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12/7/2004
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Cisco CEO Says Change Demands Investment

The greatest productivity increases come from changing business processes at the same time that new technology is deployed, John Chambers says.

Businesses that make organizational and process changes at the same time they deploy new technology report productivity gains five to seven times greater than companies that don't change their business processes, Cisco Systems president and CEO John Chambers said Tuesday.

"You've got to change your underlying business or government model to take full advantage of these technologies," Chambers told hundreds of analysts and reporters attending the company's annual analyst briefing, which was broadcast from the company's Web site. "You have to do it in parallel. You can get a dramatically higher payback."

Around three-quarters of Cisco's customers expect technology spending to help them boost productivity by more than 5%, and networking technology combined with process changes will account for half of that gain, Chambers said. "They know that they have to spend to get that payback," he said.

While Cisco intends to introduce twice as many new products this year than in the past, Chambers didn't reveal any new products or strategies. Nor would he discuss the company's outlook for the next quarter or two. However, he said Cisco will place a greater emphasis on data-center issues and help its customers virtualize their network, computing, and storage resources so users can access what they need regardless of where those resources are located.

His focus was on Cisco's plans for the next three to five years to maintain its leadership in the networking market. "No company in the high-tech industry that I am aware of has been a leader in more than one or two markets," he said. But he said Cisco is the leader in several markets--routers, switching, enterprise IP voice, wireless, security, and home networking--and is No. 3 in storage.

Cisco CFO Dennis Powell said the company hopes to grow between 12% and 15% annually during the next several years. Cisco will continue to acquire companies when it wants to enter new markets quickly, Chambers said, noting the company had bought more than a dozen security firms in the past year or so. He also said Cisco will continue to partner with market leaders such as Microsoft and Sony to bring integrated products to the market.

Chambers put on a demonstration, viewed on Cisco's Web site, to show how interconnected networks built on Cisco products can provide benefits to businesses and consumers. He did some research on a store Web site for plans and materials needed to build a fence around his home, noting that information like that can help a store adjust inventory levels. He then entered the home-improvement store with a radio-frequency identification-enabled loyalty card in his wallet. The card communicated with the store's networks as he walked through the entryway, causing the signs at the entrance to shows ads personalized for him.

At the same time, the store's wireless network sent a store map to his mobile phone and included suggestions of products to buy. A salesperson in the fence department also was alerted by the RFID chip that Chambers had entered the store. Once at the fence department, Chambers was encouraged to use a kiosk to call up a fence expert and get advice via videoconference on the tools and materials needed to build a fence. Once that conversation was done, a step-by-step instructional video was transmitted to his home.

Each item he bought at the store was tagged with an RFID chip, making it possible to check out without dealing with a salesperson. His loyalty card was used to pay for the products, and an iris scanner was used to verify the transaction.

Chambers said inventory management inside retail stores and the ability to identify customers are "two of the hottest applications areas going." Improving those areas, he said, could save retailers hundreds of billions of dollars.

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