Chambers Apologizes, Proselytizes

ATLANTA -- Supercomm -- Cisco Systems Inc. (Nasdaq: CSCO) CEO John Chambers had an earnest message for service providers attending his keynote speech here Wednesday morning: Cisco hasn’t done as well as it should have in catering to their needs, but it is resolved to do better.

"Cisco has made a lot of mistakes by not being driven enough by our carrier customers," Chambers told the crowd. "I apologize for that and it will not happen again."

Chambers' mea culpa came near the end of a speech in which Chambers encouraged service providers to use and sell network services, such as distance learning, in order to make both them and their customers more productive -- and to generate more cash. [Note: Actually, he said, "CAY-ush," which sounded even more fun to accumulate.] Citing Cisco as the case study here, Chambers says the company saved $1.7 billion a year over the past seven years, thanks to network applications such as outsourced manufacturing that is closely monitored over the Web.

But Chambers says that the methods of doing business, as well as the applications that are used, must change. You can't just automate the old way of doing things, he says. Using distance learning as an example, Chambers related that, instead of hour-long classes, the sessions only lasted 10 to 15 minutes. And where testing after instruction is the norm in a structured classroom, distance learners prefer to take tests first to see what they need to know.

"We're all going to love it," Chambers says. "[Distance learning] is a bandwidth hog."

Chambers made one thing clear: Service providers have to do more than just provide transport, or voice and data connections, to survive long term. Chambers called transport the "ante" to a much bigger game and suggested that in offering more networked services, carriers should seek the help of partner companies. He also said they should control the whole process via the Web.

But in suggesting such radical changes for service providers, Chambers is selling against two things. First: It takes time for older companies to learn new tricks, and for the period of time it takes to develop new services, money is lost, not saved.

Second: Service providers are fearful of change and might be quick to point out that all the information technology spending between the 1970s and the 1990s resulted in very slim productivity gains, so maybe investing in more networking technology isn't the answer. Chambers addressed the concern, saying that it wasn't until the advent of Web-based applications that productivity really started improving.

Cisco's focus on service providers and the suggestion that they evolve beyond just connecting folks to networks is not surprising. Cisco is in the midst of reorganizing its carrier offerings. After a sharp decline in its optical networking business and at least one busted acquisition, Cisco recently hired Ron Martin from Fujitsu Network Communications Inc. (FNC) to help its credibility with big carriers (see Fujitsu's Martin Joins Cisco). Also, with carriers reselling services like distance-learning applications, Cisco is pushing both ends of the connection -- the telecom gear that carriers install and the access gear that enterprise businesses need to use such services at businesses and homes.

Other keynote highlights:

  • Cisco demonstrated a reference design for a home gateway device that handles analog phone lines, Ethernet, USB connections, 802.11 wireless networking, and copper phone line networking.

  • Chambers donned a FedEx cap when demonstrating how the automated supply chain spits out a product for delivery to a customer. "CEO jobs are different now," he quipped. "Maybe a little moonlighting will help."

  • In a small business demo involving a mock real estate company, Chambers remarked that he might not want a home by a golf course since he was lousy at golf. "I'm sure our shareholders are glad to hear that you're lousy at golf," chimed the employee running the demonstration. "You're taking a lot of risks today," Chambers deadpanned.

    — Phil Harvey, Senior Editor, Light Reading
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    Bumper_car 12/4/2012 | 10:18:14 PM
    re: Chambers Apologizes, Proselytizes Chamber spoke of pushing bandwidth hog applications such as distance learning. He stated that there were two things that he was selling against. One of those was "Service providers are fearful of change...". The reality is that the customers of the service providers are who are not changing. The sound business processes of past years dictate a conservative approch to spending money. This is particularly true of smaller companies. Cisco may be a very large company with deep pockets, but their IT department has a budget that they have to justify. Of the applications that he sited, if they did not do a work flow study to show man power and travel expense savings to justify the applications in the first place, then I suspect that there are a lot of other applications that were put in, that are hogging bandwitdh, that have a higher cost of ownership than what they are saving.

    The people that Cisco needs to convence are the end customers that are paying for services out of their IT budgets, not the service providers. As soon as the end customers are willing to pay for something, the service providers are very willing to do what ever it takes to provide it.
    rjmcmahon 12/4/2012 | 10:18:13 PM
    re: Chambers Apologizes, Proselytizes The reality is that the customers of the service providers are who are not changing.

    Why would they change? They are not being offered anything of value.

    It's like saying that when the farming industry increased its crop yields by orders of magnitude the consumers needed to pay 100x the amount for their food such that all the farmers could keep their obsolete jobs. What happened was that food prices went down and the offspring of farmers had to learn new skills.

    Bit distribution is an efficiency play. Those with bloated unskilled headcounts cannot survive if a free market is allowed to be established.
    umustbejokin 12/4/2012 | 10:18:10 PM
    re: Chambers Apologizes, Proselytizes Yeah, distance learning! That's the answer to all our problems. Just make sure it still has to run over a Router! Yeah, YEAH! That's the ticket!!! It's a bandwidth hog, you're gonna love it. We're gonna have cayush coming out of our ayusses. Yeah that's the ticket! Oh yeah, sorry 'bout that CLEC thayang, won't happen again, I swayer!
    Bumper_car 12/4/2012 | 10:18:09 PM
    re: Chambers Apologizes, Proselytizes rjmcmahon: Why would they change? They are not being offered anything of value.


    CIR bandwidth under local loop PIR was made available with Frame Relay in 1991/1992. There were so many customers that wanted that service that it has become a major product in the industry. Dynamically provisionable T1/DS1s were available in 1995. There were not enough customers that were willing to pay for it to make it profitable. Dynamically provisionable ATM was made available in 1997. Again, not enough customers that were willing to pay for it to make is profitable. Ethernet based packet services was made available in 1999, again, there were not enough customer willing to pay for to make it profitable. This is a repeating story. The right service makes a big impact, the wrong service often doesn't even get noticed.

    The reality is that a lot of the so called "next generation" services have not made it in the market place with the end customers. Convince the end customer that these "next generation" services are cost effective for their business model and they will buy them.
    lob 12/4/2012 | 10:18:08 PM
    re: Chambers Apologizes, Proselytizes > CIR bandwidth under local loop PIR was made
    > available with Frame Relay in 1991/1992. There
    > were so many customers that wanted that
    > service that it has become a major product in
    > the industry.

    It has became the major scam in the industry. I used to work for a telco back then, and have seen the reality: what happened is that FR CIR was set for tail circuits only; the backbone boxes were promptly configured to ignore it.

    ATM is a bigger scam still, but this is a different story entirely :)

    The hard truth is that "committed information rate" does not increase backbone bandwidth or performance; what it does is trading degradation of service during periods of overloads for inability to provide service at all, given the same backbone capacity. That is one reason why nobody had any success with SVC FR offerings.

    Telcos, being in load multiplexing business, quickly discovered that they cannot stay competitive and provide hard CIR guarantees at the same time. So they lied to customers. Which explains why customers who know better keep paying for clear channel private lines.

    Ethernet-based backbones is an example of something so brain-dead, that few people even bothered to touch it. You cannot do packet routing with L2 devices in general topologies, period, so claims of Ethernet backbones being cheaper because "no one will need routers" were completely bogus.

    Having an L3 router with Ethernet interfaces is ok, but Ethernet framing is a poor match for fiber transmission and TDM equipment; to interface with those properly you need SONET/SDH framers. Thus, obviously, ATM and POS interfaces for routers is what everybody's using. Finally, using Ethernet as carrier-customer demarkation point is the industry standard for "managed CPE router" package, so not all "Ethernet-based packet services" are bad :)

    That said, I pretty much agree with rjmcmahon that carriers nowadays offer little of new value to customers. They'd better offer lower prices and more reliable service than chimeric "intelligence" in the networks. Cisco's being very cynical in promulgating FUD regarding the need for new features in routers; what they do is simply conjure justifications for their stuff being so horribly overpriced.
    techdocs 12/4/2012 | 10:18:06 PM
    re: Chambers Apologizes, Proselytizes Only a matter of a few months for Nortel to Lock the Doors. This will make it easy for LU, CSCO, ALA to pick up the slack and provide products that WORK instead of the Garbage Nortel has been shipping for years. Glad to see Nortel and investors give up, its long over due.
    sauron5 12/4/2012 | 10:18:03 PM
    re: Chambers Apologizes, Proselytizes Congratulations! You have just hit the all-time
    high watermark on the LR "flame-bait-o-rometer"
    Please post more useless and uninformed diatribe
    along with some misguided rhetoric thrown in
    for good measure!

    willywilson 12/4/2012 | 10:17:57 PM
    re: Chambers Apologizes, Proselytizes Cisco is desperate for carrier business, but they're not going to get it and here's why:

    1. VoIP is a product without a market. Each resi user who shifts from dial-up Internet to DSL or Cable Modem frees up enough switch fabric for 10 voice circuits. Voila! No more switch exhaust, hence no need for VoIP or soft switch.

    2. The ILECs know that the DSLAMs sold to the CLECs by Cisco and others are one of the major reasons the CLECs want bankrupt. The equipment didn't work, and as a result the ILECs won't touch it with a 10-foot pole.

    3. The ILECs have forced Cisco into the Silicon Valley "TechNet" monopoly restoration lobby along with Intel, Microsoft and Kleiner Perkins, but the Bells remember who started the CLECs to begin with.

    4. At the field level, the telco engineers HATE Cisco and their arrogant, pin-head, data-centric, non-carrier-class, fragile, two-nines, our-shit-doesn't stink, California Uber Alles mentality. They will buy Cisco only when forced to, and they are not being forced.
    coldPack 12/4/2012 | 10:17:55 PM
    re: Chambers Apologizes, Proselytizes There is still enuf draw down $$ until 2004. Not much comfort for investors, but expect something if they hit penny prices, either a reverse stock split or even a play by Seimens, Alcatel or Cisco. Why ?

    They are a trusted Carrier vendor no matter what you say. Cisco is nowhere near Passport in WAN multiservice. Heck, Cisco has no Carrier-Grade story until this fall. Nortel's optical leftovers are still useful to Cisco, Wireless 2.5G & 3G is something Cisco would want.

    But for the play to happen, the other unwanted half of Nortel would have to be burned/sold off.
    techdocs 12/4/2012 | 10:17:53 PM
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