Cisco's Chambers: Here's How We've Outgunned Our Competitors10:37 AM EST Fri. Dec. 07, 2012
Cisco will launch a dramatic new global marketing campaign, "Tomorrow Starts Here," to signal its goal of becoming the No. 1 IT player in the world and position itself as the most strategic networking and data center vendor for customers.
Cisco Chairman and CEO John Chambers officially unveiled the campaign at Cisco's Financial Analyst Conference in New York Friday. Reiterating many of the same points he made in an October interview with CRN and discussions with other news outlets, Chambers said Cisco can become top dog in IT thanks to its track record of seeing, grabbing and then owning market transitions and the crucial investments it's making in areas such as software, security and emerging markets.
Chambers acknowledged Cisco has many competitors but pointed to the networking titan's track record of outgunning and outlasting all of them.
"Every year there's a new competitor or a new technology that's going to completely leave Cisco behind," Chambers told a group of financial and IT analysts Friday. "We focus on competing [against] market transitions. You get the market transitions right, and understand what that means to a customer, that's how you win."
In an hourlong keynote session, Chambers gave several examples of how Cisco has seized those transitions, including Cisco's bet that service providers would want to settle on preferred vendors and unified infrastructure, and its bet that it could be a data center player, based on the growth of its Unified Computing System and its now 17 percent global market share in x86 blade servers.
The bets Cisco made three to five years ago -- including the premise that IT infrastructure would be an architectural play, not a series of silos -- are validated today by its market success and how well it's doing compared with struggling competitors such as Hewlett-Packard, Juniper and Huawei, Chambers said.
"We've left behind almost every good competitor, and that's from doing basics in ways that others have not," he said.
Cisco's done several things well, he explained, including leveraging its $180 billion global installed base and designing its ASICs in such a way that more and better features can be programmed into them over time. Cisco's also staked out a leadership position in services, which Cisco expects will grow from a 20 percent to 21 percent share of its overall revenue to 25 percent and even 30 percent over the next few years. Cisco maintains about 65 percent gross margins in services, he added.
"Most of our sales in the future will be heavily integrated with services," Chambers said, later adding, "Most of our peers have their products in boxes and their services in silos."
In addition, Cisco has one of the industry's best track records in terms of acquisitions. Chambers said Cisco will not enter a market if it doesn't think there's a "reasonable probability" of getting at least 20 percent and hopefully 40 percent market share in that market.
"If you don't have at least 20 percent [of a market], you can get wiped out very quickly," Chambers said.
Cisco plans to stay the course on how it's invested in cloud, mobility and video but invest for growth in areas such as services, security, emerging markets and software, the latter of which is a $6 billion business for Cisco and one that Cisco intends to double within five years. Nine out of Cisco's 10 most recent acquisitions have been in software or cloud, Chambers and Cisco CFO Frank Calderoni highlighted.
The network of tomorrow will be less about client/server technology and more about mobile and cloud, Chambers added. The seven-layer OSI model of networking, Chambers said, will look more like two or three layers: infrastructure, platform and application.
Among other priorities, Cisco will continue to expand in data center and wants to be No. 1 there, Chambers said. Cisco's data center business will have a $62 billion total addressable market by 2015 and is expected to have a 7 percent CAGR.
Cisco also will continue to build its strategic vendor ecosystem, from storage and virtualization players such as EMC and VMware to business application specialists. Cisco plans to be very clear about where it partners and where it competes, Chambers said.
"Our partners, even if they're competitors, trust us," he stated.
Calderoni said that Cisco's expectations remain a 5 percent to 7 percent CAGR for Cisco's overall growth. Software, which was about 13 percent of revenue in Cisco's fiscal 2012, is expected to be as high as 19 percent in five years, he said.
PUBLISHED DEC. 7, 2012