Cisco Systems Inc.’s habit of buying its way into new markets looked as though it might backfire not so long ago. But according to one of its Canadian customers, the company has transformed its purchase power into easy network element integration.
Cisco last month announced that the Riseau d’information scientifiques du Quebec (RISQ) had ordered millions of dollars worth of Cisco boxes for its province-wide network, making it the first Canadian company to deploy Cisco’s long-haul optical DWDM platform.
RISQ, which connects Quebec’s universities and other post-secondary institutions via data links, purchased Cisco’s ONS 15454 device for voice, video and data transport, as well as OC-192 support. The organization also bought Cisco’s ONS 15327 metro-edge box and the ONS 15808 long-haul DWDM system to connect distant ends of the network.
Luc Desrosiers, RISQ’s network manager, said the group went with all-Cisco architecture because “it’s just easier to manage all-Cisco.” Such single-mindedness makes for simple network management. “We don’t need to have 10 different management platforms to take care of the network.”
But it’s also proof positive that Cisco has mastered the art of unifying products built by separate companies, he added, saying that Cisco “has been extremely good at integrating those new acquisitions into the main Cisco lines. The (15) 454, for example, comes from Cerant. But the 454 feels like a true Cisco box, with the same management and it behaves…exactly the same way as other Cisco lines.”
Still, not so long ago the question of integration seemed to be the least of Cisco’s worries. Hearken back to 2001, when the company appeared on the verge of comeuppance after a costly spending spree.
That February Cisco was on top of the world, having just released its Q2 2001 numbers. The company’s net sales were up by 55 per cent over Q2 2000. In Q2 2001 alone Cisco acquired three companies, including Waterloo, Ont.-based digital video box builder PixStream Inc. In total, the company spent US$883 million on acquisitions that quarter, according to a Cisco earnings statement.
However, citing an economic slowdown in the U.S. and abroad, the company said in March 2001 that it would reduce its workforce by as many as 5,000. Cisco also shut down PixStream mere months after its acquisition.
By Q3 2001 (May 2001) Cisco’s pro forma net income had slipped from that heady US$1+ billion of Q2 2001 to a less-stratospheric US$230 million.
The high-tech press wondered at the time if Cisco had spent too much money on over-valued start-ups and not enough on its own operations. The question was, would the company emerge from the industry-wide depression a strong contender, or a shadow of its former self?
Cisco survived the market downturn because it was quick on its feet, notes Roberta Fox, president of Fox Group Consulting in Markham, Ont. “When they saw the markets dry up for external capital, that’s when they started to slow down on acquisitions and keeping their own money for operational reserves.”
Fast forward to the present and witness how Cisco’s prospects have changed for the better. The firm is buying again, announcing last month that its purchase of circuit design firm Navarro Networks Inc. had been completed.
And although the economic climate feels only mildly more temperate than it did this time last year, Cisco is also winning business, including the deal that should give RISQ the advanced network functions it seeks, said Pierre Charbonneau, Cisco’s optical support manager in Montreal.
“We were able to design an architecture that put the right product in the right place. We weren’t trying to convince them to buy a product and make it fit… It’s something RISQ does appreciate.”
RISQ also appreciates the amount of work Cisco put into its products to make sure they understand each other. Desrosiers said the 15454 is a prime example of Cisco’s integration know-how and advanced features “that allow us to traffic-engineer the network quite precisely. If you have trunks of OC-48, it’s nice to be able to slice the bandwidth into smaller chunks, to give bandwidth where it’s needed. The (15) 454 enables you to get down to the STS-1 or the 50-Meg level, where it enables you to traffic engineer the network with great care.”
Fox said Cisco mastered the art of integration, thanks to its acquisition strategy.
“They’re probably one of the strongest in the market of integrating acquisitions very quickly.”
As for the deal with RISQ, Charbonneau said the Quebec carrier sought a robust platform to connect Quebec’s educational institutions. The organization opted for the 15454s and 15327s for remote SONET aggregation, and the DWDM-enabled 15808 to transport long-haul traffic between its two largest service areas, Montreal and Quebec City.
Fox said RISQ is typical of carriers, which prefer to work with a single vendor when it comes to intelligent networking gear.