John Chambers, who in his two decades as CEO of Cisco Systems has seen the company become the dominant player in a fast-changing network infrastructure space, will step down from his position in July and will be replaced by Chuck Robbins, currently senior vice president of worldwide operations at the company.
Cisco’s board of directors made the announcement May 4, saying Chambers, who took over as CEO in 1995, will resign from the post July 26, though he will become executive chairman and continue to serve as chairman of the board. Robbins joined the board May 1.
Chambers will leave a company he joined in 1991 before assuming the CEO duties four years later. During his tenure, Chambers has overseen an annual growth of Cisco revenues from $1.2 billion to about $48 billion.
The change in leadership, which has been talked about for several years, comes at a time of transition for both Cisco and the data center world it plays in. The company, which has made billions of dollars over the years selling expensive and complex data center systems such as switches and routers, is now having to contend with new technologies like software-defined networking (SDN) and network-functions virtualization (NFV), which some analysts say threaten the company’s financial bottom line.
Those technologies—which essentially remove the network control plane and move networking tasks such as load balancing, routing and firewalls into software—also have given life to original design manufacturers and the commodity white-box systems they make. It’s a challenge that Chambers has dismissed, famously saying in February that the company’s Application Centric Infrastructure (ACI) initiative is dominating the SDN market and that bare-metal switches pose no threat.
“We are pulling away from our competitors and leading in both the SDN thought leadership and customer implementations,” he said. “The market has recognized the benefit of ACI as compared to PowerPoint concepts of aspirational competitors. … We are converging networking, applications [and] security with scale for our ACI platform, and we are doing it with the speed and the scale that no one else is coming close to it. We are seeing no unusual competition in the market, no unusual competition with white-label or white-box [vendors], nor will we in the future.”
The change in CEOs also comes as Cisco is looking to grow beyond its networking roots to become an enterprise IT solutions and services provider, offering everything from the Unified Computing System (UCS) converged infrastructure solution to a broad data and network security portfolio. However, Chambers and other company executives have said that the network will be the foundation of the modern data center, and that Cisco’s expertise in that area gives it an advantage.
In regard to Robbins—who joined Cisco in 1997—Chambers gave a nod to the rapid change happening in the industry and said that the company has “selected a very strong leader at a time when Cisco is in a very strong position. Today’s pace of change is exponential. Every company, city and country is becoming digital, navigating disruptive markets, and Cisco’s role in the digital transformation has never been more important. Our next CEO needs to thrive in a highly dynamic environment, to be capable of accelerating what is working very well for Cisco, and disrupting what needs to change. Chuck is unique in his ability to translate vision and strategy into world-class execution, bringing together teams and ecosystems to drive results.”
For his part, Robbins said he “joined Cisco 17 years ago because I wanted to be a part of a company where I believed the possibilities were limitless. Today, I am even more convinced that Cisco is that company. Over the past 20 years, John Chambers’ vision and leadership have built Cisco into one of the most important companies in the world; a company fiercely committed to delivering for its customers, shareholders, partners, and employees. The opportunity that lies ahead for Cisco is enormous, and the ability to lead this next chapter is deeply humbling and incredibly exhilarating.”
Chambers to Step Down as Cisco CEO, Replaced by Robbins
Despite Cisco’s dominance in the networking space—where is owns about 60 percent market share—and its growing data center business, there are challenges for the company. A growing group of top-tier vendors—such as Hewlett-Packard, Dell, Juniper Networks, Huawei Technologies and Avaya—continue to chip away at Cisco’s lead. At the same time, new competitors are emerging in such areas as SDN and NFV, including VMware, with its NSX SDN platform.
Network virtualization also has given rise to a host of smaller vendors, such as Big Switch Networks, that are gaining traction in the networking space, and driving rivals like Dell, HP and Juniper to adopt a strategy around what Gartner analysts call “brite boxes”—branded networking gear that can run third-party operating systems and software.
And while Chambers may swat aside ideas that white-box makers represent a threat to his company, industry analysts are finding that ODMs are making inroads into all segments of the market, from servers and storage to networking. Infonetics Research analysts in March found that bare-metal switches—hardware that is not locked into a specific operating system or other software—accounted for 11 percent of the data center ports shipped last year, and that number will grow to almost 25 percent by 2019.
“Up till now, bare-metal switching has been attractive mainly to the large cloud service providers (CSPs) like Google and Amazon, who provide their own switch software integrated into data center orchestration and management platforms,” Cliff Grossner, research director for data center, cloud and SDN at Infonetics, said in a statement.”But with vendors such as Dell and HP jumping into the mix with branded bare-metal switches, adoption of bare-metal switching is going to accelerate as tier 2 CSPs and large enterprises endeavor to achieve the nimbleness demonstrated by Google.”
Still, Chambers is confident in Cisco’s direction. In February, he noted that during the last three months of 2014, sales of Cisco network switches grew 11 percent over the same period a year earlier. More specifically, revenues for its Nexus 3000 and Nexus 9000 switches—the foundation for ACI—increased 350 percent, while the number of customers for the Nexus 9000 switches and ACI jumped from 580 earlier last year to 1,700 in the final months of 2014. Cisco has shipped more than 1 million Nexus 9000 installed ports, and the number of customers of the Application Policy Infrastructure Controller (APIC) grew past 300 since the technology was released in July 2014.
“The market has recognized the benefit of ACI as compared to PowerPoint concepts of aspirational competitors,” Chambers said at the time. “ACI and APIC will become the cornerstone of the next generation of networking architectures for many years, much like the UCS has become in the data center.”