Cisco's Chambers Keynote Acknowledges Need for Restructuring
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 Aug. 1.
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 said.
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 and virtual.
"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," Chambers said.
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 previous systems.
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 upgrading.