Defending Cisco: A Turn Around For the US and Entire Industry - Page 2
Finally, there is Cisco’s ambition move into the notorious cutthroat and low margin business of x86 servers. With Cisco’s Unified Computing System (UCS), they have created an amazing compute system that lowers TCO and provides a solid ROI. There is no greater validation of UCS than Cisco’s impressive results as they have reached almost $1 Billion in sales within 2 years. There is no reason to think that Cisco won’t continue a healthy growth curve for UCS and challenge both IBM and HP.
The issue is Cisco doesn’t have the needed software or services business to augment the lower margins of the x86 server business. Sure, Cisco has vBlocks, but that requires a major upfront investment of an approved architecture by a handful of vendors, one which many Enterprises and Service Providers may not be willing to make. Worse yet, has the economics of Cloud computing once again caught Cisco off guard? Will the rise of custom Cloud servers and ARM based servers relegate UCS to the Enterprise based on cost alone?
Most, if not all, of Cisco’s challenges may be traced back to the lack of execution on multiple fronts. Particularly, Cisco’s lack of execution on their strategic vision coupled with the inability to correctly read and react to the “tea-leaves” of the broader IT market. The great news is that John Chambers recognized this issue and made it public within his April 4, 2011 email to Cisco’s employees. The bad news is that cultural and management changes are tricky for all companies regardless of size or market cap. In the end, John Chamber’s own legacy is at stake and he must tighten the reigns of Cisco and take control even if it is against his very nature.
Beyond Chamber’s legacy, Cisco must succeed for the good of the United States and the technology sector as a whole. Cisco is facing global challengers with huge ambitions; Huawei is aiming for $100 billion of revenue within the next 10 years. Love them or hate them, Cisco is an IT powerhouse with phenomenal brand recognition and market power. A weakened Cisco isn’t good for anyone and let’s hope Chambers rights this ship as fast as possible.