Cisco CEO commits to compatibility with rivals

Cisco must move away from proprietary technologies and embrace neutrality and interoperability, becoming the "Switzerland of the internet" if it is going to continue as the leader in the networking industry, the company's chief executive has claimed.

Chambers used his keynote speech to the Gartner Symposium in Orlando to describe his vision for the future of the networking industry. Analysts, however, expressed concern that Cisco is heading towards a more proprietary approach to technology, and one that could leave CIOs finding themselves locked into the Californian company's systems.

Under Chambers, Cisco has spent the last few years broadening its reach into markets away from its core business of enterprise networking.

Cisco now has a significant presence in home and small business networking, through Linksys. It is a leading player in the fast-growing market for IP telephony, with 23 per cent of the total worldwide market for office phones, not just IP handsets. Cisco is becoming a serious player in storage networking, and is bolstering its presence in the wireless and security markets.

Such reach has been Cisco's vision for a number of years, Chambers says, and it is now becoming a reality.

"We felt it would come together, the home would be tied to the service provider, which is tied to the commercial market and which is tied to the enterprise. "We set in place a strategy to be able to do that," he says. "It now looks as if that is going to happen and out product success in each of the categories looks pretty good."

Cisco's objective is not, Chambers explains, to compete directly with other equipment makers. Rather, the company competes on "identifying market transitions, tipping points, lifecycles in the market," he says.

"We try to identify those three to five years before they become major [areas] because it takes that long to build it into the ASICs and into the product architecture." Cisco has a rule that it will not enter new markets unless it expects to take the number one or number two position, and it only enters new markets where its executives believe it really can transform that business.

Increasingly, however, this could both be putting Cisco at odds with the drive towards industry standards and causing it to alienate some of its business partners.

According to David Willis, chief of research for communications at Gartner, Cisco's backing for standards might not be all it seems. "Cisco pays lip service to SIP [session initiation protocol] but its salespeople prefer the Cisco-only protocols. Chambers wants a fully architected solution and to collapse the [IP] stack but that is an anathema to IP networking," he says.

Chambers, for his part, maintains that the company needs to take a leadership position in order to drive markets forward.

We've learned that very often before standards are established you have to enable functionality," he says. "We had to start designing the products for IP telephony seven or eight years ago. You have to design with what you think are the most likely standards of the future. Sometimes you create those standards, sometimes you adjust over time."

The danger for IT departments is that they buy into Cisco's message -- of new features and advanced functionality -- without giving full consideration to the risks involved in taking a Cisco-only approach.

Some chief information officers appear to be so in awe of the networking giant that they spend $10-20m with the company without even inviting competitive bids or asking for a discount, suggests Joe Skorupa, a research vice president at Gartner for enterprise networking.

Skorupa suggests that a company could easily increase their discount from Cisco's list price from 40 to 55 per cent by inviting competitive bids. With advanced technologies, the discounts could be as high as 80 per cent. "There are a lot of folk who, without thinking pay list price, abdicate responsibility for their networks and hand Cisco their chequebooks," he says.

But if some IT directors appear uninterested in forcing Cisco to compete, the company itself faces the challenge of having to compete more and more with its partners, in order to maintain its top-line growth. Cisco's size means that businesses that generate $100m or even $1bn a year will make little impact on its financial position.

Instead, Cisco is being forced to go after business where it will have to compete against IBM and Microsoft. Skorupa cites Cisco's AON middleware architecture as a prime example of where Cisco has found the going tough.

"The middleware layer puts Cisco in competition with long-term partners, most notably Microsoft and IBM," says Skorupa.

"What happened is that Microsoft never joined: when AON was announced they were conspicuous by their absence. IBM later de-committed and now competes directly with AON."

And, although analysts are positive about the technical merits of Cisco's plans in another key area, unified communications, it is significant that Microsoft has chosen to partner with Nortel, not Cisco, in the space.

As Skorupa puts it, far from being neutral Switzerland, Cisco has marched on Britain and Germany. "The gloves are off, and Cisco versus Microsoft in particular will be a bloody street fight," he says.