Canada ‘gets it,’ Cisco CEO says

Last time Cisco Systems Inc. CEO John Chambers was in Toronto, he and Ontario Trade Minister Sandra Puppatello announced a memorandum of understanding that would see Cisco and the province invest almost half a billion dollars in research and development facilities in Ottawa and Toronto, the vast majority of the money being Cisco's. It's the kind of cash commitmentment that we don't often see from the other Tier 1 players in the technology market. Given the opportunity at a videoconference briefing on Wednesday night, I asked Chambers what he sees in Canada that maybe the others are missing.
Canadian politicians, at all levels and across all parties, Chambers said, are willing to work with business to foster investment. It's not simply about tax incentives, though competitive tax policy is important. There's a fundamental change in the political landscape. For the last decade, Chambers said, politics has determined economics. For the next decade, economics will determine politics.
“Canada gets it better than anyone else,” Chambers said.
Chambers covered a lot of ground in a wide-ranging exchange with reporters from half a dozen North American media outlets, asking almost as many questions as he answered.
* On Cisco's need to “reinvent itself” some 18 months ago: Symptomatically, the company missed a market transition, Chambers said. Cisco saw its government sales growth drop from 20 per cent to -8 per cent; its competitors didn't. The company was launching new switches on five different platforms, but had to sell more because the refreshed switch lines required fewer boxes for the same throughput. The company's engineering was organized by product, while customers were buying architectures. Major growth was coming from emerging markets, requiring a geographic organizational re-org. And, tellingly, while Cisco was still selling product to enterprise and service provider customers, execs weren't being asked to present to customer conferences on innovation.
Cisco has reinvented itself several times in the past, Chambers said, but the goal now is for the company to constantly reinvent itself, rather than once every five or seven years.
* On Cisco's challenge of Microsoft Corp.'s purchase of Skype in a European Union court: “I have a tremendous amount of respect for Microsoft, Chambers said, and while CIsco will compete aggressively in the collaboration market, there are other areas where Cisco and Microsoft work together. The suit is to ensure Microsoft doesn't block other video calling services from its WIndows platform. Open standards allow the market to move forward faster, Chambers said.
The customer shouldn't have to be the systems integrator, he said. “(Customers say), we not only want you to interoperate, we expect you to interoperate.”
So why didn't Cisco buy Skype before Microsoft picked it up for $8.5 billion last May?
“We had a chance to make that acquisition a long time ago,” Chambers said. But it would have been hard to explain to Cisco's service provider accounts. “We don't compete with our customers,” Chambers said.
* On rumours CIsco is getting out of the set-top box business: While Chambers doesn't normally go out of his way to be in the press, rumours of Cisco pulling out of the set-top box market had to be shot down quickly. How, he asked rhetorically, could he explain to service provider customers Cisco was pulling out of a business where it had 23 per cent growth last quarter, and that those customers depended on for a revenue stream?
“We have a lot of weaknesses, and I have a lot of weaknesses as a leader,” he said, but lack of transparency isn't one of them. “We don't bluff. We don't say anything we don't mean,” he said.
Four years from now, video will be the predominant communications media, Chambers predicted, and most of that video will go to set-top boxes. Pull out of the market? “It's not even discussed at Cisco.”
* On buying, and subsequently killing off, the Flip consumer video camera business: “The timing was wrong in the sense that we couldn't pull it together fast enough,” Chambers said. The FlipShare media file organizer should have been in the cloud, he said. “We got outmanoeuvred.”
* On being active on the mergers and acquisitions front: “We don't compete against competitors. We compete against market transitions,” Chambers said. “Each of us, if we miss market transitions, it's going to cost us.” If he feels the company is missing a window, Cisco will acquire the companies and technologies it needs to stay on top. “Yo're going to see us get more active in the M&A market.

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Jim Love, Chief Content Officer, IT World Canada
Dave Webb
Dave Webb
Dave Webb is a freelance editor and writer. A veteran journalist of more than 20 years' experience (15 of them in technology), he has held senior editorial positions with a number of technology publications. He was honoured with an Andersen Consulting Award for Excellence in Business Journalism in 2000, and several Canadian Online Publishing Awards as part of the ComputerWorld Canada team.

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