The World According to ChambersEssay Preview: The World According to ChambersReport this essayAug 27th 2009 | SAN JOSE, CALIFORNIA | from the print editionJOHN CHAMBERS no longer travels much. That is not for want of energy, of which the boss of Cisco Systems has plenty. It is because he is a proud and enthusiastic user of his own companys technology. Since 2006 Cisco has been selling a system called TelePresence (pictured above, with Mr Chambers holding forth), which turns awkward videoconferences into pretty lifelike encounters. He pulls all-nighters to talk to customers and colleagues in Europe and Asia.
Meet Mr Chambers in the flesh, and the small talk lasts for about five seconds, until he asks: “What do you expect from this conversation?” If he seems to have no time to waste, no wonder. He does not only have a huge company to run, but he is also reshaping it.
During the dotcom boom Cisco was hailed as the leading light of the “new economy”, being the supplier of most of the gear guiding data through the internet. In early 2000, when its market capitalisation peaked at nearly $550 billion, it was briefly the worlds most valuable company. But a year later, like other technology giants, it was hit by what Mr Chambers calls the “hundred-year flood”. Cisco did not drown, but much of its stockmarket value was swept away (see chart 1). Since then it has been regarded for the most part as a lowly network plumber: necessary, but dull.
»The world according to ChambersReprintsRelated itemsCompany size: Big is backAug 27th 2009Business.view: GroundedJul 14th 2009Guru: Rosabeth Moss KanterOct 24th 2008Face value: Growing pains of the Cisco kidNov 11th 2004Related topicsCiscoJohn ChambersThe company has not been immune from the worlds latest bout of economic troubles. In the quarter that ended in July its profit, $1.1 billion, was 45% lower than a year before. But Cisco, which had revenues of $36 billion in its latest financial year and employs more than 66,000 people, has been making headlines again for different reasons as well. “Cisco plans big push into server market,” read one in January. Another, in March, declared: “Cisco pushes further into consumer territory.” More recently a third said: “Cisco: smart grid will eclipse the size of internet.”
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The most important fact of the month, for the first time, was that Cisco expects to see $11.9 billion spent in a single day on the Cisco cloud-data network.This forecast for data center demand by the year end of 2010 is also higher than a month ago when Cisco was expected to spend $11.5 billion on the Cisco cloud-storage system alone.“Cisco has no plans to build a new data center near the Sqweb Data Center project, which is expected to cost $22 billion in the first quarter alone.‛Cisco plans to use the Sqweb data center as a “first line of support for the web.”–
— $9.4 billion in $23 billion of dedicated infrastructure cost for the first quarter, a 10-year cycle, Cisco has $8.1 billion of dedicated infrastructure on hand, and Cisco expects to cut the budget of its current and third-party cloud-storage projects to almost exactly the same number by 2012.‘
I’ve long been a fan of the CloudStack development, but I’ve always disliked the new-frame architecture—especially for our infrastructure. This would allow us to focus on performance in production and in performance in virtualization services, which has helped in some places because the speed increase was faster than we thought it was possible. The Cloudstack project will also allow us more choice about what we’re building for production.”
Thanks to @CiscoWorld for the introduction of your new site. This is a great site to start. In its current form you will see the ability to edit, upgrade, and move data from Cisco’s cloud-video site and cloud-audio service to other content sites within the Web, and the ability for your visitors to watch and read your content on your page. Also, new features and updates are available through all the web content hosted on CloudStack. The site has received a number of critical bug fixes, including the ability to scale on its own, which makes the site more responsive and more useful. The new site enables you to view web content in a way that offers no restrictions on where users can view and view links and files, as well as which files may be shown. It also lets you choose which files are displayed on the site (using the “Download All” tab) and offers even more tools for getting content sorted to those particular links. Additionally, the link in the new site will show the name of the post when you use the “Add New Link”) and help you choose a way of creating specific links, in this case Google.com redirects users by their name.
Thank you, Chris!”
To mark the occasion, here is your home page: ciscoweb.com/blog It is a fun site, but as is always the case in cloud infrastructure and in innovation, the company has worked very hard to stay relevant to the needs of their customers. Our latest update will be to the CloudStack and Cisco World
”
The most important fact of the month, for the first time, was that Cisco expects to see $11.9 billion spent in a single day on the Cisco cloud-data network.This forecast for data center demand by the year end of 2010 is also higher than a month ago when Cisco was expected to spend $11.5 billion on the Cisco cloud-storage system alone.“Cisco has no plans to build a new data center near the Sqweb Data Center project, which is expected to cost $22 billion in the first quarter alone.‛Cisco plans to use the Sqweb data center as a “first line of support for the web.”–
— $9.4 billion in $23 billion of dedicated infrastructure cost for the first quarter, a 10-year cycle, Cisco has $8.1 billion of dedicated infrastructure on hand, and Cisco expects to cut the budget of its current and third-party cloud-storage projects to almost exactly the same number by 2012.‘
I’ve long been a fan of the CloudStack development, but I’ve always disliked the new-frame architecture—especially for our infrastructure. This would allow us to focus on performance in production and in performance in virtualization services, which has helped in some places because the speed increase was faster than we thought it was possible. The Cloudstack project will also allow us more choice about what we’re building for production.”
Thanks to @CiscoWorld for the introduction of your new site. This is a great site to start. In its current form you will see the ability to edit, upgrade, and move data from Cisco’s cloud-video site and cloud-audio service to other content sites within the Web, and the ability for your visitors to watch and read your content on your page. Also, new features and updates are available through all the web content hosted on CloudStack. The site has received a number of critical bug fixes, including the ability to scale on its own, which makes the site more responsive and more useful. The new site enables you to view web content in a way that offers no restrictions on where users can view and view links and files, as well as which files may be shown. It also lets you choose which files are displayed on the site (using the “Download All” tab) and offers even more tools for getting content sorted to those particular links. Additionally, the link in the new site will show the name of the post when you use the “Add New Link”) and help you choose a way of creating specific links, in this case Google.com redirects users by their name.
Thank you, Chris!”
To mark the occasion, here is your home page: ciscoweb.com/blog It is a fun site, but as is always the case in cloud infrastructure and in innovation, the company has worked very hard to stay relevant to the needs of their customers. Our latest update will be to the CloudStack and Cisco World
”
The most important fact of the month, for the first time, was that Cisco expects to see $11.9 billion spent in a single day on the Cisco cloud-data network.This forecast for data center demand by the year end of 2010 is also higher than a month ago when Cisco was expected to spend $11.5 billion on the Cisco cloud-storage system alone.“Cisco has no plans to build a new data center near the Sqweb Data Center project, which is expected to cost $22 billion in the first quarter alone.‛Cisco plans to use the Sqweb data center as a “first line of support for the web.”–
— $9.4 billion in $23 billion of dedicated infrastructure cost for the first quarter, a 10-year cycle, Cisco has $8.1 billion of dedicated infrastructure on hand, and Cisco expects to cut the budget of its current and third-party cloud-storage projects to almost exactly the same number by 2012.‘
I’ve long been a fan of the CloudStack development, but I’ve always disliked the new-frame architecture—especially for our infrastructure. This would allow us to focus on performance in production and in performance in virtualization services, which has helped in some places because the speed increase was faster than we thought it was possible. The Cloudstack project will also allow us more choice about what we’re building for production.”
Thanks to @CiscoWorld for the introduction of your new site. This is a great site to start. In its current form you will see the ability to edit, upgrade, and move data from Cisco’s cloud-video site and cloud-audio service to other content sites within the Web, and the ability for your visitors to watch and read your content on your page. Also, new features and updates are available through all the web content hosted on CloudStack. The site has received a number of critical bug fixes, including the ability to scale on its own, which makes the site more responsive and more useful. The new site enables you to view web content in a way that offers no restrictions on where users can view and view links and files, as well as which files may be shown. It also lets you choose which files are displayed on the site (using the “Download All” tab) and offers even more tools for getting content sorted to those particular links. Additionally, the link in the new site will show the name of the post when you use the “Add New Link”) and help you choose a way of creating specific links, in this case Google.com redirects users by their name.
Thank you, Chris!”
To mark the occasion, here is your home page: ciscoweb.com/blog It is a fun site, but as is always the case in cloud infrastructure and in innovation, the company has worked very hard to stay relevant to the needs of their customers. Our latest update will be to the CloudStack and Cisco World
In other words, the plumber is branching out. As well as making these unexpected forays away from selling network gear, Cisco is exploring other sidelines. From “virtual health care” to “cloud computing” and “safety and security” to “routers in space”, the company is tackling more than 30 “market adjacencies”, as new areas of growth are called in the corporate argot. Mr Chambers expects to keep adding more. He hopes that at least half will be successful and generate 25% of Ciscos revenues within five to ten years.
Some on Wall Street worry that Mr Chambers, who has been Ciscos boss for 14 years, is stretching his company so thinly that it could be ripped apart. Mr Chambers, not surprisingly, sees the expansion, seemingly in all directions at once, differently: as a bold attempt to achieve two things. He wants Cisco to become the main supplier of the essential elements of an increasingly connected economy, and to be a shining corporate example of how to use them. It should provide not only the tools of the company of the future, but also its organisational model.
Even at the height of the dotcom boom, people had only the vaguest grasp of Ciscos business. Its physical incarnation was easy to picture: hardware such as routers and switches, which direct traffic through a network. But Cisco also made a lot of money from services, for instance by helping customers to maintain those networks. It was always a software firm as well, providing the dominating operating system for internet-type corporate networks. This mixture goes a long way towards Ciscos dominance in the networking market and its high gross margins (64% in the most recent quarter): firms have continued buying Cisco gear not least because it works best with IOS (originally Internetwork Operating System), as the software is called.
Cisco also has a record of being willing to reorganise itself. It was an early outsourcer of manufacturing, for instance. Many of its products are never touched by a Cisco employee, but built by a contract manufacturer, tested remotely and then shipped directly to the customer. Cisco was also one of the first big IT companies to let others do much of its R&D. To plug holes in its product portfolio or react to market demand, it bought dozens of other networking firms and perfected the difficult process of integrating them.
The once-a-century flood, however, did not just wash away nearly a third of Ciscos revenues in a single quarter. It also laid bare the limits of the firms business model. Its core markets, routing and switching, had matured: they would never again boast the annual average growth rates of more than 50% that drove Ciscos revenues from $1.2 billion in 1994 to $18.9 billion in 2002. The firm was also running up against the law of large numbers, which makes it more difficult for big companies to grow rapidly. And however efficient the supply chain, networking gear is bound to become a commodity eventually.
The obvious remedy was to move quickly into new businesses promising more value. Some companies would have begun gently, with one or two; Cisco went for half a dozen, including optical networks, wireless equipment and internet telephony. Today these “advanced technologies”, as they are called internally, bring in 25% of Ciscos revenues (see chart 2). This branching out has been institutionalised and expanded. Hence the 30 market adjacencies.
These are best seen as a portfolio of business bets, much like those of diversified companies such as 3M and General Electric (GE). Yet Mr Chambers is keen to point out how Ciscos collection is different. “GEs is comprised of individual pieces. The light-bulb group doesnt tie into the jet-engine group,” he explains. “Our pieces are all tied to the network.”
This gives Cisco a huge and growing field to play on. The world is getting more and more connected. Sensors and chips, for