Cisco Systems believes video is the killer app for the next generation of Internet. But that will likely not impact the enterprise for another five to seven years.
Cisco at its C-Scape conference in San Jose beat the collaboration drum in laying out its strategy and vision for the future of networking, with video playing a key part of collaboration.
But while Facebook, MySpace and other Web 2.0 technologies are pushing network service providers like AT&T to deploy major upgrades today, those same technologies are not a network growth driver in the enterprise today.
U.S enterprises such as Chevron today are cautious in their approach to Web 2.0 and collaboration technologies, said Louis V Ehrlich, CIO of Chevron's Global Downstream Operations in a panel discussion at C-Scape.
"We're playing with some things [such as Microsoft's SharePoint]…we have a few pilots. We are consciously incompetent [with using Web 2.0 technologies]," he said.
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Chevron is using video communications to a limited extent today, but "these are early days for it," Ehrlich described. "We are trying to figure out where it makes sense," he added.
The same could also be said for McKesson, which successfully piloted a Cisco TelePresence system and is finding growing interest across its users, according to CIO Randy Spratt, who also spoke on a panel at C-Scape.
As a result, analysts don't expect that video and collaboration is going to adding significantly to growth in the network infrastructure market in 2008.
Cisco in its first fiscal quarter of 2008 saw a slight drop in its U.S. enterprise business, which industry observers attributed to several forces.
One such factor was the meltdown in the sub-prime mortgage market, where some financial services firms saw "multi-billion write-offs," and put the brakes on near term IT project spending, described Abner Germanow, director of enterprise networks at market research firm IDC.
Page 2: Cisco Views Video as Future Internet Killer App
"So far it's been fairly isolated. The data we have from the channel says this quarter looks fine. Sub-prime is taking the sheen off growth. There are questions about the depth in the drop in the housing market, but the fundamentals driving network spending are solid," Germanow said from the C-Scape conference.
And with Cisco's emphasis on growing its global footprint, a 1 or 2 percent slow down in U.S enterprise spending is a drop in the bucket compared to the growth it saw in its business in both China and India, according to Frank Dzubeck, president of Communications Network Architects, a consulting company.
"Cisco's business in the enterprise is up 30 to 40 percent in India and China. An enterprise downturn (here) is not perceived on a global basis," he said.
Another more local trend affecting U.S. enterprise business was a major network refresh that many U.S enterprises have undertaken in the past couple of years, according to Rob Whiteley, industry analyst with Forrester Research.
"There was a large, bulk refresh that made the numbers look good. That was a U.S trend. Overall the enterprise is alive and well because of globalization," he said.
In looking at the next 12 months, IDC chose not to alter its forecasted growth in the LAN switching market, despite the slowdown in the financial services sector. That forecast calls for growth of 16.8 percent growth for 2007 and 14 percent growth for 2008, Germanow said.
And as enterprises come to understand how Web 2.0 collaboration technologies can be effectively leveraged, they will likely find the need to upgrade their networks yet again, said Forrester's Whiteley. But, "there will be a digestion period associated with that," he added.
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