Cisco Rolls Out Roadmaps

SANTA CLARA, Calif. -- Cisco Systems Inc. (Nasdaq: CSCO) will begin publishing blueprints of its product strategy looking three to five years out, part of a "multidimensional chess game" to market entire architectures rather than individual products, CEO John Chambers said Tuesday.

Presenting this morning at Cisco's annual analyst day, Chambers said Cisco's future relies not on selling point products, but on increasing customers' productivity by applying a large-scale technology architecture combined with changes in business processes. The new philosophy will contribute to what Cisco expects will be 10 to 15 percent annual growth during the next four or five years.

It all comes back to the question of how Cisco will compete with Huawei Technologies Co. Ltd. and other Asian competitors, which Chambers believes will put up a significant challenge to Cisco during the next few years (see Chinese Competitors Chew at Cisco).

The key is to emphasize customer productivity. First, Cisco wants to present its products as a combined technology infrastructure, rather than as pieces and parts. Beyond that, Cisco intends to coach customers into changing their business practices to get the most out of new technology. This comes from what Chambers calls a lesson of the '90s, when some customers saw productivity decline if they implemented technology without also altering internal procedures.

Chambers admitted that Cisco will have to make some of its strategy up along the way. Indeed, it appears that the company is going this route because, in a race against the Chinese vendors, it might pay off more to change the argument rather than to try and underprice competitors.

"Our competitors come at us, especially early on, with individual products" and with lower prices, he said -- the latter apparently a reference to the rising Chinese vendors. "If you do it piecemeal, you don't differentiate yourself against the market," Chambers said.

Of course, Cisco's competitors already understand this. UTStarcom, for instance, offers its IP video solution as an end-to-end package based on carrier service needs, rather than selling its video server and other parts individually (see UTStarcom Launches IP TV System).

So even if it's not the newest approach, the strategy does have merit. In one example of an industry just waiting to be transformed, Chambers pointed to the healthcare business, which he said is woefully inefficient due to disparate networks and the lack of a standard electronic patient record.

“There is no common infrastructure to build from,” he said. “With an e-patient record you can eliminate 95 percent of injuries from drug interactions.” Chambers said an intelligent network in this case would touch many key processes in healthcare, including workflow, prescriptions, electronic medical records, order entry, payment processing, telemedicine, decision support, and remote patient tracking.

Along the same lines, Chambers ran through a case study demonstrating a retail store using wireline and wireless networks to identify customers as they enter the store and tailor the shopping experience to their past records (making sure to note that this would all be optional on the customer's part).

Chambers said these ideas came partly from the big three auto makers, each of which has complained about productivity by telling Cisco, "You're not only missing an opportunity, you're slowing us down."

To show where its new plan is going, Cisco will start making long-term roadmaps publicly available, Chambers said. In a sense, the company will be giving away its future plans, which will probably bother some investors. Chambers tried to pre-empt those concerns by noting Cisco's plan ten years ago to publish known flaws in its product line. The move did help the competition and gave the press plenty of fodder to dig at Cisco, but in the long run it improved Cisco's business and its relationship with customers, he said.

Chambers didn't spell out how the new strategy applies to the service provider market, but some clues might be found in the IP NGN concept that Cisco launched yesterday. Similar to Juniper Networks Inc.'s (Nasdaq: JNPR) Infranet initiative, Cisco's IP NGN describes an intelligent network that adapts to a user's location, applications, and preferences (see Cisco Scores CRS-1 Customers and Juniper's Infranet Takes Baby Steps).

— Craig Matsumoto, Senior Editor, and Mark Sullivan, Reporter, Light Reading

For the latest intelligence and analysis of next-generation telecom market opportunities, check out the coming Light Reading Live! event: Light Reading's Telecom Investment Conference, at the exclusive Plaza Hotel in New York City, on Wednesday, December 15, 2004.

materialgirl 12/5/2012 | 1:00:21 AM
re: Cisco Rolls Out Roadmaps This CSCO message is the one IBM has used since Gerstner came on in 1993. At least IBM sells computers. How does CSCO plan to execute their productivity enhancing plan with only a partial (network) solution? Will they buy HPQ? (NOT).
dwdm2 12/5/2012 | 1:00:20 AM
re: Cisco Rolls Out Roadmaps Well, now that IBM is not going to sell computers any more (do they still sell mainframes?), how will that equate with this situation?
optical_man 12/5/2012 | 1:00:19 AM
re: Cisco Rolls Out Roadmaps "At least IBM sells computers."

IBM exited the PC business this morning.....


Lenovo gets rights to use the IBM name for 5 years, and IBM retains an 18% ownership stake.
materialgirl 12/5/2012 | 1:00:06 AM
re: Cisco Rolls Out Roadmaps About half of IBM's revenues come from the hardware and software needed to outfit data centers. The PC part became immaterial long ago. What IBM cares about is their Power chip, Websphere, DB2, zSeries and the like. In 1993 IBM began talking about how they do not sell "piece parts" but systems. Now, with their consulting army, they sell "solutions" and have done so for a decade. It is all about using technology to change business processes for the better. CSCO is a piker here, coming into a well established buzz saw of incumbents, with a partial solution at best.
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