Cisco CEO John Chambers acknowledged that the company urgently needs to restructure as part of his Cisco Live keynote in Las Vegas, where he also discussed corporate plans to focus on collaboration, virtualization and video.
While Cisco Systems continues to innovate, it has become too complex and
needs to become more streamlined and easier to work with, CEO John Chambers
said in his opening keynote at the Cisco Live show in Las Vegas.
As a result, Chambers acknowledged the company will undergo a restructuring,
although he didn't disclose any specific plans for layoffs.
Cisco needs to focus on innovation so that it can remain a networking
leader, execute faster and more simply, and have a leaner organization,
Chambers, said in a 90-minute keynote presentation on July 12. The
reorganization will consolidate multiple groups working on new products and
streamline decision making, Chambers said.
Industry analysts have predicted that Cisco
will reduce its headcount
by at least 5,000, with about 1,000 employees
departing under an early retirement program started early in 2011. The rest
will come from layoffs coming after the start of Cisco's 2012 fiscal year on
As part of the simplification process, Cisco will narrow its focus on five
major priorities going forward, including its core networking business such as
routing, switching and services, collaboration, data center virtualization and
cloud, video, and business architecture that tie the various technologies
together to work seamlessly, Chambers said.
"Intelligent networks will be the most strategic asset in IT,"
Chambers said. By focusing on the five main priorities, Cisco will drive the
future of networking and change every industry around the world, he said.
Security will be a "key focus across the top five areas" with
built-in capabilities. "Security will not be bolted on," Chambers
Data center virtualization and going to the cloud will be the "new IT
architecture" because customers are looking for scalability,
cost-effectiveness and on-demand availability, according to Chambers. About 76
percent of new servers in data centers are virtualized, but the goal is to bump
that figure to 80 percent, said Chambers.
Cloud is a combination of software-as-a-service, platform-as-a-service and
infrastructure-as-a-service, Chambers said, noting that "everything is
going to be a service."
Cisco will also make sure all its products and services fit under the four
mega-trends that will change how people work, including mobile, social, visual
"Four years ago we said video was going to be the next voice. Video,
four years from now, will not only be the leading way we communicate, it'll be
the primary form of IT," said Chambers. He said just over half, or 51
percent, of network traffic in 2010 was video, but that figure will rise to 91
percent by 2014.
Video will be a game-changer for enterprises, but distribution, management
and usability will depend on the strength of the network architecture
supporting it, Chambers said. Without the proper architecture, video won't take
off, Chambers said, noting that among major IT vendors, Cisco is the only one
with a whole stack enterprises can deploy for video.
Collaboration will drive innovation for Cisco, Chambers said. In a
demonstration with Jim Grubb, Cisco's chief demonstration officer, attendees
saw how social media and video can be used to share information and improve
work processes. Video will enable virtual collaboration in businesses, as it
will get the experts to the problem no matter where it is, Chambers said.
Chambers acknowledged that Cisco is getting too top-heavy and promised to
streamline its operations. He cited internal complexity, such as the processes
and layers of bureaucracy, as a reason "we became a more difficult company
to do business with." Faster decision-making is the "No. 1 thing"
Chambers wants to see improved, he said.
"If you don't change you get left behind, regardless of size,"
Earlier at Cisco Live, the company announced a major upgrade to its flagship
Catalyst 6500 switches. The announcement focused on the new Supervisor Engine
2T module, which Cisco claimed tripled the performance of the chassis over
New modules add 40G-bps Ethernet capability and 10G-bps Ethernet, up to
eight ports of the latter per slot, without oversubscription. In video, the new
6500 would be able to handle 256,000 multicast routes, compared with 15,000
available from competitors, said Scott Gainey, Cisco's director of switching
solutions. NetFlow has also been enhanced to handle more than 13 million pieces
of network information.
An existing Catalyst customer could expect to pay $38,000 for the upgrade to
Sup 2T, Gainey said. He said customers would get three times the performance
over a comparable system from Hewlett-Packard for one-third of the price by