Cisco Systems achieved another milestone recently: It became the most highly valued publicly held company, elbowing out Microsoft. Of course this was a week or so ago; given the roller-coaster volatility of the market these days, things may have changed dramatically since then.
Still, known a decade ago only to us network technical geeks, the San Jose, Calif., company has truly made it to the top. Indeed, few of the enterprise networkers reading this can honestly say that they don't have Cisco gear, probably worth at least six figures, handling a sizable portion of their data backbone.
During the product testing and equipment selection that we at Mier Communications do for our clients, we are increasingly hearing, "Cisco offers a product in that area, too, doesn't it? So how does Cisco's system compare?"
It turns out that Cisco usually does offer a product for almost any backbone network vacancy you're looking to fill. Besides its unquestioned dominance of the Layer 3 router market, it's also a majority owner of the Layer 2 switch sector. Cisco is out in front of the explosive new voice-over-IP market, too. It offers fully functional ATM switches, and it's beefing up its VPN portfolio. Cisco's even got a persuasive product package to pitch for QoS. It offers special packaging for cable operators, and it also sells DSL equipment.
And on it goes. Indeed, Cisco makes it to the short list of purchasers at least 90 percent of the time these days. And with erstwhile competitors like Cabletron, 3Com, and Nortel Networks busily divesting, restructuring, or just plain rediscovering themselves, the percent of wins that Cisco gets continues to grow, too.
The two questions that everyone's asking are
- What's the secret to Cisco's success? and
- How long can Cisco keep it up?
The secret to Cisco's success, in a nutshell, is equal parts good technology, good marketing, focus, good sense, and luck.
Take good technology, for instance. In very few of the product sectors it targets, even its cherished L3 routers, does Cisco offer unquestionably the best-performing products. Backbone L3 switch-routers from at least two other vendors, Foundry Networks and Extreme Networks, offer greater throughput and better price-performance for IP routing. Cisco tends to outpace its competitors in software functionality; that is, its operating software is richer in features. Now don't get me wrong: Cisco's stuff performs well, too. But while Cisco typically offers broader functionality and features, one or two competitors often outperform Cisco's top of the line.
Good marketing? This area has several dimensions. The first is good pricing. In virtually every sector in which it plays, Cisco's products are competitive and affordable. They're not the cheapest ones on the market, but they're usually far from the most expensive. Cisco watched the decline and fall of IBM and learned a big lesson there.
Many consumers believe that Cisco's IOS brings commonality to the command line of all the company's assorted equipment. I consider that perception to be one of the greatest marketing coups of all time. I won't qualify that statement now; there's not enough room here. But suffice it to say that Cisco has an incredibly effective marketing organization. And Cisco craftily conceals this capability -- it's hard to tell whether one of their people is from sales, marketing, tech support, or product management.
During its 15-year lifetime Cisco has stayed focused on networking equipment. And while technology trends have broadened its areas of endeavor far beyond routers, it hasn't gotten sidetracked in unrelated industries. It has also exercised uncommon common sense in acquiring its way into new technologies when appropriate. Few of Cisco's acquisitions over the years seem either inappropriate or overpriced.
And then there's luck. At the dawn of the Internet era, Cisco was in the right business at the right time.
But can Cisco hang on to its good fortune?
I believe it can to a large extent, if it follows these simple recommendations:
- Don't get cocky or arrogant. Market dominance corrupts absolutely: Just ask Novell or IBM. Cisco should try to remain a straightforward supplier of leading-edge network equipment at competitive prices. I'm sure a few people now buy backbone network equipment from Cisco simply because it's from Cisco, but not that many. And I doubt that they would continue to do so if Cisco gear were the most expensive in its niche.
- Watch out for the inevitable bloat of bureaucracy. If customers can't efficiently buy a Cisco product, or configure it appropriately, or figure out how to work it, they will go elsewhere. Management of its diverse product lines is definitely one area where Cisco is vulnerable. The problem is that few competitors do it much better.
- Don't try to dominate every market niche you're in. If you do, Janet Reno and her storm troopers will lower their antitrust sights on you. They've tasted Microsoft's blood, and they'll be looking to find work for the hundreds of DoJ antitrust lawyers that will soon be unemployed.