Opinion:if Cisco Moves Into Consumer, What Happens to Enterprise and SP ?

Given that Cisco wants to move into the retail space, what is the impact to the exist­ing cus­tom­ers ? What hap­pens to the focus and com­mit­ment that Cisco gives to its mar­ket lead­ing products, and the com­mit­ment to R&D ?

What hap­pens to product development ?

To start a new product cat­egory will require a huge com­mit­ment in fin­ances and man­age­ment resources. It seems reas­on­able to sug­gest that money will be reduced to the core product port­fo­lio to make and grow this new market ?

I think we have already seen the effects in the last year. Cisco must have been plan­ning and devel­op­ing for more than a year to get to the announce­ment phase and will have been pour­ing resources into the retail/​consumer pro­ject. In 2008 we saw the pre­ma­ture launches of the Nexus 5000 and 7000, and the ASR 9000. Both of these fam­il­ies are ship­ping with no fea­tures, lim­ited line cards, and zero gen­er­a­tion super­visor engines. If you buy the Nexus today, you will be fork­lift­ing all com­pon­ents within a year or two. And the ASR 9000 has no line cards or super­visors, only back­plane and soft­ware spe­cific­a­tions. I call this a long­horn announcement.

Marketing reduc­tion ? Here’s hop­ing they all move to retail

A retail product requires vast quant­it­ies of mar­ket­ing to pro­mote the product and build aware­ness. Cisco is already heav­ily loaded with less than excel­lent mar­ket­ing resources, increas­ing the mar­ket­ing com­mit­ment and size could shift the com­pany emphasis away from engin­eer­ing and tech­nical lead­er­ship, into a retail focus ? “Perception is real­ity after all”. We saw this hap­pen at HP a few years back, when the printer /​ ink cart­ridge BU had so much mar­ket­ing that it skewed to com­pany to retail. In one purge they got rid of 3500 mar­ket­ing staff in 2002 becuase there was so much bloat (which begs the ques­tion, if you ditch 3500 mar­ket­ing people, HOW MANY WERE LEFT ?).

What hap­pens to new Security products ?

We have seen cri­ti­cism of the CS-​​MARS and Clean Access products in recent weeks. Is this another symp­tom of the man­age­ment los­ing focus ? These are com­plic­ated, expens­ive and vital products to Cisco Security strategy. A loss of focus might be symp­tom of real problems.

Is Huawei being cut off here ?

Is this move into retail an attempt to keep Huawei in line ? Huawei is com­pet­ing on price, and this is likely to give them a lot of air this year.

What am I think­ing now ?

Most of my work is in Enterprise and Service Provider. The Cisco strategy in the SP space is not inspir­ing, or mar­ket lead­ing. It feels more like they have gone into farm­ing mode, and are happy to let Juniper /​ Huawei take some mar­ket share while they take good profits on their exist­ing products.

In the Enterprise space, the immin­ent likely Nortel fail­ure (hard to see Nortel sur­vive) prob­ably means more easy profits for Cisco in the short term. Some cus­tom­ers might have turned to Foundry for eth­er­net back­bone, but I think people are unlikely to do busi­ness with Brocade because the focus on Storage is all wrong, and Foundry is actu­ally a very small player with less gross rev­enue for the entire com­pany than a single Cisco product.

Juniper has their new Enterprise switch, which might get a good start in a time of change and lack of other play­ers. 3Com doesn’t have any­thing that any­one wants and doesn’t seem to have the guts to stand up and go Enterprise. Juniper looks good right now.

Which leaves Huawei and HP. I sus­pect that HP and Huawei are going to cruise like hungry reef sharks into the SME space, say net­works of less than thou­sand eth­er­net ports. The ProCurve gear is mature and proven (and expens­ive), while Huawei is all about price, price and price. I don’t think that Cisco has ever been ser­i­ous about this part of the mar­ket, Cisco switches are poor com­pet­i­tion for many companies.

And HP and Huawei will prob­ably take a bite of lar­ger com­pan­ies too who are strapped for cash.

Concerned ?

Yes, I am con­cerned about the net­works I work on and I will be look­ing closely in the future. Cisco wants to get big­ger, and Cisco has tried to get into the Small Business for years without suc­cess. I think this likely because the profit mar­gins that Cisco wants are too high but Apple has shown that people will pay for qual­ity product, if it is done right. Is this what Cisco is play­ing for ?

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