Has Chambers Tipped Hand On Cisco CEO Succession?11:28 AM EST Tue. Oct. 09, 2012
With speculation rampant over who will succeed John Chambers as CEO of Cisco, Chambers himself isn't ruling out the potential for outside candidates. But there are clear advantages to an internal candidate, he said, and several Cisco observers say the recent promotions of Cisco's top operations and sales executives to the level of president imply the Cisco CEO shortlist is now even shorter.
In an exclusive interview with CRN at Cisco's San Jose, Calif., headquarters just prior to those promotions, Chambers, 63, repeated that he will likely transition out of the Cisco CEO chair within two to four years and hopefully remain board chairman, "barring a surprise." If that transition's done right, Chambers argued, it will be a non-event.
"What I think we've done well over the years together is we've been very predictable," Chambers said. "We do transitions extremely well and if we do our job right, you will see the same transition at the top."
Chambers has been top gun at Cisco since 1995, making his one of the longest tenures in the tech industry. Speculation has amplified over Cisco's succession process, especially given the contrast in recent transitions at other tier-one tech companies, from IBM, which made an orderly succession from Sam Palmisano to Virginia Rometty, to HP's turmoil-plagued transitions from Mark Hurd to Leo Apotheker and Apotheker to Meg Whitman all in the span of two years.
Cisco has planned for succession for decades, Chambers said, but a lot of the previous emphasis had been on "hit by the bus"-type planning -- or a case in which, as Chambers put it, "I mess up."
The way Cisco looks at the CEO transition now, however, is that there's a first tier of three or five potential people, and then a second tier of five or six people Chambers and the other Cisco board members look at.
"That sounds like a lot, but it isn't about who's going to be the CEO. It's about, who are the three to five people who are going to run the company," Chambers explained. "No one would be CEO of Cisco who would not stay if they weren't in the [running] for the three to five people."
In the near term, Chambers said he will provide some top Cisco managers with broader management purviews. Two of those moves came late last week.
They included the announcement that Gary Moore, Cisco's COO and the executive who architected Cisco's massive restructuring, would become a Cisco president, as would Rob Lloyd, Cisco's hard-charging executive vice president of worldwide operations, now president, development and sales, with oversight over Cisco's engineering organization as well as its sales teams.
In addition, Chuck Robbins succeeded Lloyd as global sales chief, another step up following Robbins' move last year to become senior vice president, the Americas. Cisco has not yet disclosed who has replaced Robbins as Americas sales boss.
Moore, Lloyd and Robbins -- along with Edzard Overbeek, senior vice president of global services; Padmasree Warrior, Cisco chief strategy officer and CTO; and Pankaj Patel, Cisco executive vice president and chief development officer -- were several of the names identified by Chambers as being on the list of executives Cisco's board reviews every quarter.
But according to Chambers, Cisco's management depth is what to focus on, not the CEO horse race. During the interview, he called out several engineering leads by name, including Rob Soderbery, senior vice president and general manager, enterprise networking group; Marthin De Beer, senior vice president, video and collaboration group; Kelly Ahuja, senior vice president, mobile Internet technology group; Chris Young, senior vice president, Cisco security and government group; and David Yen, senior vice president and general manager, data center group.
Chambers said Cisco has similar strength in both sales -- "Rob has four to five players who could be the head of any of our competitors," Chambers said -- and in its "world-class services organization."
"What you see is a a management breadth and depth none of our peers have, and the ability to make these transitions in ways that are almost completely transparent," he said.
Cisco partners say the promotions of Lloyd and Moore imply the field has already been narrowed, however.
"They're both great executives," said Gary Alexander, CEO of Alexander Open Systems, an Overland Park, Kan.-based Cisco Gold partner. "Lloyd is awfully well positioned and has been well positioned -- he's got the sales organization. Moore was brought in because of his operational experience. Plus, here are two guys that fully understand technology. We have a lot of respect for them."
Kent MacDonald, vice president, converged infrastructure for Long View Systems, a Calgary-based Cisco Gold partner, agreed there's no reason to doubt a smooth succession at Cisco and that Lloyd and Moore are the likely front-runners.
"From the conversations I've had, those moves appears to be further grooming," MacDonald said. "They're both long-term Cisco disciples and have had various roles across the organization. I don't know if there's a clear favorite but it seems it's going to be one of the two."
NEXT: Chambers: Cisco Transition Should Be Seamless
History has shown that Cisco knows what it's doing, Chambers said, and it has emerged through previous executive and market transitions "dramatically stronger" than before.
"My job and the board's job is to make this relatively seamless," he said.
Chambers didn't commit to whether he thought Cisco's next leader would definitely come from inside the company but said the benefit of an internal promotion would be pretty clear.
"You need to understand that this a board of directors' decision on which I do have an influence," Chambers said. "All of us recognize that there are huge advantages having it come from internal. It is such a complex operation -- our complexity on our ASICs alone is very unique in the industry. Sixty percent of our engineering is in software."
Cisco will benefit both investors and its channel with a smooth transition, observers said.
"Cisco's set the standard in how it does acquisition, with the forethought, planning and respect they give those types of transitions," Long View's MacDonald said. "I think they've been a class act in that regard so it seems likely they'll continue to be the leader of that pack."
"We view the new appointments as a step in the right direction," wrote Raymond James & Associates analysts Brian Alexander and Simon Leopold in a note Friday. "We believe Cisco has management depth, and with planning, a transition can occur. We think a clear communicated plan could alleviate investment community's concerns over succession planning."
Whoever's next to lead Cisco will shepherd the company into an era of unprecedented change, with big data, mobility, data center convergence and social networking all such compelling trends, Chambers said.
Because so many of those transitions are network-enabled, he explained, Cisco has the opportunity to become not only the No. 1 communications company, but the No. 1 IT company and the "best business partner for our customers."
"All these new markets are network-centric," said Chambers. "The opportunities in front of us are the greatest they've ever been."
PUBLISHED OCT. 9, 2012