San Jose California: Forget the switches and routers that built Cisco Systems Inc. into a giant, albeit somewhat boring, company at the core of the Internet.
These days, the company is peddling email software, video conferencing systems, cable television boxes—even furniture—as it tries to break out of the data centre and get its products in front of ordinary office workers.
Head-on strategy: Cisco Systems’ headquarters in San Jose, US. The new line of business being developed by the company, known as unified communications, directly challenges some of Cisco’s big customers. Tony Avelar / Bloomberg
“Cisco is kind of like the Madonna of networking,” said Mark Sue, an analyst with RBC Capital Markets. “It is continuously trying to reinvent itself.”
The effort directly challenges a main area of growth for some of Cisco’s big customers, including International Business Machines Corp., Oracle Corp. and most pointedly, Microsoft Corp.
The line of business, known as unified communications, aims to provide a common set of tools that workers can use to make calls, send email messages, hold Web conferences and send instant messages.
On Wednesday, Cisco plans to announce updates to much of the technology behind the effort, including improvements to its TelePresence videoconferencing software and WebEx collaboration suite.
Cisco’s strategy is an obvious outgrowth of its acquisition strategy. Over the last four years, the company, which is based in San Jose, California, bought 36 firms, including WebEx Communications Inc., a Web meeting specialist, for $3.2 billion (Rs14,656 crore today). In recent weeks, Cisco also picked up PostPath Inc., a maker of email software, and Jabber Inc., a leader in corporate instant messaging.
Although Cisco has not yet formally bundled all of these services together into a single suite, the company said it intended to move in that direction.
Microsoft, the maker of Windows and Office software, is not amused. The company dominates the market for the communications software used by office workers and takes in more than $1 billion in annual revenue from its SharePoint collaboration software, which executives consider one of their shining stars.
Zig Serafin, the general manager of Microsoft’s Unified Communications Group, said Cisco’s core business was “under siege” and that had forced the company into unfamiliar territory as a software player. “They are trying to stick together acquired applications, and the approach they have taken is largely piecemeal,” he added.
Nikos Theodosopoulos, an analyst at UBS AG, said Cisco’s move could have consequences. “We’ll see if Microsoft will try to do more business with Cisco competitors like Juniper, or Nortel, or whomever,” he added.
The unified communications initiative is still a small part of Cisco’s $40 billion annual revenue. Cisco hopes it becomes significant in its own right, but more important, executives hope to drive more network usage and related sales of the company’s Internet hardware and software.
The flashiest part of Cisco’s effort is TelePresence, an elaborate videoconferencing set-up that includes video cameras, huge displays and even the surrounding desk and leather chairs. For about $299,000 a room, a company can smoothly conduct a virtual meeting across the world.
Cisco will now extend that technology through a programme it calls Expert on Demand. Customers, or employees will walk up to a videoconferencing terminal, press a button and be routed to the person they desire.
“You could TelePresence into a bank where you might have a loan officer shared between multiple branches,” said Donald R. Proctor, the senior vice-president of Cisco’s software group. “This allows that one loan officer to meet with people in various locations, or for someone to punch ‘home loans’, or ‘auto loans’ and be directed to the right person.”
Although its rivals offer some videoconferencing ability, none of them is quite as elaborate on that front. Google Inc. is focusing on offering cheap collaboration tools over the Internet, Oracle just announced a new suite of software called Beehive that meshes with its database applications and Microsoft integrates its tools into Outlook and Exchange.
The rise of software that is so tied to the basic communications functions delivered by the Internet has resulted in some peculiar changes in the technology landscape.
Google, an Internet search and advertising company, makes its own servers and switches, while going after everything from corporate email to mobile phones. Amazon.com Inc. grew up shipping books and vacuums to consumers and now rents out its data centres.
Cisco, which sells more and more switches to power these services, could soon end up pushing its software into your home via the television set-top box. The company bought Scientific-Atlanta Inc., a maker of cable television boxes, for $6.9 billion in 2005, and Cisco has publicly said it is thinking about ways to take advantage of that entryway.
“Go forward a couple of years, and I believe we’ll be sitting watching TV with instant-message windows open to our friends and webcam images of them in a sidebar,” said James Governor, a software analyst at RedMonk.
©2008/THE NEW YORK TIMES