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Cisco Systems CEO John Chambers said it was about three years ago that he saw a transition beginning in the industry—the digitization of business—that would put the focus on the network, the sweet spot for his company for more than two decades.
Trends such as IT mobility, big data, social networking, the Internet of things (IoT)—or what Cisco officials refer to the as the Internet of everything (IoE)—and the cloud would significantly change the way business was run and the technology that organizations would need. Chambers said he wanted to lead Cisco through that transition, and then step aside.
He figured at the time it would take between two and four years. In year three, Chambers is deciding to step down.
Cisco’s board of directors announced May 4 that Chambers, 65, will relinquish the CEO job on July 26 after 20 years at the helm of the giant networking vendor, handing control over to 17-year company veteran Chuck Robbins. Chambers will be executive chairman of the board and remain board chairman, though he made it clear during a conference call with journalists and analysts that the final decisions on Cisco’s direction will lie with Robbins.
The move comes after working with candidates both in-house and externally over the past 10 months, Chambers said. While lauding the other candidates, he said Robbins separated himself from the others in such areas as vision, strategy and execution. It was Chambers’ job to coach the candidates and the board’s job to make the final call, he said. He declined to name the other candidates.
Robbins will remain senior vice president of worldwide operations until July. He joined the board of directors May 1.
The move surprised some industry observers, who expected Cisco President Rob Lloyd to be the next CEO. However, some analysts said the move to promote from within made sense, particularly given the gains the company appears to be making, not only in networking but in the array of other market segments the company plays in, from data center systems and collaboration technology to services and security.
“Having someone who’s been there a long time, and who was primarily focused on sales, will continue Cisco’s momentum, and maybe enhance it,” Mike Fratto, principal analyst for enterprise network systems at Current Analysis, told eWEEK.
Zeus Kerravala, principal analyst with ZK Research, agreed.
“It’s good staying in-house,” Kerravala told eWEEK, noting the strong momentum Cisco has going right now, particularly given the network-centric nature of such trends as IoT and the cloud. “If you brought anyone [from the outside] in, it could disrupt things.”
Cisco saw its fortunes hit their peak during the late 1990s and early 2000s, as the Internet grew rapidly. However, over the past several years, the company has undergone a painful restructuring that has included thousands of job cuts and the shedding of various businesses, particularly around its consumer efforts. Cisco now is looking to transform itself into an enterprise IT solutions and services vendor, touching on everything from data center systems (such as its Unified Computing System, or UCS) and security to unified communications, video conferencing and security. In all, it has 18 business units, according to Chambers.
The $47 billion company also is navigating its way through a rapidly changing networking space that is seeing the rise of network virtualization in the form of software-defined networking (SDN) and network-functions virtualization (NFV). The technologies are aimed at enabling more programmable networks by taking the network intelligence off the underlying hardware and putting it into software. One result has been a growing data center presence of white boxes—low-cost commodity systems built by original design manufacturers (ODMs) that can run a range of operating systems and software.
Cisco CEO Chambers: Retirement Decision 3 Years in the Making
The network virtualization trend also has given rise to new competitors, most notably VMware and its NSX SDN platform. Cisco has responded with its Application Centric Infrastructure (ACI), which offers a combination of hardware and software designed to enable the best application performance.
Chambers noted in February that revenues for the Nexus 3000 and 9000 switches—the foundation for ACI—increased 350 percent in the last quarter of 2014, 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. In addition, the number of customers of the Application Policy Infrastructure Controller (APIC) grew past 300 since the technology was released in July 2014.
ZK’s Kerravala said Cisco is a stronger position now than it was a few years ago, and that the company has done a good job responding to the threat of SDN and white boxes. The changes in business toward cloud and mobility also work in Cisco’s favor.
“The market in a lot of ways is coming to them,” he said. “It is becoming more and more network-centric.”
Current Analysis’ Fratto also said that SDN isn’t a challenge only for Cisco, but for the entire market, as both vendors and customers continue to figure out how best to handle the technology. Cisco has gotten a good start with ACI, and it has only penetrated a fraction of the company’s install base. There’s a lot of room for the company to grow, he said.
One of the advantages Robbins will have is that he is familiar with Cisco’s operations in a wide range of areas, not only technology but also sales and the channel. Chambers noted that 80 percent of the company’s sales come through the channel, and Kerravala said one of Cisco’s ongoing challenges is helping partners that have spent years selling boxes become comfortable with selling cloud- and services-led solutions.
The analyst said it appears that since Chambers and other executives began talking about the cloud and services, partners are embracing the idea. Kerravala said that partners at a recent Cisco conference seem more at ease about the changes, now that Cisco officials seem to have made the right predictions.
In his brief comments during the conference call, Robbins, 49, said he will spend much of the next 90 days talking and listening to customers, partners and employees. However, he said he is confident in the company’s strategy.
“When Cisco gets into execution mode, we can be pretty unbeatable,” he said.
For his part, Chambers said he will stay involved with the company, though he also wants to spend more time with his family, including his four grandchildren, and continue his philanthropy work. A staunch Republican, he also said in response to a question: “I will probably support people in political office, but I probably will not get involved myself.”