Cisco Chief Executive’s Mantra: Simplify Computer Networks
SAN JOSE, Calif. — Over more than three decades, Cisco Systems became a Silicon Valley giant partly because of one facet of its business: technological complexity.Posted — Updated
SAN JOSE, Calif. — Over more than three decades, Cisco Systems became a Silicon Valley giant partly because of one facet of its business: technological complexity.
Managing Cisco’s many varieties of networking equipment, which help computers exchange data, became such a convoluted process over time that customers who learned to do so became loath to try competing products.
But that pattern can’t go on, according to Chuck Robbins, Cisco’s chief executive, who took over the company in 2015. At Cisco’s annual technology conference in Orlando, Florida, last month, he declared that technical shifts were affecting how all companies used the internet, forcing Cisco to rewrite its product playbook.
“The networks that we build we’re going to have to think about fundamentally differently,” Robbins, 52, told attendees.
Behind the scenes, he has already started to do so. Robbins has been pushing for networking systems to get simpler and smarter, both to reduce operating costs and to head off security threats. He said he wanted to simplify because of the sheer number of connected devices and the changing patterns of data traffic caused by cloud computing, the outsourced services that tend to reduce companies’ spending on high-tech hardware.
New Cisco offerings that are based on Robbins’ streamlining strategy seem to be selling well, reversing years of revenue stagnation for the company’s core business. Since 2015, Cisco’s market capitalization has risen by more than 50 percent to around $200 billion.
“It’s now getting better understood by investors that Cisco is not an incumbent being killed by the cloud,” said Pierre Ferragu, an analyst at New Street Research.
Cisco’s momentum is representative of how some older technology giants are finding ways to survive vast changes in their markets, forces that felled earlier standard-bearers like IBM in personal computers and Nokia in mobile phones. Many of these companies are today finding their footing by listening to changing customer preferences rather than dictating technology choices. A prime example is Microsoft, where Satya Nadella, the chief executive, has embraced open-source software that was once seen as a threat to its Windows franchise. Others include Intel, which popularized a standard chip design for most computers but has lately acquired other technologies. And Oracle now sells cloud versions of software that customers once had to install on their machines.
“There is no room for technology religion,” Robbins said in a recent interview at Cisco’s headquarters in San Jose, indicating that he is open to changing longtime practices.
Robbins, who joined Cisco in 1997, rose through the company’s sales ranks during the 20-year tenure of his immediate predecessor, John Chambers. After being chosen as chief executive in May 2015, Robbins wasted little time in dispensing with Chambers’ leadership structure.
Ten of Cisco’s most prominent executives soon left. Some other senior managers have exited more recently, while the company has also recruited from outside. Of 13 people in Robbins’ top executive circle, 12 are new to that role. One key appointment was David Goeckeler, an executive vice president who was given responsibility for all networking offerings and security products. Robbins said Cisco needed faster decision-making and new skills.
One reason for urgency: By mid-2015, Cisco’s business of networking switches and routers was no longer growing predictably. Some longtime telecom customers had turned to lower-priced networking hardware and new software that made it easier to run systems from multiple vendors. Cisco had also largely failed to win over big cloud-computing specialists, a group led by Amazon.
Robbins persuaded Cisco’s board to shift research and development dollars back to networking. One key focus was a little-noticed company stronghold: the closets of many businesses where boxes, wires and Wi-Fi connect PCs and other devices to the internet.
Those campus networks, as they are called, are not easily disrupted by newer technologies like cloud computing; even ardent fans of such services need boxes to connect users to the web.
Robbins specifically pointed to a new line of switching systems called the Catalyst 9000, which has some novel features, including the ability to scan packets of data for malicious software even if they are encrypted. In just the past three quarters, it has been purchased by 5,800 customers, a record order rate for the company.
Catalyst 9000 also comes with new software used to manage the systems, called DNA Center, which provides a kind of digital dashboard for all the devices connected to a corporate network. The software streamlines what technicians need to do, which previously involved typing in an arcane set of text commands for each networking device to configure and make changes to a network. Cisco estimates that it has taught that skill to more than 6 million people over the years, building customer loyalty through their investment in training.
But the labor to manage that complexity has turned into a liability, Robbins said. Companies often spend $15 in operating costs over five years for each dollar spent on network technology, he said.
Seth Price, who manages networks operated by Durham County, North Carolina, estimated that DNA Center and other Cisco software had reduced the time needed to resolve service problems by 80 percent. Finding and isolating a computer infected with malware — a job that once took months — now takes hours, he said.
DNA Center is also designed to improve security by making it easier to restrict what devices can communicate with one another. That was a key selling point for Children’s Hospital Los Angeles, which has to worry about protecting computers, medical instruments and other devices, said Steven Garske, its chief information officer. The hospital decided to buy 350 of the Catalyst devices last July.
The latest Cisco technology works like “digital alchemy,” said Jerry Sheehan, chief information officer at Montana State University, which is also testing DNA Center.
Robbins still has plenty to think about. Rivals are promoting similar approaches, including the hardware makers Arista Networks, Hewlett Packard Enterprise, Juniper Networks and Huawei of China, while software specialists include VMware, Cumulus Networks and Apstra.
Some competitors question whether Cisco, which has long specialized in hardware, has what it takes to thrive as software becomes a decisive differentiator.
“I think they have a difficult transition from where they are,” said Pat Gelsinger, VMware’s chief executive.
Others said Cisco’s campus stronghold could be breached, although it would not be easy. Arista, for example, recently announced plans to enter that business. But Jayshree Ullal, Arista’s chief executive, said dislodging Cisco on a large scale would take a long time.
“They are running uncontested,” she said.
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