Page Two

By Paula Musich  |  Posted 2004-12-13 Print this article Print

With the growth strategy focused on both business architecture and technology architecture, youre relying heavily on professional services. But youre also talking about an arms length approach to professional services through service providers and systems integrators. Can you really achieve 10 to 15 percent growth without the account control youd have if you were in the integrator position?

Yes. I never compete with partners I must have to win. We have to have IBM, EDS [Electronic Data Systems Corp.], Cap Gemini Ernst & Young Application Service LLC, BearingPoint [Inc.], and the VAR and our distribution partners. Secondly, our core differentiation is the products and how they tie together and whether we can have a leadership product in both stand-alone decisions and [those that involve] 10 to 12 products. That depends on a dramatically lower cost of ownership and higher investment protection. [It also depends on] design and implementation—network transformational services and how you help them apply this to really change the business process, which is the primary reason we do it: to change health care or change education or change productivity within the company.

Like most good ideas we have, its always customers telling us, "This is what we want you to do." It was January of 1996 when two New York customers said the same thing the same day. They said, "Cisco, you have a number of devices throughout our network. We would like to go with a preferred vendor throughout." And I said, "Dont you want best in class?" And they responded, "Youre reasonably close to that. You can fill it out with acquisitions—you seem to do that well. Were after cost of ownership and time to market."

We heard the same thing almost two years ago. In this case, it was actually the Big Three automotive companies who were very direct. They said, "We want you to provide a thin layer of your expertise both on our technology and business processes. We have no problem working with integrators. If you do that, youll get a lot more business from us, and youll have a more strategic role. If you dont do that, we will buy less, and you wont be strategic."

Do you have the alliances with the big players, such as PricewaterhouseCoopers, EDS and even Hewlett-Packard Co.s services unit?

Were very strategically aligned with IBM. We meet with the key leadership within EDS, as well. And were expanding our relationship with HP. I think that speaks well to the change in terms of the systems integrators attitude. When you see them standardize, it means theyre doing it for the exact same reason that customers did it: Its cost of ownership; its practicality on investment protection; its cost of your support because each vendor you support adds more complexity; its a realization the market will probably evolve into an architectural play—not a pinpoint product play. Weve been very surprised that our peers in the industry have not followed this strategy.

Click here to read about how Cisco and IBM integrated their respective data center architectures to further advance on-demand computing. Weve got a pretty good lead. If were right, we will have a major three- to five-year advantage.

Your strategy also counts on customers initiation of new projects to go after new business opportunities or productivity improvements when the market is still in the cost-cutting mode. How do you reconcile your strategy with the current IT spending climate?

We believe in market transitions. As unusual as this sounds, market transitions can be economic; they can be a change in what the customers view as added value; they can be network evolution—moving from [best-in-class products] to a network of networks to added intelligence in the network. They could be industry consolidation. They could be the integration of data, voice and video on an IP infrastructure. I would argue all those are going on. The time to move is well before it becomes obvious what needs to be done because by the time most people see it, its too late. You get the most benefit from your moves during the tough transitions—not during the good. As painful as this downturn was, we came out of it dramatically stronger than we went into it, and we also came out of it with true product leadership and innovation across many products, which we never had before.

This is when we tend to build a culture that accepts change, and change means new people from acquisitions, as well as change in direction and one that is philosophically aligned with letting the customers set your direction. Thats a hard culture to get and really stay with. I would argue all my mistakes are when I move too slow. Well see if we can continue that culture for the next 20 years.

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