Cisco CEO John Chambers Plans to Grow Company's IT Budget Despite Financial Downturn

Cisco Systems CEO John Chambers said that despite the downturn in the U.S. economy, Cisco plans to grow its IT expenses by 10 percent in the next year as the company looks to expand into markets from home entertainment to the data center and virtualization. While speaking at Gartner's Symposium conference, Chambers said Cisco plans to expand its software offerings and also what it does to enhance virtualization in the data center.

ORLANDO, Fla. - While many enterprises might try to cut down IT expenses in the next year as Wall Street's financial crisis continues, Cisco Systems CEO John Chambers is looking to invest in his own company's information technology.

During his Oct. 14 keynote address at the Gartner Symposium/IT Expo, Chambers said Cisco will increase its IT budget by 10 percent in the next year as the networking giant looks to increase its presence in the data center as well as in the home. Chambers said the company plans to put more money and resources into software development, while increasing the types of collaboration tools it uses to cut down on its internal expenses such as travel.

While many enterprises and government organizations view IT as an expense, Chambers said investing in IT at a time when budgets are tightening can actually save money by making it easy for employees to communicate or work collaboratively. The trick, said Chambers, is making sure the IT priorities align with the company's overall business strategy.

"In other environments, IT is viewed as an enabler of the business strategy and in the case of an economic slowdown, you can use IT to gain a huge competitive advantage," said Chambers. "What Cisco is going to do is grow our expenses regardless of what the economy does and in IT that means growing by 10 percent."

When it comes to using IT to help save money, Chambers said IT managers need to look to collaborative tools and Web 2.0 technologies, such as blogging and especially video collaboration technology, to gain a competitive edge. These are also keys to reducing expenses in the long run. For large financial institutions that are merging, Chambers said video collaboration is a way to help make those transactions smoother and more cost effective.

Within Cisco, Chamber said he is putting that philosophy to use. In the past year, Cisco has added to its software engineering teams, including 50 vice presidents, and added more emphasis on collaborative tools and Web 2.0. Chambers said that to better communicate with his employees, he blogs frequently. All these different types of internal collaboration tools have helped Cisco slash $150 million from its travel budget.

As for the company's future, Chambers said Cisco wants to position itself and its networking products as the crossroads between hardware and software. Chambers sees this as another form of collaborations. However, Chambers also said he believes Cisco needs partners, such as Microsoft, to complete its vision.

There are plans to provide more services around the network, which will help bring Cisco technology deeper into the home and into new enterprise vertical markets such as sports and entertainment.

Cisco also has big plans for virtualization and Chambers sees an enormous role for the company's networking products to enhance virtualization. While Chambers did not offer much in the way of specifics, Cisco has already announced that it will team with VMware to develop a software switch that should ease the management and networking of virtual machines.

"Virtualization will first occur in the data center and then come all the way to hub, so you will see us make a series of announcements in the next 12 months," said Chambers. "When it comes to virtualization in the data center, we are going to be extremely aggressive. You will also see us being aggressive all the way to hub, so you won't know if your movie is stalled on your set top box, on your PC or on the television itself ... and our goal is how do you play these all together virtually."