Microsoft and Cisco Get Cozy

By Peter Galli  |  Posted 2007-08-20 Print this article Print

Microsoft and Cisco merger rumors are unfounded, according to CEOs Ballmer and Chambers.

NEW YORK – Microsoft and Cisco Systems are working hard together on the future of the data center and, as that gets redefined going forward, it will bring new areas of competition and opportunity, Microsoft CEO Steve Ballmer said August 20. In a discussion held at the Mandarin Oriental hotel here in New York and moderated by Charlie Rose, Ballmer and Cisco CEO John Chambers talked about the growing need for them to work together and to have their technologies interoperate, across those areas where they compete as well as cooperate.
Asked by Rose if there was going to be a merger between Microsoft and Cisco, Ballmer categorically stated that no such move was in the cards, quipping that neither would be willing to work for the other.
Asked what lay behind the newfound friendship and interoperability between them, Chambers said that he was sensing a change among CEOs, who were no longer thinking of IT as an expense, but rather as a tool that can help solve their real business needs. "This is about shared information with an architecture-type approach. The ability for us to solve a common set of customer problems is what drives this and customers dont want competition to pre-vent interoperability from developing," he said. Read more here about John Chambers ruminations on Ciscos future. Cisco had moved away from just being a plumber—"and I was proud to be a plumber"—to transforming how the network, software and hardware all worked together. This change is being driven by the ability to use technology easily and the way in which that drives the personal and work lives of customers, Chambers said. "Video, data and voice are all going to be delivered over the Internet and those load networks will generate a whole new wave of applications around this," Chambers said. "We have to find ways to make all of this work together in the home for consumers—which is a nightmare today—as well as meet the needs of our business customers." Companies either caught industry market transitions right or were left behind, Chambers said, noting that "if you dont take risks during market transitions you let your staff, customers and shareholders down. We know how difficult this is going to be and we do not underestimate the challenges, but we both know that it is necessary, and I trust him [Ballmer]," Chambers said While Ballmer stressed that customers loved the fact that the two firms competed, as this offered them greater choice and lower prices, they were quite clear in their message that they did not want to be penalized for that choice, and wanted the different technologies to all work together. "Its not an either-or situation. The two most attacked things on the Internet today are Windows and Cisco routers. Customers want everything to work together, to work well, and we recognize we have to get that level of sophistication and interoperability to where they want it, or they wont be happy," Ballmer said. Cisco was a good competitor and "my choice is to make things work in those areas where we compete and where we dont," Ballmer said, adding that each company retained the prerogative to compete in those areas that were traditionally the domain of the other and "we just have to be more sophisticated about how these solutions all work together," he said. "Ive got great respect for everything Cisco does, but in those areas where they do the same thing we do, I have more respect for us," Ballmer quipped, noting that the engineering arrogance of its staff should not be taken as competition Chambers agreed, saying they were listening to customers and there were more areas of opportunity going forward than either could ever take advantage of. "The days of being either friend or for are over, the industry is moving too rapidly for that," Chambers said. Customers wanted roadmaps of where their vendors were going as well as how they planned to work together and ensure that their products interoperated so that they were not caught in the middle, he said. There was a big transformation taking place around how software was evolving and moving towards software plus services, meaning that the future and how all Microsofts solutions played into this was more vague than it had been in the past, Ballmer said. A big market transition was taking place with regard to the convergence of voice, video and data, however "we are only a little ways down this path but we need to push this transition quickly. We also recognize that we need to talk to one another about what we are doing in that regard, in both the areas where we compete and those where we partner," he said. To read about Steve Ballmers request that Microsofts partners embrace SAAS, click here. Chambers pointed to the area of collaboration and how this was happening far more quickly than ever and needed to be quickly communicated to a range of constituencies. "This is the most rapid period of change I have ever seen, and the next wave of technology is the most exciting, and we all need to embrace and take advantage of these rapid transitions, which are being driven in large part by the customer," he said. Asked by Rose for specific examples about where the two companies could work together, Ballmer said that security was the big one as this was an area that could slow down this market transition more quickly than anything else. "There are seven areas involving ten technologies where we have asked our teams to do things and work together, like around security for their corporate networks, management in the data center, and defining new standards for all of that," Ballmer said. Anything that Microsoft could do to deliver more value to customers "gives us the opportunity to make more money and deliver better customer value, and how well we do that will determine how successful we are," Ballmer said. Check out eWEEK.coms for the latest news, views and analysis on servers, switches and networking protocols for the enterprise and small businesses.
Peter Galli has been a financial/technology reporter for 12 years at leading publications in South Africa, the UK and the US. He has been Investment Editor of South Africa's Business Day Newspaper, the sister publication of the Financial Times of London.

He was also Group Financial Communications Manager for First National Bank, the second largest banking group in South Africa before moving on to become Executive News Editor of Business Report, the largest daily financial newspaper in South Africa, owned by the global Independent Newspapers group.

He was responsible for a national reporting team of 20 based in four bureaus. He also edited and contributed to its weekly technology page, and launched a financial and technology radio service supplying daily news bulletins to the national broadcaster, the South African Broadcasting Corporation, which were then distributed to some 50 radio stations across the country.

He was then transferred to San Francisco as Business Report's U.S. Correspondent to cover Silicon Valley, trade and finance between the US, Europe and emerging markets like South Africa. After serving that role for more than two years, he joined eWeek as a Senior Editor, covering software platforms in August 2000.

He has comprehensively covered Microsoft and its Windows and .Net platforms, as well as the many legal challenges it has faced. He has also focused on Sun Microsystems and its Solaris operating environment, Java and Unix offerings. He covers developments in the open source community, particularly around the Linux kernel and the effects it will have on the enterprise.

He has written extensively about new products for the Linux and Unix platforms, the development of open standards and critically looked at the potential Linux has to offer an alternative operating system and platform to Windows, .Net and Unix-based solutions like Solaris.

His interviews with senior industry executives include Microsoft CEO Steve Ballmer, Linus Torvalds, the original developer of the Linux operating system, Sun CEO Scot McNealy, and Bill Zeitler, a senior vice president at IBM.

For numerous examples of his writing you can search under his name at the eWEEK Website at


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