CIOs that if 80% or 90% of the decisions are largely influenced outside of the IT department, the IT departments fail. This is where we’ve got to move from discussing concepts that are exciting to us like getting server combinations with storage, with switching, with LAN, to clouds or mobility or others, and translate it through. It’s about speed of revenue generation, it’s about how quickly we can turn on services, it’s about your customer differentiation, it’s about productivity, it’s about new business models and enabling those. I believe the [IT] companies who can really help in a strategic way, help their customers truly achieve their goals, will be those who grow and survive, and those that do not will fall behind.
Most of my CIOs I talk to don’t think that major high-tech companies provide a major strategic value to them. If they’re being real candid, they say maybe one or two. When you challenge them about can we become No.1, I say if not Cisco, who? And you get candid recognition that there is not a good player in position to lead this other than Cisco, if we execute it right. Now this is a big jump for us. So it comes all the way around. If you’re clearly talking about OPEX and CAPEX, you’re going to be having your budget cut or held stable for the next, definitely, two years, and depending on the economy, maybe beyond. If you’re talking about complete alignment with the business goals in the company and the business units and your ability to help them achieve [business goals] it’s a whole different discussion.
What would you say are the critical elements for Cisco in becoming that No.1 provider?
Managing the market transition. Those areas like everything moving to IP, Internet of Everything, a transition where many people think the data center and the cloud and the LAN are separate, but we believe it will be a total architecture. I might put that as a whole separate point, even though it’s part of the market transition. We think there will be a single architecture, a single approach in the data center that combines routing and switching and storage and software and server technology and that will go straight up into the cloud, with intelligence throughout on the net. [See Unified Framework graphic.] Now, once that occurs, all of a sudden you can program to any [part] of that, and you can bring services or tie into revenue generation, from months to minutes. When you sit in front of an AT&T, or a JPMorgan Chase, or a Walmart, or a Deutsche Telekom, you’re able to talk about transforming your business. When you have those discussions your share-of-wallet goes up dramatically.
Remember, John, when you and I first started talking about architectures, nobody in the industry believed them. Now people appear to get it. Now with 18 product families where we’re the one or two [in market share], no one has even come close to that in history, and we’re talking from the data center all the way down to security. If we combine those well architecturally, we are two to three years ahead of our nearest competitor on how you use ASICs and silicon to go after this. This ends up being the architectural play to solve the business solutions, which I now firmly believe it will be. Before I believed it, but there were fair critics, and you have to listen to your critics, because they always have moments of truth. Now I’m very comfortable that we would take the capability that concept-wise SDN and NFV [network functions virtualization] and the cloud want to bring to life, and we’ll bring it to life in a way that no one else can.
[INVENTIVE: Cisco celebrates 10,000th patent]
The next element is, are we able to accelerate our customers not only with technology implementation of that but the business solution? This is where you’re going to see us move into consultancy much more with our partners, and move much more into an independent development community in terms of getting solutions on that.