CIO

Chambers part 3: Proprietary and the cloud

In the final instalment of our special interview with John Chambers, the Cisco boss touches on the vendor's premium brand and shares his thoughts on cloud computing

In the third and final part of an in-depth interview with John Gallant, Scot Finnie, and Editor-in-Chief Eric Knorr, Cisco’s John Chambers discusses the proprietary issue and cloud computing opportunities.

Q: How do you respond to the three most common things that competitors say about Cisco? Cisco products are proprietary. They come at a premium. When you can't get win with IT, you go around them to the business side and create a stir.

John Chambers (JC): First, let's deal very much with proprietary. We are an open standard company, period. The Internet is open, any device to any content. When we moved into telepresence, we got huge market share on the high end. Sixty-four percent. Yet, we made it an open standard. We made it an industry standard available to others, not just for a Tandberg-type of interface, but anybody who wanted it. All of our base is off an open, standard net -- the Internet. We don't have a proprietary operating system that only operates in our products. The Internet, any device can interface to it. And we want it to. First, it allows us to move in markets faster. Secondly, customers are protected. They don't lock in to a device operating system, a device or in the data center.

The second part of your question about whether we sell the technology to the business side at the same time? Of course. If you're really going to be a successful company, it isn't about how you just work the technology side. You've got to be able to develop the confidence to the business leaders, the CEO's and the IT organization at one time. IT is no longer about managing this complex data center and making it run. IT is about enabling the business strategy of a company, using it to differentiate yourself versus your peers, drive productivity. I would argue [it's about] even embedding IT into your core capability, whether it's how you do services, product development, sales. In fact, at some point you won't be able to tell the difference between what's my business strategy and my IT strategy, they'll be so deeply intertwined. Anybody who's going to be successful here must learn to develop the trust, both of the IT organization, the CIO, the CEO, the business leads. In fact, if you only develop the trust of the CIO organization, you can't help the IT organization as they begin to move rapidly in key project areas.

Q: What about the middle point about the Cisco price premium? They call it the Cisco tax, that people pay a big Cisco tax.

JC: Well, that's a little bit unfair. Do we come down Moore's Law at tremendous speed? The answer is yes. As long as you do that, customers don't have a problem with you making a premium, because if you don't make a premium, you don't develop new products. You don't protect their investment. They've all been through that.

Do I believe there's a rapid industry consolidation taking place? Absolutely. Do I believe that part of the decision for who's going to win is based upon your innovation, based upon your ability to catch market transitions, based upon making your products play architecturally together, protecting the customers' investments, and an open architecture? Yes. Will customers pay a premium for that? Absolutely. But, I would argue it's not a premium. I'd say [it's about} your total cost of ownership versus your productivity. It costs a lot less. Wal-Mart considers us at the very top of their partnerships. You would think that unlikely because they are one of the toughest in the world on cost. Yet, if you talk to the CEO or the CIO, they would say we're at the very top of the list. If I had told you two or three years ago BT would say we're their strategic business partner, not just technology partner, you'd have said unlikely. Yet, we are. If I were to have said the same thing about a G.E.

Are we tightly tied with the business group? Absolutely. Are we tightly tied with the CIO? Absolutely. Now the CEO? Yes. Does the CIO like us doing that? You betcha. So, it isn't a question of do you end run? In fact, if you didn't end run, that's usually a problem. The key is how you work toward common goals. Do we push the envelope on productivity? Yes, because I think any company that doesn't evolve their productivity, who doesn't move into new markets, regardless of industry, will get left behind. We are making people, at times, a little bit uncomfortable with how fast we move. This will surprise you: My mistakes have not been moving too fast. It's when I move too slowly in a market transition. Or, equally as bad, when I moved too fast without a process behind it.

Q: How do you see both private and public cloud rolling out from an enterprise perspective? What do you see as the ultimate intersection of these?

JC: We think the ultimate intersection will be a confederation, where it is completely transparent to the end user, the CIO and up. Completely transparent to the end user what combination of physical, virtual, public clouds and private clouds. That is perfect for us, because that's what networking's about.

The first thing I asked Padmasree [Warrior, CTO] when she came to Cisco was to outline our cloud strategy. She went and got the best engineers, worked with them, came up with the approach. Now we're driving it with tremendous speed and efficiency, and expanding the partnership with VMWare and EMC, who are our best partners. But we're also getting close to Net App and other players within the industry and getting back to the open standards type of question. We're off to a real good start here.

Now, having said that, do you know who our best partners will be in public and private clouds? The service providers, because it's in their interest that the pipes are not dumb pipes and they're not commoditized by the edge players or by the content players. We have a common opportunity here.

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Q: What's the bigger market sooner, private cloud or public cloud?

JC: Public cloud, in the short term. Longer term, the private and the combination, the federation, whatever you want to call it. By the way, we're already doing that ourselves. We're already doing our own clouds and we're interfacing to other peoples' clouds. It's classic Cisco. We do it ourselves. Understand the strengths and limitations of it. Then share what our moves will be.

Q: Based on this and other discussions with Cisco executives, it sounds like Cisco's making a huge bet on service providers and the cloud. Would you characterize it that way?

JC: We made the huge bet on service providers back in 2001. A lot of people at that time said we ought to focus on enterprise, we ought to focus on commercial. Service providers are a separate business, not as healthy in direction. We respectfully said we can do the 'and' here. And you'd have to argue that we did pretty well in enterprise, pretty well in commercial and very well in the new market, the service provider. They are the logical step for our first real cloud build outs, and there's not a major service provider that I'm aware of in the world that isn't at least thinking about potentially doing that with Cisco.

Q: How much of your day is video or telepresence now?

JC: I'd say video is half my day. Video could be telepresence or Flips or Webcasts, etcetera.

Q: From a policy perspective, for the health and future growth of the tech industry, do you think President Obama's leading us in the right direction?

JC: I think that the tech industry is in a very good position. You've seen that both in terms of the market transitions going on and the business results. It was a very good quarter for technology, as a whole. In terms of technology enabling both business objectives and government objectives, it's a must. In terms of health care for every American, in terms of productivity, in terms of his goals of job creation, innovation, technology is the logical partner on it. I'd be surprised if that is not what occurs over a period of time.

Q: [UCS], by all accounts, is a remarkable product.

JC: Good start.

Q: Today, UCS is tuned toward a segment of the market that understands that data center transition and can afford to make that kind of transition. How do you make it a bigger market opportunity?

JC: The answer is pretty simple. You have to make the first major installations go well. Will most CIOs really look hard at our strategy for virtualization? Absolutely. Will they adopt UCS if the initial couple dozen accounts, the majority of them are really satisfied? Yes, they will. You've seen the volumes. We announced the [Nexus] 7000 is growing, year-over-year, at 150 percent. The 5000s, which are the key elements of implementing UCS, grew at 450 percent. UCS, in terms of number of customers, is off to a great start. But it's like anything you do. You've got to make your initial pilots, first 50 systems work well. If they do, then I think we're in good shape to get pretty excited about it.