Cisco conference comes after a year of upheaval

SAN DIEGO — Just over a year ago, Cisco Systems Inc. began a major restructuring after several quarters of sluggish financial performance.

When the network and unified communications equipment maker officially opens its annual Cisco Live conference here Tuesday, it will try to show a year’s worth of job cuts, new products and a more focused strategy has revitalized the company, reassured customers and energized solution provider partners.

“They’re coming up on the end of their fiscal year,” observes Bob Laliberte, senior networking analyst at the Enterprise Strategy Group. “This is going to set the tone for what their sales force will be doing for the next year.”

There have been some leaks about what’s coming. In a news release to reporters, the company said last week will make product and strategy announcements about its core networking and virtualization businesses.

Last month NetworkWorld U.S. reported that a Cisco executive told a U.S. investment firm that one announcement at the conference will deal with how it will embrace theyoung software-defined networking technology

SDN allows an external controller to oversee all routers and switches on a network. Backed by a number of large networking companies and the Open Networking Foundation, the potential has mesmerized enterprises and service providers.

But, as Zeus Kerravala of ZK Research says, invoking a hockey analogy, “we’re still in the pre-game skate.”

“Right now there’s a lot of hype,” agrees Laliberte, but there’s also a lot of promise. Enough that companies like Hewlett-Packard Co., IBMBrocade Communications Systems and Juniper Networks have enabled support for an API called OpenFlow, which lets physical switches talk to an external controller on some of their switches to allow companies to leverage SDN.

So far, while supporting OpenFlow, Cisco has held its cards close to its chest on exactly how its customers can implement software-defined networking.

This being 2012, Cisco will likely also talk about cloud computing.

Since deciding for focus on five core areas and largely get out of consumer-related products, Cisco’s financial health has improved. In May it announced record third quarter revenue of US$11.6 billion, the second quarter in a row it hit a record.

There are some worrying signs about the strength of the global economy. CEO John Chambers told financial analysts then that spending in the U.S. public sector, Europe and India were a concern, as was “customer conservatism.”

Since then the global economy hasn’t gotten better.

Meanwhile, Cisco is pushing on with its restructuring. Analysts agree it’s done a good job so far.

“They’re more focused,” says Kerravala. “They’ve given up the sexy allure of the consumer market. While sometimes it may seem like there’s a big pot of gold there, there’s an awful lot of low-margin business and Cisco realized the price premium (they can get) on the enterprise side simply wasn’t there on the consumer side.”

“I also think they had so many initiatives going on that they didn’t have the same emphasis on core networking as they do today. And they allowed companies like Juniper and HP to sneak up on them and take some [market] share.”

“They’re much more aggressive competitively than they were in the past. One of the mistake they made, when you look at the relative fast rise of companies like Riverbed [in WAN optimization], F5 [in application delivery controllers] and Aruba [in enterprise Wi-Fi] is Cisco had left those companies dictate the terms and conditions of competition … and when you do that it’s hard to win.”

Today, if a company says something about its product that “stretches the truth, Cisco’s not afraid to call them on it.”

That in turn makes customers “take another look” at Cisco, which in some cases is all it needs to win business, or at least not lose it.

Cisco has also updated its product lines with competitive models, he said – for example, added the Catalyst 4000 line. It has fewer features than the 6000-series, which means Cisco can make it more attractive to price-sensitive buyers without deep discounts.

“They’ve been doing a good job of consolidating and optimizing its groups,” agreed Andre Kindness, enterprise networking analyst at Forrester Research, “but they still have a long road ahead of them integrating components (in their lineup) to make networking solutions.” For example, he said, the company still needs to integrate some data centre modules in its Cisco Prime network management platform so its an integrated system.

“Prime is getting a lot of good customer feedback,” he added, “they’ve just got to keep on going.”

The conference unofficially started Sunday with two days of labs and technical sessions for the thousands of network engineers in attendence. Tuesday will start with a press conference on products and strategy, followed by the official conference opening and keynote speech from Chambers.

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Howard Solomon
Howard Solomon
Currently a freelance writer, I'm the former editor of and Computing Canada. An IT journalist since 1997, I've written for several of ITWC's sister publications including and Computer Dealer News. Before that I was a staff reporter at the Calgary Herald and the Brampton (Ont.) Daily Times. I can be reached at hsolomon [@]

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