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What does the next-generation VAR look like? Do they need to be business consultants asking these questions you are? What skills do they need to have as we go through these market transitions?
I think the most important thing to realize is that these market transitions wait for no one. Many of our partners will say what level of differentiation they want to add. So there's room for just making the architectural stack work well together. There's room for saying, 'We need to go sell that in a given geography or industry vertical.' And that's much better than their counterparts that are selling stand-alone unified communications, stand-alone security, stand-alone wireless, stand-alone routers and switches -- which, by the way, were designed to work together.
The major thing is just take it one step up in terms of being able to understand the advantages of architectural sell regardless of how many you sell. The nice thing about the portfolio at Cisco is you can add value on top of that. You can get very sophisticated about what you do from a security perspective, or what does this really mean in terms of video and collaboration to healthcare, or what does it means in safety and security for customers in terms of how do you combine safety and security in an architecture, with any device, any content. I can take it up one level, second level, third level. Then there'll be a set [of partners] that really gets good, that takes this as an architectural play and translates that into either across the board productivity and business model changes, or, in a specific industry: defense, or retail, or manufacturing, et cetera.
But all of us have to move. Merely providing a router and a switch and responding to an RFP is probably not going to make either one of us very much money, although I want them to win it like I want my team to win it. Playing at the level, the ability to make money is going to be more in services so serviceds will be a key element of the future. [We'll] watch our services probably grow five to 10 percent faster than our core business and that should be true of our partners as well. When there'll be some overlap, our golden rule is with [Executive Vice President, Cisco Services] Gary Moore: customer satisfaction. It's about margin and it's about our partners having five to 10 times the services that we do, in terms of revenue and people than we do.
We are an ecosystem partner, and that's a lot different than what HP and IBM are doing. They clearly want it for themselves, and it's an afterthought to have their partners do it.
You mention HP, and with Leo Apotheker now running the show, we've heard a lot of emphasis from HP on becoming a software company and upping its stake as a software company. Does Cisco need to be seen as a software company? What's the plan to invest in software?
So three separate questions, If I can. First, Leo is a good person and a good friend, and I wish he weren't at HP. Same thing with Ray Lane, their chairman. And I will feel very guilty beating them.
[laughter]
You heard it here first!
[laughter]
You did! But it's hard to change the culture and direction of a company. We spend 13 percent of our revenues on R&D. We acquire a huge number of companies every year. In the last year alone, we spent over $6 billion in acquisitions. That's hard to do. Our success rate on acquisitions has been off the chart. The Tandberg success, the Starent success, just amazingly good. And while 90 percent of this industry's acquisitions will fail, ours, 70 percent hit or exceed what we expect. We will have some misses of course, and if we don't, we're not taking enough risk in terms of the direction. So what I'm really saying is that we've got a very good lead.
NEXT: Cisco's Supply Chain Challenges
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