InformationWeek
Defining The Business Value Of Technology
February 28, 2000
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IBSG doesn't charge for its services, and it doesn't even pitch products during advisory sessions. Neither does Cisco undertake the implementations--it leaves that to the customer or to Cisco-recommended consulting partners. One of Cisco's most prominent partners is KPMG Consulting, in which it has a 20% stake bought with a $1 billion investment last August.
Yet undeniably, IBSG is focused on increasing Cisco's already awesome penetration in the enterprise. Cisco does not track how much additional business it can attribute to IBSG's efforts, but readily admits one of the group's functions is to keep Cisco from becoming a commodity network supplier and drive higher sales volumes. According to Sue Bostram, VP of IBSG, "We're focused on moving customers aggressively toward their goals. We want to be the provider and we want them to get there fast." KPMG Consulting, launched earlier this month, will have 4,000 Internet consultants specializing in Cisco equipment and has committed to recommending only Cisco to clients.
Chambers says Cisco's own success is proof that IT can play a big part in delivering competitive advantages, and IBSG has a critical role in relaying that message to business executives. "When I ask CEOs when IT was last a top initiative, in many cases the room gets quiet, because IT has been seen as a cost area," says Bostram. "Seventy-five percent of the time we spend with companies is talking about business; only 25% is talking about technology. We have to talk about changing business processes, and changing culture."
Thompson says IBSG was critical in getting buy-in from top brass. "We needed external validation. We don't turn our coat inside out just for fun."
The situation was similar at Procter & Gamble Co., whose top officers weren't convinced about how aggressive to be on the Internet when they consulted with IBSG last year. "We're going through a continual process as far as integrating the culture," says Jim Boyce, VP, customer business development and E-commerce for P&G. "When people grow up doing things a certain way, it's predictable you'll hit some resistance. But we're making strides." Cisco helped P&G plan a business-to-business portal that allows customers to give feedback on P&G's market strategies.
The leverage Cisco continues to gain with business customers will, it hopes, help it increase its presence in the service provider market via its Cisco Powered Networks initiative. The number of CPN-certified service providers has grown from five in 1997 to more than 250. The objective of CPN is to move enterprise voice, data, and video traffic over a common infrastructure of Cisco gear running across LANs, WANs, and the Internet. Providers commit to offer Cisco hardware end-to-end, to ensure interoperability for standards-based and value-added features such as quality of service and management.
Cisco says companies with its hardware in place on their networks and on their service providers' networks can reap business advantages. Cisco believes in networking standards, says Larry Lang, VP of service provider marketing, but often it's possible to do things before they're standardized.
A business could, say, turn on new multicasting features for sending out broadcasts even if those features are still under review by a standards body, as long as they're already supported in Cisco equipment and both the company and its service provider are Cisco shops. "There's an inherent competition between state of the art and standards," says Lang. And Cisco says that because it drives many networking standards, early adopters likely won't have to make major changes when those standards are finalized.
Cisco says its CPN initiative helps users verify service-level agreements. Says John Kijewski, VP of data center systems and operations for SMS Corp., a CPN-certified provider in Malverne, Pa., "It's important our network is as bulletproof as possible, to meet service levels customers contract for."
SmarterKids.com chose CPN-certified Exodus as its host for many reasons, Secor says, but certification has been an advantage. The retailer boosted reliability by adding automatic router backup using Cisco's Hot Standby Routing Protocol, a feature Exodus could support on its end, too.
Not everyone's biting, though. Brandon Ross, director of network engineering at service provider Mindspring Enterprises Inc., a Cisco customer that was recently acquired by Earthlink Inc., doesn't think CPN-certification matters to the average customer. Small businesses just want fast, reliable connections at a good price, Ross says, and large companies choose a service provider based on a plethora of more technical criteria. Who does care? "Midsize enterprise customers--they're savvy enough to know who the networking players are, but not savvy enough to use real technical criteria to select a service provider," he says.
Still, Cisco is putting an increasing amount of energy into its service-provider push, says analyst Morency. He says he's seen close to 100 service provider initiatives in the last year, but only a handful of enterprise projects.
Cisco wants to woo the big phone companies--which are ramping up to offer converged data, voice, and video services--away from vendors that have long provided them with rock-solid voice infrastructure equipment. Cisco has only a 3% share of the service-provider market now, but says that line of business grew 39% in the last quarter from the year-ago quarter; it's growing faster than 80% year over year. But better-established competitors in the market--Lucent and Nortel foremost among them--also are set on delivering equipment to carriers that melds voice, data, and video across one network.
The nascent market for such routing equipment at the IP switched core of the Internet is expected to be about $2 billion by year's end, says Raj Mehta, a senior analyst at RHK Consulting. With its GSR 12000 router, Cisco so far has locked up the data segment of that market, but Lucent this past summer spent $900 million to buy terabit router start-up Nexabit Networks, and Nortel has disclosed plans for its own high-capacity switch/router, the Optera Packet Solutions, due later this year.
"Cisco clearly has tremendous franchise in enterprise router infrastructure," says Curt Sandford, group president of Lucent's internetworking systems. "But in terms of the service provider market, they are entering space where Lucent has been traditionally strong and we continue to be No. 1." Yet Chambers says he sees Lucent as less of a threat today than 12 months ago. "Its acquisitions haven't gone well," he says.
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Illustration by David McLimans
Photo of Bostram by Gary Parker
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