Cisco aims at service provider space

SANTA CLARA Calif. — Using its strength in the switch and routing area as a launching pad, Cisco Systems Inc. is setting its sights on the service provider market.

The audience of the annual Cisco Worldwide Analyst Conference

on Tuesday heard president and CEO John Chambers voice his increasing optimism about the networking and communications market. While acknowledging that the climate will remain a challenging one for the next few quarters, Chambers said that the intensifying focus on convergence and development of intelligent networks is creating significant opportunities for Cisco.

Cisco’s staple routing and switching products for enterprise markets will remain a top priority for the company, said company executives. But the company is also increasing its focus on adding security features to these products to make them a more valuable proposition for branch offices and smaller businesses.

Vice-president of product development and GM Charlie Giancarlo identified growing concerns about the commoditization in the commercial market, but said he feels confident that with a focus on core competencies Cisco can withstand the competition’s maneuvers.

“”This is not something new. It just comes along with different twists now and then,”” he said. “”The commodity players and the other propositions that we see in the competitive space make us run harder and provide better solutions.””

It may also provide for unexpected partnerships. Addressing Intel’s close scrutiny of Cisco and its desire to enter the communications business, Giancarlo said the company remains quite confident that Cisco quality will carry its products over and above Intel and others trying to bite at its heels.

“”Are we concerned about Intel as a competitor? In a word, no,”” he said.

A partnership between Cisco and Intel is quite likely to materialize in the near future, Chambers said. He admitted it’s a move Intel would not have been keen on a short time ago.

“”But I think now Intel would agree that a partnership is the best option for them and for us,”” he said.

Cisco has also planned a renewed attack on the service provider market. Its weak presence in that sector is a frustrating challenge, said Chambers.

Giancarlo said the company still sees a tremendous amount of potential in the space, especially as the adoption of IP telephony increases. Voice-over IP (VoIP) will mean carriers will no longer base their revenues on time and distance. Instead their charges will have to be based on bandwidth and service, he said.

He also re-iterated Cisco’s firm belief in an all-packet future for the telecommunications industry.

“”If you were to walk into a service provider party two years ago and said the future is all-packet, you probably would have gotten lynched,”” he said. “”Today you don’t cause such a stir.””

Cisco is betting that its ability to supply service providers with intelligent, secure networks — which don’t require them to spend the R&D funds building a proprietary network — will win over the community and drive the company’s success in this space, Giancarlo said.

The company may be setting out for a tough battle, said IDC Canada Ltd.‘s director of enterprise networking services Dan McLean, since the barrier to its success in this area is the perception service providers have of Cisco’s legitimacy.

“”The fact is that many service providers still don’t necessarily see Cisco as that company that they’re going to hitch their entire wagons to, in terms of moving forward,”” he said.

While service providers recognize that Cisco comes up with the innovative ideas that end up defining the networking space, McLean said, they often simply don’t have a strong belief in Cisco technology.

McLean said that Cisco’s legacy in the enterprise space has a tendency to scare off the conservative service provider community.

“”The evolution of networking in the enterprise is that it started from a point where it was very flaky, it broke a lot and it gradually got to the point where it was very stable,”” he said explaining that service providers are afraid the same evolution would need to occur in their space. “”Are we going to see products that are a little flaky, that aren’t as reliable as what we’re accustomed to seeing?””

McLean also points out that the stakes are a lot higher when the network is not just something you use to enable your business, it is your business. Service providers feel they need to exercise caution and Cisco has not always been great at recognizing that.

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