Philosophically, I don't partner and then compete later. I won't enter into strategic partnerships that I think will not have lasting evolution. Secondly, using IBM as an example, they are my best partner today and they will be my best partner 10 years from now. Third, we see the market evolving very similarly. We share what we're doing with them very closely, they share what they're doing with us very closely. And both of us have the same philosophy.
Isn't IBM's strategy a countervailing notion to providing virtualization through the network - they are providing virtualization through the management layer - and doesn't that by its very nature put you in competition?
There will be segments in which we may have overlapping philosophies. But if you take a step back, it's real simple. I will partner with IBM for as long as I think it is strategically very important to my company and I deliver on my ethical commitments. If there's a little bit of overlap in one area, and yet we can dramatically grow the revenues, profits and customer loyalty because of our ability to work together, then [IBM and Cisco] are going to do that. And then we'll let the [market] sort out which products take the lead. We're not going to let our fields mess up each other over a product which accounts for a small percentage of our revenue vs. growing it in other areas.
If you look at IBM's total revenue in the data center, consulting or outsourcing or in so many other areas, our overlap is a relatively small number. Our ability to grow those others dramatically faster by working together is [more important] than saying that if we have any overlap we're not going to work together. If you overlap too much and your visions of how the market evolves are too different, you can't have a partnership. But I don't think that will be the case.
If you go back to innovation being doing it yourself, acquiring or partnering, remember that 90 percent of the acquisitions in my opinion still fail. But our hit rate has been remarkably high. If you can't acquire, I would argue you can't partner. Partnering is much more difficult than acquiring: At least [in an acquisition] you control the resources for a period of time. I believe that partnering will be one of the four or five major variables that determine a company's success. And partnering is not reselling products. It's really about whether you can go to market together with the strengths of both organizations in a way that gets you competitive advantages and really focuses on delivering the power of the network to your customers.
You have initiatives under way in the data center, storage, security, application networking, among others. Is there a fear of overloading your customer base, asking them to make too many upgrades, buy too many products, buy into too many strategies, at a time when they are trying to reduce complexity?
CIOs are very concerned about the complexity that exists and the costs of supporting that complexity. But I would argue the reverse: that actually works to our favor as opposed to our detriment. If we can touch so many of those elements off of a common IP open standard that they don't have to worry about changing all their applications, it gives them a lot of flexibility. So when you talk to the CIOs you're finding more and more of them are leaning stronger and stronger to Cisco. They actually pushed us to move dramatically faster in the application area. So it's moved from a transport mentality to something they want dramatically more out of in a shorter time period, and at the same time how do they control the costs with it.
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