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.
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 ?