Cisco's Video Transformation

It's been evident for some time that Cisco Systems Inc. (Nasdaq: CSCO) is keen to position itself as a video company more than a router company.

Expect to hear a whole lot more about that this week -- and prepare to be bombarded with a new buzzword dreamed up by the Cisco marketeers. That new buzzword, being unveiled Monday, is "medianet," Cisco's term for an IP network built with video in mind (as opposed to the regular IP network, which was built for best-effort data traffic).

The medianet concept will be at the heart of a major marketing assault that begins Tuesday at C-Scape, Cisco's annual analyst conference, where the vendor's executives will outline the company's new video strategy.

"When we set out last year, John Chambers said video is going to be one of the top priorities -- 'top' meaning 'way up there' -- and we're going to make this video thing cut across the business," says Murali Nemani, Cisco director of marketing for service provider video. (See Cisco's Kool-Aid.)

"What we're doing now is saying, 'Here's the strategy we've built as an entire company, and here are the products,' " adds Nemani.

That strategy could cut across all of Cisco. "Five years from now, Cisco will look like an entirely different company," says Zeus Kerravala, an analyst with Yankee Group Research Inc.

Cisco isn't doing this just because video is cool. The company needs to find ways to keep expanding its market, so it's in Cisco's best interest to convince customers to not only upgrade their networks for the video age, but to provide the necessary equipment.

"If they [Cisco] can't get video to take off, then they're going to have trouble selling a lot of other things," Kerravala says.

To be fair, many signs already point to video becoming a major driver of traffic. Cisco's own estimates say half of all consumer IP traffic will be video by 2012, up from an estimated 32 percent this year. And while CEO John Chambers has talked up Web 2.0 and collaboration quite a bit during the past couple of years, video is a larger topic, and one that more directly affects Cisco's router franchise. (See Will WebEx Change Cisco?, Chambers at NXTcomm, and Cisco's Kool-Aid.)

"It’s a valid obsession due to the traffic growth and video being the fastest and thirstiest out all traffic applications on networks," writes analyst Ray Mota of Synergy Research Group Inc. in an email to Light Reading.

The video push comes at a time when Cisco is having to cut back, conceding that the tough economy is likely to linger. CEO John Chambers asserted last week that he's still comfortable with long-term growth predictions of 12 to 17 percent, but for the near term, Cisco is working at trimming $1 billion from its budgets. (Among the items to go, incidentally, were many press invitations to attend C-Scape in person.) (See Cisco Predicts Q2 Plunge.)

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