Cisco achieved a milestone in its most recent fiscal quarter, one with profound implications for the future of the company: Cisco made more money from its new products and services than it did from routers and switches.
Naturally, the network giant has long known this day would come, and has been more than just preparing for it. Cisco has been embracing the change, actively pursuing it for years. Every major move has been toward what it calls "market adjacencies," toward products that by some logic relate to Cisco's traditional, core markets but are actually brand-new territory for Cisco.
That's the logic that has gotten this router vendor neck-deep into selling everything from set-top boxes to blade servers to video cameras. In fact, the company has its hands in about 30 "market adjacencies" right now.
But this strategy is creating difficulties for Cisco even as it creates opportunities. In the data center, partners such as HP and IBM are now bitter rivals. In the retail stores, Cisco is still struggling to understand what consumers will buy - and at what price. And meanwhile, in its router backyard, Cisco is losing market share to companies with a sharper focus.
Overall, the scattershot approach of getting into 30 new markets - of fighting a war on dozens of different fronts - is starting to take its toll. Analysts in Jim Duffy's insightful story this week (page 1) argue that Cisco has been too aggressive, trying to maintain a rate of growth that may no longer be realistic as a $40 billion company. Indeed, the story also reports that Cisco is quietly curbing its growth goals.
Certainly, this is the road Cisco had to take. The company's longstanding determination to be first or second in every market it competed in served it well. When it had dominated its primary markets, Cisco needed new worlds to conquer; it found them and it went after them.
But now Cisco is at an interesting point in time. It's not a young company anymore, and it can't move like a young company, no matter how many start-ups it absorbs. If Cisco were a person, you might say it's graduating from college. It's been Big Man on Campus. It's done a lot of experimentation. But now it's time for Cisco to figure out what it wants to be when it grows up.
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.