Totally by chance, I happened to catch the interview that John Chambers did with Charlie Rose last week.  If you can’t watch the video, Businessweek did a good recap here.

ciscoFor those of us who have heard John speak before, much of what he covers is common ground.  He speaks to the strengths of Cisco, and to it’s struggles.  He talks about Cisco getting fat, and losing some of it’s ability to made decisions quickly.  He talks about some of the struggles, as he puts it with doing business in the US today.  Nothing earth shattering, nothing new.

The part that was the most interesting, and slightly gratifying to me personally, was when the discussion of acquisitions came up.  Charlie asks about the NDS software acquisition, and follows that up with a question about the Flip video camera.  John’s response was:

The transition was not about a device that could do really cool video … it was about software that goes into the cloud—the way you’re going to really deliver information in the future. We should have been developing our software for the cloud as opposed to the device. And we missed that window of opportunity.

If this attitude is something that is being pushed from the CEO down, and if it’s one that can truly permeate the Cisco fabric (pun intended), than we could see some exciting things come out of San Jose.  I’ve long felt that Cisco needed to work harder to turn the corner from being a hardware company to a software company, much the same way that EMC has worked hard for the last ten years to accomplish something similar with great results.  From an investor standpoint, I would be much more interested in a Cisco that could sustain high margins by creating innovative software solutions that could be leveraged with hardware offerings, rather than in a Cisco that relies on it’s market position to maintain artificially high hardware margins that are vulnerable to competitive and economic pressures.

ciscocius-lg3In July of last year, right before Cisco Live, I published a post questioning what Cisco was doing with the Cius, to very mixed results.  While the feedback I got was generally positive, there was a very strong reaction from Cisco directly. I had some inside help to assist me in navigating the political waters, but it was clear that there were people who were not happy at all with my line of questioning.

Less than a year later, I feel better about sticking to my guns on the original post.  I still feel like Cisco made a mistake by developing for a device, and not sticking to the core software which was the overall value anyway.  Looking at the current Cius data sheet, my primary fear, that Cisco couldn’t iterate fast enough on the hardware and core Android support have proven to be mostly justified.  It looks like legal issues with Google have prevented Cisco from getting access to the 3.0 source code (I don’t know, but I’d guess it’s related to AppHQ), so it’s still running Froyo (2.2) which makes it almost 2 years old and two full versions behind.  And the hardware is still the same as well, although there have been promises that new form factors and connectivity capabilities are coming…

On this topic, I 100% agree with John Chambers: Cisco should be developing software for the cloud (and other tablets) that leverages and enhances the customer’s interaction with the network, not sinking money into a device.  If you asked 100 people on the street to pay $725 for a 7” tablet with wi-fi only and running Android 2.2 with no access to the Android market, you’d quickly find out why the Cius has been finding itself on all the wrong lists.

I have a lot of faith in Cisco, and once they finish becoming the company that John Chambers describes in his interview they will open a lot of eyes, in my opinion.  They still employ some of the most fantastically smart people in the industry, and once that talent is focused in a way that the customers value, the market will respond in a big way.  I’m proud to be part of the Cisco family, and John’s interview just reinforces that.

What do you think?  Is the path that John Chambers lays out one that can help Cisco succeed?  Should they focus more on the software than the devices?  Courteous comments below are always welcome!

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One Response to John Chambers Talks Hits and Misses

  1. Jay Cuthrell says:

    Disclosure [1] — I’m bullish. ;-)

    I think that the Cisco story is important to consider in terms of timeframe [2]. Consider what many categorize as the Cisco offer of 2002 to the Cisco offer of 2012. You can see some amazing inflections if you dig into it beyond just the surface of ‘Cisco makes routers’ and look at the death of ATM, emerging email threats, the massiveness of all things mobile core, the rise of XMPP, scaleable CAS, and on and on… But the real way I see this is the Cisco of 3-5 M&A mega events [3] from now having a massive asteroid impact and reshape something the size of a planet in an undeniable fashion.

    [1] http://fudge.org/disclosure/
    [2] http://www.cisco.com/en/US/solutions/ns340/ns414/ns859/the_art_of_acquisition.html
    [3] http://en.wikipedia.org/wiki/List_of_acquisitions_by_Cisco_Systems