At its annual worldwide analysts day here Tuesday, Cisco officials stayed on message with the company's future vision, in favor of focusing on near-term stategies as it had done in the past.
The man opining about the virtualized world was none other than Cisco Systems Inc.'s (Nasdaq: CSCO) CTO, Charles Giancarlo, whose hour-plus presentation was titled "Endless Opportunities: Technology Architecture, Vision and Strategy." And, while buzzwords like virtualization and convergence mean different things to different people, Giancarlo says their meaning should be quite clear to service providers.
Giancarlo told analysts here that by 2009, many applications, such as security, will move from the physical box to a virtual or software layer of functionality. The consumers of the future will demand new services to be rolled out at a speed that can only be supported by an all-IP network architecture, he said.
Giancarlo used VOIP to illustrate the point. "Voice over IP makes it possible to deliver new services like click-to-dial, Web-based voicemail, custom ring tones, and area code selection today, whereas in the PSTN world you have to [add those features manually] switch by switch."
For the service provider, Giancarlo said, virtualization is another reason to push for an all-encompassing IP network as opposed to the multiple, service-specific networks (ATM, Frame Relay) used traditionally. Specifically, Giancarlo said the service provider's IP network will require:
- A service-transparent aggregation layer
- A packet services edge that's feature-rich
- A service-transparent core
"I think what Cisco is talking about when it says virtualization is doing more with less, taking the multiple networks of today and collapsing all that into one large network," said Legg Mason analyst Timm Bechter, after Giancarlo's presentation.
Further, Giancarlo sketched a totally new content distribution model that will come about as a result of that virtualization.
The new model will consist (from top through bottom) of a content layer, a service and control layer, a network provider layer, and a consumer electronics layer.
The content layer, Giancarlo said, will consist of players like Sony and Microsoft who actually create and market the content moved by the networks.
The service and control layer will be populated by companies such as Google and Yahoo! -- companies that aggregate network users and distribute content.
The network layer is the domain of today's carriers and service providers - players using IP infrastructure to provide a conduit for the flow of content to consumers.
Finally, the consumer electronics layer consists of devices that receive and play the content such as MP3 players, cell phones, and PDAs.
Giancarlo predicts that under the new distribution model, more than 90 percent of major service provider revenue will come from advanced services, and 80 percent of voice traffic will be VOIP.
Cisco will be involved at every level of course, and could realize as much as 60 billion in revenue in 2009 from this new virtualized architecture, Giancarlo predicted.
However, some doubt exists that Cisco can truly play well at every single link in this new content delivery chain.
"I'm not sold on the idea," Bechter said. "I think they may be [better positioned] as opposed to their competition, but certainly not against some other players - I think Microsoft is better positioned to take advantage."
Bechter says a more important question to him and his clients is what Cisco will do in the near term to get the company's growth back into the multiples again. But Cisco's management seems more interested this year in talking about the future. Indeed, technology companies often find their vision for the future tested by the reality of serving shareholders.
"They are stressing 2008 and 2009, saying that their bottom line could be 16 percent," Bechter says. "Based on that, Cisco would have to grow 14 percent per year through 2009, and I didn't hear anything that supports that."
— Mark Sullivan, Reporter, Light Reading
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