Cisco Systems Inc., which dominates the high-end routing market, owes much of its success to staying focused on engineering and sales, said John Morgridge, chairman of the board of the San Jose, Calif.-based network equipment maker.
Morgridge,
who was in Toronto Tuesday for his company’s 20th anniversary, described Cisco’s work in philanthropy and education, and the corporate culture he encountered when he was appointed chief executive officer in 1988 of the then-35-person operation.
“”We stayed very focused in the (networking) space,”” Morgridge said of the company’s early days in the mid-1980s. “”We had companies that had products that competed with us, but they tended to get diverted, they got off on tangents and didn’t stay focused. Cisco did, and it proved to be the successful strategy.””
Morgridge, who spoke at a luncheon for industry analysts and journalists, said Cisco’s focus on engineering and sales also contributed to the growth of the firm, which had net earnings of US$4.4 billion on revenues of US$18.5 billion last year.
One analyst who attended Morgridge’s luncheon said Cisco also owes its success to the burgeoning Internet Protocol (IP) telephony market.
Ronald Gruia, enterprise communications program leader of Frost & Sullivan‘s Canadian operation, said Cisco benefits from voice over IP (VoIP) adoption not only by selling IP private branch exchanges and phones, but also by selling the equipment necessary to allow data networks to handle voice traffic.
Gruia added for every dollar an organization spends on VoIP, it spends $3 on upgrading its IT network. But Cisco also owes some of its success to the shortcomings of competitors such as Nortel Networks Corp, said Albert Daoust, director of special projects at Toronto-based Evans Research Corp.
“”Despite what an excellent company they are, (Cisco has) most certainly benefited from serious mistakes on the parts of their competitors,”” Daoust said in an interview. “”With better quality management at Nortel, they would not be nearly in the position they are in.””
Daoust, who did not attend Morgridge’s speech, said Nortel, which has repeatedly delayed the restatement of its revenues for the past three years, could threaten Cisco’s market share but only if it is broken into smaller firms focusing on voice and data.
“”You do not leave a supplier of Cisco’s quality to go with someone having the type of public financial problems that Nortel has had.””
Asked whether he agreed, Morgridge said he doubts “”any particular event, in and of itself, enabled our success.””
But he added when a company grows, every part of the operation is important.
“”You can’t ignore manufacturing,”” he said. “”You can’t ignore finance. You can’t ignore HR. You can’t ignore sales. Companies that fail usually have some strengths but they fail to demand the same level of capability across the company.””
Cisco could face serious competition from 3Com Corp., which partnered last year with Huawei Technologies Co. of China to manufacture routers and other networking equipment, Daoust said, because China is one of the fastest-growing economies in the world.
But he added companies buying Cisco routers have little reason to change suppliers.
“”There are huge risks to leaving the Cisco platform and no obvious benefits,”” he said. “”You have to hate monopoly power – you have to feel that the market needs competition.””
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