Cisco needs to provide hardware tailored for SMBs, Ovum analyst says

SANTA CLARA, Calif. — Cisco Systems Inc. is putting more effort into selling products to organizations with fewer than 1,000 employees and one analyst says the manufacturer needs to build less expensive products specifically tailored for that sector of the market.

“”The trick with the (small

to mid-sized) market is to find a way to serve them where you both give them what they need … and recognize that they don’t have a lot of money to spend,”” said Jan Dawson, Boston-based telecom research director of Ovum, a British technology market research firm.

Dawson, who attended Cisco’s worldwide analyst conference here last month, said buyers in small to mid-sized businesses (SMBs) tend to think of Cisco’s products as high-end.

“”The brand is associated with enterprise-type products, and the big problem with the SMB market is they’ve been historically underserved,”” he said, adding vendors try to sell equipment which is unsuitable because they are actually enterprise products that are “”toned down”” for small to mid-sized firms.

“”It’s either too expensive .. or it’s not functional enough because they’ve stripped it down,”” he said. Dawson added small to mid-sized organizations should be in the market for security and Internet Protocol telephony products, if they have high-speed connections.

“”No matter how small a company you are, the minute you are on a network of any kind, you need security,”” he said. “”The minute you have an always-on network, you’re vulnerable to all kinds of security risks.””

At the conference, senior executives outlined the company’s vision of its technology and strategic direction over the next decade.

“”If you ask people at Cisco how they feel about the company, they would say, “”the best years are still in front of us and we have a lot of room to grow,”” said Charlie Giancarlo, Cisco’s vice-president and chief technology officer.

His “”fantasy”” is for the company to make revenues of more than US$50 billion per year in 2009 (compared to US$18 billion last year), he said. At that time, he predicts the public switched telephone network will “”barely exist”” with most phone conversations travelling over IP networks.

Giancarlo added Cisco has shipped more than four million IP phones.

John Riddell, an analyst from Ajax, Ont.-based Angus TeleManagement Group who attended the conference, said Cisco has an advantage over traditional phone suppliers — who normally sell to telecommunications managers — because it has traditionally sold data products to IT networking staff.

“”Cisco has the edge there because they already have relationships”” with IT managers, Riddell said.

A week before the conference, Cisco announced 20 additions to its Catalyst switching line aimed at the business market. The Catalyst Supervisor Engine 32, for example, lets users add security features, such as denial of service protection, to the switch.

Another product set aimed at the commercial market is the Integrated Services Router (ISR) series announced earlier this year, said Peter Alexander, Cisco’s vice-president of commercial worldwide marketing.

Alexander said 87 per cent of U.S. companies with fewer than 150 employees have never bought Cisco products.

“”That represents a huge opportunity, and that’s what we’re going to focus on,”” he said, adding his company will try to sell existing customers more products.

John Chambers, Cisco’s president and chief executive officer, said in the next few years, the company will focus more on providing SMBs with technology they need.

“”Small to medium companies will be where the majority of people are employed when growth occurs,”” Chambers said during a media briefing. Chambers added he is no longer optimistic he can form a partnership with competitor Nortel Networks Corp., which is currently in a mad scramble to correct financial statements from previous years.

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