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Some Thoughts on the Cisco Strategic Initiative

John Chambers said something during his introductory session at C-Scape, Cisco's annual industry analyst conference, that caught me by surprise. When discussing his corporate strategy to be the leader in its target product markets with at least a 40% share, similar to the long time General Electric strategy of being #1 or #2 or not being in the market, Chambers said that Cisco only looks at competitors to measure how they were doing. I took this to mean that competitive actions are not highly consequential to Cisco nor is development and implementation of competitor-specific marketing/sales strategies and tactics. As a competitive analyst of long time standing I thought about this for a while and finally came to the conclusion that the Cisco approach is viable, but only for a company in Cisco's position.Cisco was a pioneer in the modern data communications networking market and established itself as the undisputed leader for WAN routers. It leveraged this position to sell Ethernet switches and gain control of this product market. Based on its data networking dominance it entered the enterprise voice communications market and in the span of a decade rose to the top with a product not remotely as strong as those from established competitors. Cisco succeeded in large part by focusing marketing and sales efforts on data communications professionals with little or no knowledge of voice communications. Cisco is now attempting to duplicate this unlikely success in the area of Unified Communications (UC) and is currently succeeding to a large degree, but this is where the company's market dominance and installed base leverage advantage may soon hit a roadblock.

The competition in the voice communications market was highly segmented, with no single dominant players. Several system suppliers, including Avaya, Nortel, Siemens, Alcatel, Ericsson and NEC, were top tier global competitors with geographic spheres of influence in the enterprise-segment for voice communications systems. In the evolving UC market, two competitors dominate at the desktop, Microsoft and IBM, and neither are likely to be as complacent as the voice systems suppliers were when Cisco began eating their lunch. Both Microsoft and IBM are protecting their positions by heading into voice communications and are far greater marketers than any of the traditional voice system competitors, some of whom saw marketing as a necessary evil to support sales. For Cisco to win out against the Microsoft/IBM tandem may require finely developed competitive strategies to replace the incumbents at the desktop. Customers may accept two principal desktop application software suppliers and multiple screens for a few years, but will eventually choose one to simplify the situation.

It is going to be many years before a victor is decided in the UC wars. Many battles will be fought and temporary winners declared. Cisco, Microsoft and IBM are certainly in the running. Google must also be added to the short list. Any of the traditional voice communications competitors must be considered a long shot. It is also a possibility that a new technology spawning new products will be developed to totally disrupt current market evolution and shake up today's competitor lineup. Can a company that currently exists only in the imagination of some high school student topple someone like Cisco or Microsoft from their perches? It's been done before and it will certainly be done again.