Recently, a letter to Cisco employees, written by Cisco CEO John Chambers himself, was released to the public. In the letter, Mr. Chambers talks about how Cisco’s strategy has been, and continues to be, sound. Cisco’s operational execution on that strategy is where it has lost its way, according to Chambers.
So Cisco is dumping the Flip digital camcorder unit, axing ūmi telepresence as a consumer-oriented product, and probably dropping some of its consumer networking products. Big deal, right?
It is a big deal, because there’s no way this is the end of this reorganization around what Chambers identifies as Cisco’s five core businesses: routing and switching, data center virtualization/cloud, IT architectures, collaboration, and video. This does tell us what Cisco won’t be doing though.
Cisco won’t be killing off their server and storage products. It won’t be killing off WebEx, as that’s a key piece of their collaboration business. Cisco also isn’t eliminating the rest of their video-related products, though some journalists are questioning why Flip isn’t a part of that business anymore.
No. What Cisco is doing it getting back to what made it successful – the boxes it sells that make the Internet, and enterprise networks, run. Cisco will also continue to develop and build products that extend networks, and cause enterprises to purchase more network gear due to increased bandwidth needs (that’s where video comes in).
Make no mistake – this is not the end of cost cutting at Cisco. Chambers told financial analysts just last week that Cisco needs to cut its expenses by 50%. Eliminating 550 jobs, one product line and some consolidation will not achieve that goal.
Of the products that are left that don’t align with Cisco’s five key businesses, or that are currently influx, I believe that Quad, the Linksys brand, and Eos media server are all in play. Quad doesn’t truly fit into collaboration, the Linksys brand does not have the lustre it once did thanks to numerous missteps in both the hardware and software over the past few years, and Eos does not truly meet any enterprise video objectives.
Enterprise video is about connecting people via video, where Eos is designed to help media businesses develop websites that incorporate audio and video. Eos may survive, but it will be rolled up into another product management team.
Cisco has to do something significant in the SOHO market. Either the Linksys brand has to be killed off in favour of purely Cisco products, or the opposite. In terms of generating and maintaining mindshare at the SOHO level so that small businesses continue to think of buying Cisco gear as the business grows and matures, killing off the Linksys name makes more sense.
ūmi will be re-focused at small businesses instead of consumers, if not dumped entirely. Therefore the logical progression for a small business that wants to buy videoconferencing equipment will be ūmi as a small business, Tandberg products as a medium-sized business, and then Cisco TelePresence at the enterprise level.
Though network security is certainly a prerequisite to selling networking gear, I’m not so sure Cisco will continue to develop all of the security products it currently does. There are security mechanisms that can be embedded into routing and switching gear, and the ASA line of products have a good reputation. However, I think it’s possible that Cisco will axe other security products or services like IronPort and ScanSafe. At the very least, look for a consolidation towards either products or services, but likely toward services.
This will be a significant change for Cisco. The cuts have just started, and if Chambers wants to cut 50% of its expenses, expect announcements related to cuts to continue for several months yet.