Cisco's taking some heat - again -- from the blogosphere for its spin-in innovation model, just after confirming its investment and likely acquisition of Insieme, a start-up chartered to develop programmable networking technology. Insieme is one component of Cisco's multipronged network programmability strategy.
Insieme is Cisco's third notable spin-in, and led again by Cisco's three top engineers: Mario Mazzola, Luca Cafiero and Prem Jain. Spin-ins are companies started up with seed money from Cisco and then acquired by Cisco and absorbed back into the company for hundreds of millions of dollars after products are developed and sales begin to ramp. Many of the engineers recruited for the spin-in come from Cisco and reap rich rewards when Cisco acquires them back into the company.
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This has left their peers back at Cisco resentful not only of their riches but also that they - and not them - were recruited by Mario, Luca and Prem to join the spin-in. Not only do they miss out on the big pay day, their talents were deemed not suitable for the project Cisco invests close to a billion dollars in. And then they have to work with the newly-minted multimillionaires again when they're acquired back into Cisco!
It's enough to make engineers leave Cisco because of it, and many have.
Om Malik at GigaOm is the latest to note the bad PR of Cisco's spin-in practice. He references an internal Cisco memo on its SDN strategy and an announcement of Insieme to conclude that Cisco can't build what it needs internally. The New York Times has pointed out several times in its Insieme coverage how the spin-in practice kills morale at Cisco, echoing what Twilight in the Valley of the Nerds stated years ago.
But Cisco is unapologetic. CEO John Chambers says the company will innovate by any means possible to achieve its goals. He says there's plenty of opportunity and reward for those left back at Cisco when a spin-in is incubating. CTO Padmasree Warrior, in an interview at this week's Cisco Partner Summit, is a bit more sympathetic but equally resolute:
I think it is not different from any acquisition we would make. It doesn't mean that what we're developing internally is not important. It is important. Our approach has always been build, buy, partner. So when we do that, clearly sometimes organic programs have to be redirected. From my point of view it's no different from making portfolio decisions. We may decide to cancel this ASIC because it's running behind schedule, and double down on a different ASIC. We make those decisions all the time. This to me is no different - at the end of the day our clear intention is to lead in networking and we will make sure we are covering our bases in all aspects of where the future of networking is going. People inside the company are chartered with a great mission for innovations, I don't think we've ever been stronger with clear roadmaps, clear accountability, clear funding, how we are doing with portfolio management... People are excited about that. Now, is there anxiety when we do spin-ins about people making more money vs. less money? I think that's human nature, I don't want to discount that. But people have benefited through this process too. People that are now inside the company were at one point in the spin-in. To me this happens in the lifecycle of any company. If you were employee No. 20 at Google you made a lot more money than if you joined Google recently, or Cisco recently for that matter. So I don't see this as any different from that. Clearly, we have to give the charter and make sure that people inside understand that the projects they are working on are critical to the success of our company. And we want to make sure that as a leadership team we are sending that direction emphatically.
The thing to remember is that (Mario, Luca and Prem) are proven entrepreneurs. They understand Cisco, they understand Cisco technology, this is a model that's created billions of dollars of revenue for us and generated a lot of value to the industry at large. The industry has benefited from a lot of the innovation they have driven. And people want to be part of that but they also want to be part of Cisco because we driving really amazing innovation inside the company. (Spin-ins) are only one aspect of it. People on David Yen's team, for example, get to work on Cloud Connect, they get to work on Unified Management, they get to look at how does collaboration and video connect with the data center. When you're working in a narrow aspect of it you don't get that exposure. So I think there are trade-offs. It really depends on people's personalities, and if some people want to be exposed to the breadth of Cisco. And they want to understand, how does security play into this? It crosses the boundaries of what David Yen's doing and what Chris Young is doing - security for the virtualized data center.
Hmmm, work on something broad and holistic like Cloud Connect and/or security for the virtualized data center; or a narrow aspect that has a $750 million payday coming... Tough decision?
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