Chambers: Productivity Key to High-Tech Turnaround

Cisco CEO John Chambers in his N+I keynote claims increased productivity can help pull high technology out of its doldrums.

LAS VEGAS--Buoyant a day after his company reported positive earnings, Cisco Systems Inc. President and CEO John Chambers during his keynote today here at NetWorld+Interop lauded the ability of increased productivity to pull high technology out of its doldrums.

Chambers specifically cited a Labor Department report on Tuesday that productivity--output per hour worked--grew 8.6 percent in the first quarter and recorded its biggest increase in nearly 19 years. Networking applications, built with more availability and security, will be key to pushing productivity even further inside companies and throughout the global economy, he said.

But Chambers said that Cisco and other leading companies are aiming to take productivity higher—into the double digits. Ciscos goal is for 10 percent to 15 percent productivity gains each year over the next five years, he said.

"The old Internet economy tended to focus on speed," Chambers said. "Today its about profits."

Productivity has become increasingly important in the current "show me" economy, where CEOs are implementing technology that helps the bottom line. At Cisco, the implantation of "e-systems" such as e-learning, e-commerce and others is probably responsible for half of the companys profitability, Chambers said.

"When you think about our products that we jointly bring to our customers, it has to generate productivity," Chamber said.

The rollout of network applications comes in waves, and only about 45 percent of companies are even in the first wave with applications like e-commerce and customer support, Chambers said. That leaves much more work and productivity gains to be had. The second wave, as he outlined, includes virtual manufacturing and virtual financials closing, with applications such as e-learning and e-sales in the third wave.

What Cisco has learned is that even within those phases, the greatest increase in productivity comes after the first few years. To make these applications pay off, though, companies must deploy common data network and data architecture as well as focus on business needs and not just the technology, Chambers said.

Yet the biggest risk to increased productivity gains is security, he said. The number of security attacks reported by CERT is on a path to double in 2002, and that comes as employees become increasingly mobile, Chambers said.

"Youve got to make the mobile network secure as you move around the world," Chambers said. "When youre talking security, you need a strategy across your company."

Chambers, during a presentation of a networked home, was distracted a few times by the stock ticker appearing on a television screen in front of him. He had reason to be jovial. Cisco stock, after its strong earnings report, was up about 20 percent on Wednesday and was helping to lead a rally of tech stocks and the market overall.