Chambers Preaches Productivity, Pans Expensing Options

In the opening keynote speech of NetWorld Interop here Tuesday, Chambers told attendees that he thinks IT spending will pick up two to three months after business leaders see an improvement in their own operations. Business leaders will focus their spending on technology that increases productivity, he said. "Technology for technology's sake is not only on the back burner, it's off the stove," he said.

Exactly when that about-face will occur, however, remains to be seen, Chambers said. "The honest answer is nobody really knows" when the economy will turn around, he said.

Chambers also took time out from preaching productivity enhancements to get political, speaking out against attempts to legislate expensing stock options. Cisco and Intel would have underreported their earnings by some $3 billion if they had expensed the stock options they granted over the past two years, he said.

Creating employee ownership through granting options has been key to the growth of all the major high-tech firms in existence in the United States, he said. Forcing high-tech firms to expense stock options when they are granted would push jobs overseas, he said, calling current efforts "the high-tech job export act of 2003."

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In his evangelical style, walking the floor among attendees of the keynote at the Las Vegas Convention Center, Chambers said that wave after wave of applications will deliver productivity gains to businesses. And Cisco practices what it preaches, he said. When the economy went south, Cisco continued to invest in applications that now save the networking hardware vendor $1.94 billion per year, he said.

Through these networked applications, companies can become "networked virtual organizations" that focus on their core competencies and rely on partners and technology for other tasks.

As an example, Chambers said Cisco saves some $275 million per year by using systems to "out-task" manufacturing and order fulfillment while maintaining control through tightly integrating applications and networks with suppliers. Maintaining that control distinguishes "out-tasking" from simple outsourcing, he said.

In-house, Cisco now handles 73 percent of customer support requests through Web-based applications, bringing the cost per transaction down from $250 for a human-assisted technical support call to about $7 per incident, he said.

While the high-tech, retail and finance industries are well on their way to implementing these applications, many other industries have yet to begin, Chambers said. "Adoption of these technologies will vary by industry, but it will happen," he said.