How Cisco trimmed the fat, John Chambers style

SAN DIEGO, CALIF. — Cisco Systems (NASDAQ: CSCO) CEO John Chambers walked onto the stage of the San Diego Convention Center for the 16th annual Cisco Partner Summit looking like he just got off the red-eye flight from China. He admitted that he’d gotten soft and needed to trim four to five inches off his waistline.

The weight loss reference was to describe Cisco’s 2010/2011 struggles. A very candid Chambers said that average is over and above average will be over in three years. His mission for partners he said is to educate, inspire, listen, share successes and more importantly have fun. Cisco has a whole wasn’t having any fun and they decided to do something about it.

They needed to get slimmer, more aggressive and smarter.

“We had to reinvent ourselves and three times we won (market transitions) and twice we got dropped on our tail including last year,” Chambers said.

A year ago Cisco didn’t know how dire its situation was. Chambers wasn’t sure if it was self-inflicted, a global problem or both. Without being able to pinpoint the main problem Cisco had to solve Chambers hired Gary Moore to run operations; he’d be Cisco’s first ever COO. What Chambers realized was that Cisco needed to be simpler to work with.

“We go fat. And, when you get fat it’s difficult to make decisions and you get frustrated. You have to have the ability to be critical of yourself and embrace rapid change,” he said.

While Chambers was willing to eat some humble pie; he stopped short of apologizing for Cisco’s current state. He reminded channel partners that when he became CEO 16 years ago, they faced tough competitors such as WellFleet, ACC, Proteon, SynOptics, Digital Equipment Corp. along with up-and-coming companies such as Bay Networks, 3Com, Ascent, Cabletron and Newbridge. On top of that were multi-national corporations that challenged Cisco such as Alcatel, Siemens, Lucent, Ericsson, Nortel, NEC and Juniper Networks.

“The point I’m making is you can’t be just good enough. There’s a reason we don’t go into a market where we can’t get 40 per cent share. If we don’t change we wouldn’t make it through these new market transitions,” he said. “And neither will our channel partners.”

When he became CEO, Chambers said 87 per cent of today’s Fortune 500 companies weren’t on the list. “The average stay for a company on the Fortune 500 list used to be 75 years. It’s now 15 years and headed for single digits,” he said.

Today, Cisco faces new competitive challenges. He listed these firms as his top competitors: HP, Juniper, Microsoft, CheckPoint, Anistra, Aruba Networks, Avaya, F5 Networks, Hauwei, ShoreTel, Dell, Fortinet, Brocade, Polycom and RiverBed.

“I got soft on competition and they took advantage of that,” Chambers admitted.He added that every year there will be new technology challenges and new company challenges and Cisco must address these technology changes head on.

Enter Gary Moore

Chambers hired Gary Moore to help him trim the fat. But one of the areas left untouched was the investments Cisco makes in the channel. Moore said he knows how important it is for the channel to make money. Moore used to be a channel partner. “When there are barriers it slows you down. So I was tasked to simplify this.”

In a year on the job Moore pushed for a faster quoting system for the channel. Cisco had multiple imputing systems. With the new Cisco Commercial Workspace, for example, channel partners can produce quotes 35 per cent faster.

Moore will be judged on customer service, profitability for partners and Cisco’s overall growth with partners. In the services area, Moore, along with services head Nick Earle, trimmed 47 channel programs down to one. Earle told CDN that this move would enable channel partners to potentially earn up to 32 per cent margins and drive top line revenue faster.

Joining the channel

Chambers told channel partners that with services they can get on average $5 for every $1 of Cisco equipment sold. He also outlined the company’s technology priorities: Leadership in the core routing and switching, collaboration, mobility monetization/optimization and speed of service creation.

Cisco and Chambers specifically took some tough shots 18 months ago, but trimming the fat, keeping their focus on the channel and developing smart services has provided the company with some early results, such as an eight-point uptick in switching and routing. Services are now up by 11 per cent from last year and in the collaboration market place, Cisco gained 10 per cent market share.

But the work is not over. Chambers admitted the company needs to do a better job in security. And, while it sounded unbelievable, Chambers said he would put more of his focus on maintaining and enhancing shareholder value.

While he mentioned past successes Chambers stressed to the partners at Cisco Partner Summit not to look to the past for solutions. “You must act like a 13 year old for future solutions.”

Follow Paolo Del Nibletto on Twitter: @PaoloCDN</a.

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Paolo Del Nibletto
Paolo Del Nibletto
Former editor of Computer Dealer News, covering Canada's IT channel community.

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