'We are looking at 12 new segments, each with a potential of $1 billion'

Cisco’s first acquisition, Crescendo, has been a real success story. It not only brought Cisco into the wiring closet, but also made it the leader in the switching arena–a far cry from having no revenues in that space before the acquisition. Prem Jain was one of the biggest assets that came to Cisco from that acquisition. He is today, one of the main brains behind Cisco’s worldwide strategies. VOICE&DATA caught up with him to discuss on the latest in networking in India. Excerpts:

It is the 30th anniversary of Ethernet. How does Cisco foresee the switching space?

Ethernet today is very different from what it was thirty years ago. It was supposed to be a shared media. But today, it is dedicated bandwidth and there is no collision in reality. First there was 10 Mbps, and later 100 Mbps. Now it is going forward to even 40 Gbps speeds. The Ethernet is continuously evolving and we have to continuously evolve and innovate to meet people’s expectations.

What about people catching up with you on technology front…?

Let me give an example in routing. We have this concept of a full-service branch router. It is not just plain routing anymore. It has many more capabilities. It has VoIP, switch, firewall, security and other features integrated into it. That is what our competitors are missing. People can compete with us only in the basic things.

Prem Jain

Senior VP,  routing technologies group, Cisco Systems

An oft-repeated chorus is that Cisco technology is not the best. IOS has taken Cisco to where it is today. But, now it has become a threat. With more features being added to this software, there are fears that it could crash anytime.

IOS is like an engine. If you buy a car, you need to overhaul it periodically. Similar is the case with IOS. Cisco has been making tremendous investments over the years. It is not the same IOS today. We did run into some challenges in the past and hence this perception. But in the last two years we have modularized the IOS. In the past, we had one big chunk, running IP.

We have now broken it into smaller pieces and have also added redundancy. 

Cisco equipment are usually based on a common control and data plane, which is not the way to achieve redundancy …


Yes, historically Cisco equipment used to run both the control plane and data plane together on a single processor. But, today, it is entirely different.
Control plane is totally separate from the data plane. Otherwise, how do you achieve the performance
of tens of gigabits or higher on a CPU. There is no CPU available today that can run on the data plane. So, we have innovated on the ASICs, even as the IOS got innovated. 

Is Layer 3 switch router the new way for future networking? And if it is, do we need two boxes?

We don’t have two boxes. The Catalyst 6500 is the world’s best switching and routing platform. 

That is interesting. You say that the Catalyst 6500 switch is the best router. Then what happens to your 7500 routers? 

7500 routers are still being installed and we are making a transition to Catalyst 6500 in the enterprise. We are also making a transition to 7600 routers in the service-provider segment. 6500 and 7600 are from the same family. One was pure IOS and the other is a hybrid. 

So, you find a need to rationalize your product lines. 

There is already a rationalization in our product lines. In the last two years, we have consolidated the entire organization. My team handles the entire range of routers. So, we look at every router from the low end to the high end in our range including the part that goes into Layer 3 switches. In the same way, we have consolidated the entire switching platform. When the market was growing, you could have all kinds of products. But since the market changed, we have consolidated. And today we know exactly what product to use where. 

Some say that end-to-end is just a marketing pitch. Is there anything really like an end-to-end solution? 

Let me share with you some of the cultural changes that have happened in Cisco. Cisco had started with switches and routers.

So, we said let’s use the end-to-end concept in the enterprise, which was really using the applications. And that worked really well. It was not just a marketing pitch. Certain features need to go into the wiring closet, a different set of features needs to go into the data center, and yet a different set into wide area networking. Unless we thought about how different products would work with one other and how to provide quality of service in each instance, we couldn’t have achieved the QoS that we promised. 

If we had given only a product with QoS, the weakest link would have broken the chain. That’s why end-to-end was very important. We became a systems company two years back. And now we have become a services company. So, now the thinking is how do we offer the services? Convergence is very complicated unless you think about service. The days of how fast you can switch or how fast you can route are over. 

Today, there seems to be a move among the enterprise customers towards a dual vendor strategy. 

We would love to see competition. We are not against dual vendor strategy. Customers need to judge it themselves. But, if they do dual vendor strategy just for the sake of doing it, it is wrong. They need to really think what they want to provide and what bandwidth they want. In the end, it all comes down to what money they invest. They had better show returns on it. If they don’t, they don’t survive, no matter what vendor strategy they adopt. They know that they have to reduce both capex and opex. And it is a fact that opex is much higher when you do dual strategy. But, if they think it is in their interest, they may do it. A lot of this is being created by the competition. We do respect our competition. And we do think that competition is good for us as it keeps us on our toes. But, at the same time, we like to have our fair market share. 

So, is it the threat of shrinking market shares that is driving Cisco to pursue other things?

No, that’s not the thing. The reason we are looking at various other areas is growth. What is missing today if you look at Cisco? Our earnings are better, our efficiencies have improved, and our product lines are all doing well. What is missing is growth. Now, how do we do that? John Chambers has constantly said that we are looking at 12 different market segments and see if each one of them can be a $1 billion segment. At present, we are looking at four of them. VoIP, wireless and security are three of them. The day isn’t far when we hit the $1 billion mark in each one of them. The last remaining one is storage, which we entered only this year. And already we have hit a $100 million run rate per year. 

Coming to the marketing aspects, does Cisco need to have so many channel partners as it does today? Did you foresee so many Cisco channels competing with each other for the same contract?

We see that all over the place. We try to make sure that such kinds of things are avoided, as there are inefficiencies involved.

But, sometimes they all use the same Cisco equipment but have their unique propositions as well. Channel conflicts will always be there. But, the good thing is that Cisco understands the issues and we have really focused on how to manage these conflicts in a positive way, so that it does not hurt our partners. 

There is a perception that there are hidden costs when it comes to buying Cisco. What do you have to say about this?

We don’t have anything that is hidden. The model of how we price our product is in front of the customer. If it is not, that to me is hidden. Every company has its pricing strategy and it changes from time to time. There was a time when people were saying give us memory upgrades. People were saying you are charging ten times the cost of memory from a hardware shop.

Why were we giving the new memories? Not to sell the memories per se. We were giving it because we had developed this new feature. Now, if we had sold these features when we sold the product, I think you have the right to get these features free of cost. But, if we continuously develop the features and not make money on it, how can we be in the business of innovations.

We have changed this strategy, as now service providers say “give us the entire memory so that we don’t have to send a truck

again to fetch the additional memories”. So, we do adjust our strategies.

Our earnings are better, our efficiencies have improved, and our product lines are all doing well. The reason we are looking at various other areas is growth 

Nareshchandra Singh Laishram