Cisco needs to redefine itself as a software company. But Google and Microsoft are way ahead in the "collaboration" game

Cisco Systems (CSCO) reported its fiscal fourth-quarter 2008 financials last week, but while the San Jose (Calif.)-based networking giant beat Wall Street estimates, thanks to the hurdle posed by the law of large numbers, it forecast more modest growth going forward. "The market is clearly in transition, and we will use this time as an opportunity to expand our share of customer spend and to aggressively move into market adjacencies," CEO John Chambers said in a statement.

The question is, which adjacent markets is Chambers eyeing? After all, to move the needle, Cisco needs to find untapped markets it can serve. Such a challenge comes at a particularly difficult time: The telecom market has consolidated in the hands of a few carriers, new opportunities are few and far between, and the overall trend is toward hardware becoming a service.

Where the Growth Is
Therein lies Cisco's solution: It needs to start thinking like a software company, one that assumes that "the network is the corporation." If it does that, it will see that one of the biggest potential areas for growth lies with the (seemingly boring) infrastructure found in data centers, since, as a reader points out, the growing popularity of cloud computing means corporate data centers will increasingly start to look like Internet data centers.

Cisco has already recognized that as the "network" continues to become the focal point around which our digital personal and professional lives revolve, the opportunity to make money will be immense. That's why Chambers never misses an opportunity to talk about "collaboration."

For instance, in the press release announcing the company's latest numbers, he said: "We believe we are entering the next phase of the Internet as growth and productivity will center on collaboration enabled by networked Web 2.0 technologies." But Cisco isn't the only one with this vision—Microsoft (MSFT) and Google (GOOG) are thinking along these lines as well and are much further ahead in the game.

In a recent interview (BusinessWeek.com, 8/2/08), Manesh Patel, chief information officer of Sanmina-SC, an electronics manufacturer with $10.7 billion in sales, said: "We have project teams working on a global basis and to help them collaborate effectively, we use Google Apps."

Collaboration Means Competition

Meanwhile, while many have focused their attention on Microsoft's suite of "office apps," the company's online collaboration strategy is actually centered around SharePoint, which offers a way for companies to share information and services and is well on its way to becoming a billion-dollar business. "The spectacular growth of SharePoint is the result of the great combination of collaboration and information management capabilities it delivers," Microsoft co-founder Bill Gates said back in March. "I believe that the success we've seen so far is just the beginning for SharePoint."

We've been saying for a while now that Microsoft and Cisco were going to butt heads. As GigaOM writer Allan Leinwand pondered last fall: "So could a Cisco social-networking platform aimed at the enterprise market enable messaging, interaction, and collaboration and, by extension, be a wedge against Microsoft and their current lock on the enterprise IT messaging market?"

To fulfill Chambers' desire to be a collaboration king, Cisco has to compete with these guys aggressively. The problem is that it doesn't have either the software or the Web DNA of its fellow tech behemoths. It has made some hesitant steps. It bought WebEx to move deeper into Web conferencing, nabbed Tribe.net to get a closer look at social networking, and acquired Five Across to beef up its content management skills.

Ideally, Cisco would develop a suite of applications that pivot around WebEx, which it could do by offering to work with all comers, big and small. Acting as a neutral player that delivers best-of-breed Web services would give Cisco that best shot at effectively competing with Google-only and Microsoft-only solutions. At this stage, however, it just might not be enough.

Source:businessweek