Cisco approaches WiMAX with caution

SAN JOSE, Calif. – Cisco Systems Inc. is taking a wait and see approach to WiMAX technology while continuing to market to what it sees as a largely untapped small to mid-sized business market.

Charlie Giancarlo, Cisco’s chief development officer, said his company is not planning on entering the radio market any time soon.

“We’ve been sitting on the sideline for a number of reasons,” he said during a press conference Wednesday at CScape, Cisco’s annual analyst conference. Although WiMAX has been “moving a lot over the past three years,” one of the major applications is last-mile access in regions without adequate wired infrastructure.

“We don’t believe in fixed wireless as a viable technology in the developing world,” Giancarlo said of WiMAX (Wireless Interoperability for Microwave Access), which was ratified as the Institute of Electrical and Electronics Engineers’s 802.16 set of standards.

Giancarlo said because WiMAX operates in licensed spectrum, wireless operators need to agree it is a viable technology. Another concern is the plethora of wide-area wireless technologies already available. “There’s a chicken and egg (problem) there,” he said. “It’s just another wireless technology. That’s not enough to allow Cisco to enter and be successful in that market.”

A Canadian analyst who attended the conference said Cisco officials are smart for taking a cautious approach to the WiMAX market.

“I agree with their point that there’s going to be more network diversity on the wireless side rather than less in the next few years,” said Tony Olvet, vice president of IDC Canada‘s communications practice. “To make a big bet on any single one might be a bit risky, so it behooves them to stay neutral in terms of the various technologies — WiMAX and what have you.”

Although Cisco is not making WiMAX equipment, it is partnering with other vendors in developing technologies using WiMAX as a backhaul, rather than as an access technology, Giancarlo said. For example, he said, the company is working on interfaces to wireless radios so users can run Internet Protocol-based applications over WiMAX networks.

Cisco has also joined forces with IBM Corp. to provide a wide-area wireless network to the county of San Mateo in California, which will initially be based on Wi-Fi but will use WiMAX as a backhaul technology.

Many businesses in the Silicon Valley region do not have access to inexpensive high-speed Internet services, said Brian Moura, assistant city manager of San Carlos, Calif., who spoke on a panel on IP Mobility at CScape.

Cable television firms usually do not install lines in business parks, and many companies are located too far from the telco central office to get DSL. They have a choice of T1 lines “or starting a business on dial up and that’s not acceptable,” Moura said. He hopes to have three cities running the high-speed service by the end of March 2007.

Cisco officials also used the CScape conference to emphasize their small to mid-sized market strategy. In the past, Cisco officials have characterized what they call the “commercial market” as one which is largely untapped, as companies are only starting to buy routers, switches, security appliances, IP phones and wireless equipment.

Most small business “buy reactively,” meaning they tend to purchase network equipment only after they realize it is essential to remain competitive, said Wray Smith, a partner with network equipment reseller 3t Systems Inc. Smith made his remarks at a panel titled “Smart Business Communications: New Business Models for SMBs.” He said for many small firms, the adoption of technology has become critical.

“If you go to a dentist’s office, ask yourself if the computers went down, would they know you were coming in?”

Another panelist, the chief executive officer of a New York-based investment banking firm with 14 employees, said her company was able to get a discount on insurance because they use disaster recovery technology.

Donna Childs, founder and CEO of Childs Capital, said her company is more competitive than firms that do not backup their data off-site, and her use of video streaming and podcasting technology also gives her a leg up on competitors in sub-Saharan Africa.

The most popular Cisco products in the SMB market include the low-end switches and the Adapative Security Appliances, Wray said. “They’re doing a good job of downsizing a lot of those products without stripping out these features.”

Although Cisco products have a reputation of being more expensive than other equipment aimed at SMBs, one analyst compared Cisco’s equipment to Cadillacs.

“Cadillacs are not inherently too expensive,” though some people will opt for a car that’s less expensive, with fewer features, than a Cadillac, said Jan Dawson, Boston-based vice-president for the U.S. enterprise practice with Ovum, a London-based market research firm.

The SMB market was one focus of Cisco’s analyst conference in 2005, but the theme that year was its service-oriented network architecture (SONA), which was described at the time as a “framework” that allows customer to build an “intelligent information network,” a concept Cisco announced in 2002.

Last year, SONA was touted as a technology that could help speed up Web services and transactions, but the concept was barely mentioned this year.

“Articulating SONA and what that means is still a bit of an issue for Cisco,” Olvet said. “They seem to be almost apologetic about it and even when they were asked to articulate it, I didn’t get the sense that they were confident in really laying it out.”

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