One of the leveling factors in small business, consumer and enterprise network technology is the commoditization of LAN/WAN gear and the chips built into such products, says Frank Dzubeck, president of Communication Network Architects. This was a major drive behind Cisco’s move to offer Linksys-based voice and data gear for small businesses, but mix in touches of enterprise-class technology with a hosted carrier service.
“A lot of small businesses are going to the local store and buying Linksys instead of buying Cisco products,” Dzubeck says. “What’s the difference between the two? It’s money, not features or anything like that.
“In the past the consumer market was differentiated from the SMB market based on quality and reliability. That’s disappearing. Products now all have the same silicon. Boxes that go into enterprises and ones sold to consumers are very similar now.”
Cisco’s move to sell co-developed Cisco/Linksys gear into sub-100-employee companies reflects a growing trend in the IT and networking industry overall.
“You’ve got a lot of hosted things in this world: hosted PBX, Centrex cervices, Web hosting, etc.,” Dzubeck says. “Even Microsoft is suddenly getting into this, realizing that Salesforce.com is a real company. So Microsoft says, ‘We have to be in the software-as-a-service businesses.’ And now Cisco is saying, ‘My god, maybe we should do the same thing.’ And the market for all these kinds of hosted offerings has always been the same: the small business guy.”
One potential kink in the whole strategy may lie in the first partner Cisco chose to go to market with for Hosted SBS — MCI, Dzubeck says.
“This [Hosted SBS] would have worked very well when MCI stood alone,” he says. “But now that they’re part of an RBOC, it’s different.” This is because companies such as Verizon, which will soon own MCI, often resell network and telecom equipment to small businesses as well as provide services.
Dzubeck says Cisco will have to expand its carrier partnerships quickly in order to avoid this kind of RBOC/channel partner conflict: “Why would [MCI and Verizon] want to give up margins to another third-party VAR?”
But overall, small businesses — with around $12 billion to spend on networking gear — is not a bad sweet spot for Cisco to hit.
“The largest base of customers in the world turns out to be the small business. That’s unequivocal,” he says.
