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Defining Emerging Tech
In June, Cisco Systems started showing off its latest in emerging technologies. At the time, the focus was on physical security, but three other technologies are coming out of the San Jose, Calif., companys incubator: TelePresence, integrated emergency radio and digital signage.
The curious thing is that these are all technology areas that have long-established pedigrees. TelePresence seems like a fancy name for videoconferencing; digital signs are poised to take the place of paper placards posted throughout grocery stores, company reception areas and anyplace that large groups need to see special information; and physical security has long been the province of surveillance cameras.
To find out what Cisco is defining as emerging technology and what companies can expect when old tech gets dressed up in network-enabled clothes, eWeek Labs Technical Director Cameron Sturdevant spent the afternoon with Cisco Emerging Technology Chief Technology Officer Guido Jouret.
In 2005, CEO John Chambers announced that Cisco would take greater risks and build products from emerging technologies. What has come from that?
We have four publicly announced emerging technology areas: TelePresence, IPICS [IP Interoperability and Communications System], physical security, and digital media and signage. We have four others that are still being incubated that we are not ready to talk about yet. What is different since 2005 is that in February 2006 we created the group of which I am the chief technology officer: ETG—the Emerging Technology Group.
The only vocation of this group is to create and incubate these new startups. Weve been deliberately looking for new opportunities, selecting them [and] staffing up a business unit up around them.
How big is the group?
All of ETG today is about 300 people. It is growing. If you take an average business unit, by the time we get to market with a product we typically have 50 to 80 people. As it comes to market and starts to generate more services and add-on products, it will grow to between 100 and 120. As you can see, we are adding more and more businesses, so you can expect that number to continue to grow.
What is Ciscos definition of emerging technology?
We have three categories of products.
The back end is the products weve been selling for the longest, and we call them foundation technologies—routing and switching technologies that we came out with at the beginning of our company.
Then, about 10 years ago, mostly through a series of significant acquisitions, we got into what are called advanced technologies. Things like wireless, unified communication, storage, security, optical. Our main strategy was to buy our way into these markets.
The ATs [advanced technologies] were at that time considered the areas that were growing more quickly, but they were still small. They were having a trickle-down effect into the foundation products. The result is that our routers and switches today can handle voice and video. Its not a pure waterfall, because some of the stuff we do in ET [emerging technology] goes into foundation.
Our incubated startups begin with a core team, and then, if necessary, some small acquisitions may be done. But the ETs dont tend to make big acquisitions, at the scale of a WebEx or a Scientific Atlanta. Those are the big bets, the bold leaps, which we do because we see the market opportunity and timing.
What we prefer to do in the emerging technologies is deliberately identify a growth market and grow it. The ET becomes an AT over time. An AT becomes part of the foundation.
For example, this year we consider that unified communications—in terms of sales and coverage strategy—no longer requires a dedicated sales team. We think that this has reached a tipping point. If you want to buy a PBX and a phone system today, the odds are its going to be IP-based.
What are the expectations for a successful emerging technology?
We have a couple of criteria. We assess an emerging technology over its life cycle. From idea to product will be about 12 to 18 months. To decide if the ET is successful, we look ahead for another two to two and a half years. We then look for growth that is two to three times that of Ciscos organic growth. We also look for the ability to start gaining significant market share. We may not be No. 1 or 2 in that marketplace, but we want to start becoming one of the major players.
We also want to make sure that the market we are targeting has the potential to become a billion dollar or more market.
As we look for emerging tech, there may be areas that are very attractive, but they are too small. Once we hit a point within that four-year time period of about 200 to 300 million dollars a year in sales, at that point, the challenges change from gaining awareness with customers and becomes a problem of scaling. Then we propose to move that emerging technology into an AT group.
If we have something related to wireless, then it would join the wireless group, for example. Those are established organizations that are really good at scaling and they would grow it to the billion and beyond.
We expect that one out of four projects will fail. This is because we want to take on some risk; we want to experiment.
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Defining Emerging Tech
Cisco has made more than 25 acquisitions since 2005. Can you explain how these acquisitions are providing enterprises with technology that can be used now and in the future?
Weve had two types of acquisitions, platform and accretive. Our acquisition of Celsius was a platform acquisition that got us into telephony. Our acquisition of Aironet got us into wireless. In the case of emerging technology, we tend to do accretive acquisitions that add on to our in-house incubation. For example, Tivella gave us a digital media signage product, a media player. That was a very nice add-on to our business unit that is focused on desktop video. Because not everyone wants to watch video at their PC, you also have signage products like flat-panel screens and projection systems, so that was a logical add-on.
TelePresence was almost all built in-house. There was a video compression made by a small company called OpGate, but that was it.
How are channel partners included in the emerging technology group?
The whole channel question is a key aspect of our due diligence of entering a market space and looking at possible acquisitions. We look at what complementary assets Cisco already has to get us into a space, then we focus on the outside. The outside is customers and partners. We look at the market to see how we will sell, and this is where our channel partners come in. We have a channel organization that is, of course, adept at selling our products. Quite often they have a lot of skills that in the past we havent tapped in to. It turns out that many of our partners who sell our routers, switches and telephony also have a business in physical security. When we decided to go into the physical security market, we had conversations with our channel partners to ask if they could teach us something. We asked them to validate some of the product ideas we were considering. We also asked for some competitive analysis to see how our product would be perceived against the established players.
For example?
In our physical security area, we have two key areas—gaming and public safety. The choice of those two areas was largely shaped by our partners because they said we know these spaces and we can get you into these markets. Especially in public safety, this was critical because these are large, complex projects. There are many aspects of these projects with which Cisco was intimately familiar, so going through some established defense contractors as a channel strategy worked very well.
Do emerging technologies shake up IT as we know it? If so, what is disruptive about something such as videoconferencing?
To some extent in IT what we find is that nothing is genuinely new, its reinvented. Videoconferencing was first demonstrated at AT&T at the 1964 Worlds Fair [the Picturephone system in New York]. We didnt have broadband, we didnt have high definition, we didnt have flat screens. Weve had many incremental improvements that make it possible today.
I find that when people keep trying to reinvent the same thing over and over again [it] is a good sign. Why? Because it shows that there is a compelling need.
The big difference between videoconferencing and TelePresence is the average utilization numbers. Our data shows that videoconferencing is used 2 to 5 percent of the time compared to TelePresence rooms, which are used 60 percent of the time.
Only now has the technology gotten there to create the illusion of presence, which is what our system does.
Another difference is the business drivers. Business is much more global than it was 40 years ago. We are more concerned about energy. And today travel is difficult and tedious. After a wave of outsourcing what you are left with are the key knowledge workers and intellects in your company. Without TelePresence, what are you doing? You are wearing them down by forcing them to be everywhere at all times. We dont solve the time zone problem.
But the ability to give them more frequent, high-quality interactions and avoiding the need to be there in person, yet to have a credible and high-quality experience, makes a big difference.
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