Cisco: Our competitors could give products away

SANTA CLARA, Calif. – Cisco Systems CEO John Chambers doesn’t care if rival network equipment makers can sell their routers and switches for lower prices.

At the vendor’s worldwide analyst conference Wednesday, Chambers boasted customers would still buy Cisco gear even if competitors gave away their products free of charge.

Most companies choose an IT networking vendor that will help them increase revenues, rather than the vendor with the lowest prices, Chambers said during a briefing to international media at the Westin Santa Clara, located a few kilometres from Cisco’s corporate headquarters.

He said the sticker price of the products accounts for only a quarter of the cost of a network’s infrastructure. Half the cost is from service and support, while the other quarter comes from the cost of housing the gear – such as air conditioning.

“We believe customers will make their decisions on how does networking become a platform, not on individual boxes,” he said. “Our competition could in theory give it away and we would still be in a better position.”

The “network as a platform” was a common theme throughout the sessions at the three-day conference, which attracted about 400 IT industry and investment analysts.

Cisco announced several initiatives, including application networking services (ANS), which is part of the company’s service-oriented network architecture (SONA).

SONA is a “framework” for enterprise networking, rather than a specific product, but will allow for virtualization, meaning different components – such as storage and security – from different vendors can be used as a “virtual pool.”

One of the goals of ANS is to make networks more “application-aware,” so the networking components recognize specific applications or messages, rather than simply packets and protocols. This has several advantages, company officials said, including reducing delays in transferring files and processing applications over wide-area networks.

Both SONA and Cisco’s previously-announced next-generation networks (NGN) initiative form the “building blocks” of the vendor’s vision of the network as an IT platform, Chambers said.

“We believe that network IT will become the platform — in other words, you will access it from any device any time anywhere in the world over any combination of networks and you will have no idea where the information is stored, where it’s processed, where the application resides,” Chambers said. “That’s a vision you have to plan for five to 10 years out. When we started on this path five years ago, many people were not comfortable with it and nor were our customers. Today, almost 100 per cent of our customers expect it to evolve that way.”

But the company needs to convince both its integrators and potential customers that SONA will help customers increase their profits, according to a Canadian analyst who attended the conference.

“If you look at SONA, it’s really about being able to converge all these different protocols,” said Ronald Gruia, enterprise communications program leader for Frost & Sullivan Canada. “There are over 200,000 Cisco certified folks, and they’re going to have to discover what this is.”

Cisco will have to point to examples in specific industries of how SONA works, Gruia said.

“To convince the CIOs, more than anything else, they’re going to have to say ‘what are the cost savings I can realize over a period of time?’”

Cisco has all but given up on forming a reseller partnership with Nortel Networks Corp., Chambers suggested. Last April, during Cisco’s partner conference in Vancouver, Chambers had said he “would like to partner” with Nortel, though there had “not been any substantive discussions on that.”

But on Wednesday, he said he was “a little less optimistic” about the prospect of forming a partnership with either Nortel, Lucent, Alcatel or Siemens.

“I’ve tried very hard to get us a partnership for 10 years, and that just did not work.”


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