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Cisco Winning Market Perception War

Light Reading
News Analysis
Light Reading
9/24/2003

The service provider community around the world has spoken, and one thing is clear: Some of the stalwart incumbent equipment manufacturers of decades past are stalling out, while Cisco Systems Inc.'s (Nasdaq: CSCO) reputation has soared.

The $146 billion networking powerhouse has successfully transformed itself from an enterprise-focused vendor to the leading telecom supplier in the world, service providers believe.

That’s one of the main conclusions drawn in a new report, published today by Heavy Reading, Light Reading Inc.'s market research division.

The 150-page report -- the Heavy Reading 2003 Telecom Equipment Market Perception Study -- analyzes the results of the largest market perception study of telecommunications equipment and its manufacturers ever undertaken. Cisco "routs" most of its competitors in the survey, while the reputations of incumbents like Lucent Technologies Inc. (NYSE: LU) and Marconi Corp. plc (OTC: MONIY) appear to have passed a tipping point from which it may be impossible to recover.

Here are some details about the survey that spawned these controversial findings.

Heavy Reading’s study is the culmination of a three-month project that began on Light Reading with the publication of an article -- Who Makes What: Equipment 2003 -- inviting readers to help define the telecom equipment taxonomy that is published for the first time in the Heavy Reading 2003 Telecom Equipment Market Perception Study, and which identifies and defines 22 product categories and suppliers.

The taxonomy formed the basis of the largest market perception survey ever conducted in the telecom industry; 770 service provider employees representing more than 300 carriers worldwide responded. What came from those participants was a stunning amount of critical market perception data for 85 publicly held and 219 privately held telecom equipment vendors -- 304 companies in all. A full 40.8 percent of the respondents were from incumbent carriers -- the ones most equipment vendors target for having the largest and most stable capital spending budgets.

Overall, the Heavy Reading survey showed that, across all product categories, 19.4 percent of service providers consider Cisco to be the leader in price. 29.7 percent say its the No. 1 player in terms of product performance. Even more remarkable was that -- again, across all product categories -- 35 percent of respondents perceived that Cisco was the leader in quality, while a whopping 40.2 percent picked it as the leader in service and support.

The report slices and dices the results into various buckets, including overall rankings based on criteria such as company size and the number of product categories in which vendors play.

Table 1: Overall Perception Leaders

RANK Vendor Total Number of Categories Recognition Price Performance
1 Cisco Systems Inc. 20 81.5% 19.4% 29.7%
2 Nortel Networks Corp. 14 75.2% 10.7% 13.9%
3 Alcatel SA 18 64.5% 11.5% 12.1%
4 Lucent Technologies Inc. 15 68.0% 6.3% 9.5%
5 Fujitsu Ltd. 12 50.1% 6.6% 5.5%
Average Ratings Across All Products for Vendors Appearing in 10 or More Product Categories

Source: Heavy Reading



Table 2: Overall Perception Leaders, Part II
RANK Vendor Total Number of Categories Recognition Price Performance
1 Juniper Networks Inc. 5 63.8% 15.7% 22.9%
2 Ciena Corp. 6 59.7% 8.1% 11.0%
3 Extreme Networks Inc. 5 47.5% 12.1% 10.3%
4 Motorola Inc. 5 44.8% 7.7% 6.9%
5 Advanced Fibre Communications Inc. (AFC) 5 29.6% 9.9% 5.9%
Average Ratings Across All Products for Vendors Appearing in 5 to 9 Product Categories

Source: Heavy Reading



Cisco did not beat all in this ground-breaking survey. Its ratings in Europe were weaker than those in North America or Asia. But even there, it only did poorly in a couple of categories.

Nortel Networks Corp. (NYSE/Toronto: NT) beat Cisco in the Sonet MSPP (multiservice provisioning platform) category -- an area that began as the lynchpin of Cisco's service provider strategy. And service provider respondents felt that Juniper Networks Inc. (Nasdaq: JNPR) was superior to Cisco in two out of five core router performance metrics: price and performance.

The Heavy Reading survey will have implications for the marketing plans of telecom equipment vendors the world over. In addition to black-and-white answers and a wealth of quantitative statistical data, the survey also features areas where service provider participants candidly comment on the vendors they use and evaluate.

For instance, in the core router category, Cisco and Juniper received flattering comments. "Only Cisco and Juniper have really proven that they can cut it at this stage in terms of feature set and stability," writes one respondent. Another, however, writes that he was not impressed with Cisco's follow-through after completing an equipment sale: "Cisco will discount to whatever extent to get the business but everything else sucks."

Cisco did not respond to requests for comment on selected survey results.

— Phil Harvey, Senior Editor, Light Reading

To learn more about the report, including selected excerpts, please go here. The Heavy Reading 2003 Telecom Equipment Market Perception Study is priced at $4,950, and includes access to an online database allowing further analysis of all survey results according to search criteria such as geography, customer type, and respondent job title.

The product categories covered in the survey are:
Sonet and SDH Multiservice Provisioning Platforms, Metro Ethernet Equipment (including a separate study of Packet Ring Technology), Ethernet Access Equipment, 10-Gbit/s Ethernet Switches, Core Routers, Multiservice Switches, Edge Routers, Broadband Remote Access Servers, DSL Access Multiplexers, Equipment for Cable/MSO Networks, Third-Generation Digital Loop Carriers, Access/Metro DWDM Systems, Long-Haul DWDM Systems (including separate studies for terrestrial and submarine systems), Optical Switches, Softswitching/VOIP Equipment, IP Service Controllers (including separate studies for content switches/load balancers, traffic management devices, session controllers, and route optimization devices), Test Equipment, Fiber Access Equipment, Free-Space Optics, Broadband Home Gateways, Integrated Access Devices, and Video-Over-IP Equipment.


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dodo
dodo
12/4/2012 | 11:23:49 PM
re: Cisco Winning Market Perception War
"770 service provider employees representing more than 300 carriers worldwide"

It would be interesting to know which segments of the network hierarchy these employees are experienced with.
If some are more familiar with the Enterprise, for sure Cisco will be on their mind and they may not know what goes in the Transport or access for example.

Just an opinion:-)
solver
solver
12/4/2012 | 11:23:48 PM
re: Cisco Winning Market Perception War
To folllow on dodo'd point, it is very likely that a large portion of the survey participant do not have the expertise to evaluate vendors based on price/performance metrics, especially for new equipment introduced within the last 6 months.

Perception does not equal knowledge unless LR can filter the database to only cature responses from people that have at least 6 months of recent experience with that equipment sector. Otherwise, their responses should be discounted heavily or tosses out completely.

I would be interested in getting more understanding of the raw database that resulted from the survey.
hyperunner
hyperunner
12/4/2012 | 11:23:47 PM
re: Cisco Winning Market Perception War
Hi,
I think dodo and solver are missing the point. By the title this is claiming to be a market perception survey.

It doen't matter whether the people who responded even know what a router or an MSPP is. their perception is that Cisco is "good". And that's what marketing is all about.

I hasten to say that I do not use Cisco products directly (I'm an ATM man, and wouldn't touch an MGX with a 10 foot pole). But I understand from my colleauges who do use Cisco routers that...

1. Cisco is not a performance leader.

2. Cisco is not a price leader (hell, they have the best margins of any hardware manufacturer in the industry).

But that don't matter none. There's a continuous, background noise in folks' heads that says "if you wanna buy something other than Cisco, you'd better have a damn good reason". A lot of the time other routers simply don't have the features we need, or they don't have some of the "prestandard" features (like Tag Switching support) that our installed base of Ciscos do.

I've already described this "Cisco problem" as being similar to the "Microsoft problem" we all face with PC operating systems and office productivity suites.

I don't think Cisco has done anything wrong in getting where they are today - quite the contrary. It's their competition who seem to have screwed up big time.

hR.
mdwdm
mdwdm
12/4/2012 | 11:23:46 PM
re: Cisco Winning Market Perception War
This kind of "perception survey" is nothing
but some smokes from cisco.

Cisco still has not learned how decisions are
made in telecom world. They believe carriers
buy their wares by surfing lightreading ,
heavyreading, and cisco websites.


----------
Perception does not equal knowledge unless LR can filter the database to only cature responses from people that have at least 6 months of recent experience with that equipment sector. Otherwise, their responses should be discounted heavily or tosses out completely.
gbennett
gbennett
12/4/2012 | 11:23:46 PM
re: Cisco Winning Market Perception War
Hi hyperunner,

The disappearing message is my fault. I saw your message and noticed you'd used the underline HTML, and you forgot to turn it off, so your whole message was underlined.

So I thought I'd do a good deed and edit the message for you. Well I don't use the editing system very often, and when I did that, ownership of the message changed to me!

Scott noticed and we thought deleting the message and sending you an email was the best solution.

I do apologies. And I'm glad you posted it back.

Cheers,
Geoff
hyperunner
hyperunner
12/4/2012 | 11:23:46 PM
re: Cisco Winning Market Perception War
I could have sworn I posted this message earlier, sorry if it ends up duplicated...

I think dodo and solver have missed the point. This is a Market Perception survey (emphasis on perception).

I don't use Cisco routers directly, but my colleagues who do are very clear that they are:

1. Not the performance leaders.
2. Not the price leaders (Cisco has the best gross marging in the hardware business).

I've said on another thread that I feel that the "Cisco problem" is analogous to the "Microsoft problem". In other words, you have to have a very good reason to buy something other than Cisco. And that kind of pressure comes about through excellent marketing.

We are also often obliged to keep deploying Cisco because we've turned on "prestandard" features that Cisco is very good at coming up with. Stuff like Tag Switching (I understand a lot of carriers are still using Tag, even though MPLS has been available and standard for several years). This kind of thing prevents us from using third party equipment in a lot of the network.

All credit to Cisco for doing a "sufficiently good" job on the product side, and an excellent job on the marketing side. And for shame on the competition for letting them get away with it.

hR.
swprincipal
swprincipal
12/4/2012 | 11:23:46 PM
re: Cisco Winning Market Perception War
...or two for $6999.
skeptic
skeptic
12/4/2012 | 11:23:45 PM
re: Cisco Winning Market Perception War
But that don't matter none. There's a continuous, background noise in folks' heads that says "if you wanna buy something other than Cisco, you'd better have a damn good reason". A lot of the time other routers simply don't have the features we need, or they don't have some of the "prestandard" features (like Tag Switching support) that our installed base of Ciscos do.
-----------------

This is a total misread of the situation in the
market in my opinion. More often that not,
cisco wins business at a business level.
It has nothing to do with features or technology
which to be honest are places where cisco loses
today.

I don't see the "little voices" you speak of
in favor of cisco. What I tend to see is
"big voices" telling people in labs not to
test other gear or "big voices" throwing away
the technical evaluation and going with cisco
because somebody wants to play golf with
John Chambers.

Cisco's quality isn't great. And for most
customers, their customer service is horrible.
materialgirl
materialgirl
12/4/2012 | 11:23:44 PM
re: Cisco Winning Market Perception War
When you are running low on cash (as service providers are), and firing all of your expensive (or smart) lab folks, you end up blindly relying on smart vendors to con (er 'help') you. Pay now or pay later.
dodo
dodo
12/4/2012 | 11:23:43 PM
re: Cisco Winning Market Perception War
Skeptic

Thanks for putting it bluntly.
HR
I did not missed the point when I questioned the "demographics" of the employees.
I have seen cases where an Enterprise Boss influenced the purchase of equipment for Transport.
I realized that he PERCEIVED a certain vendor to be good at supplying him routers ( during the bubble years, financing was easy) but that same vendor was still "emerging" as far as optical equipment was concerned.

Perception or not , there is always a loser.
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