interview
He may be the consummate salesman. Cisco Systems president and CEO John Chambers is going door-to-door in Asia, meeting with key business leaders and politicians to spread the word about networking. By his own count, Chambers has made five trips to Asia in the last six months. During those visits he has met with senior decision-makers in the region not only to gauge the needs of his customers, but also to teach them about the value of IT, networks, and the Internet. IDG's Sumner Lemon sat down with Chambers to talk about his most recent trip to AsiaIDG: In your role as a government advisor, how do you walk the line between discussing the applications of technology and politically sensitive aspects of networking technology, such as censorship of the Internet?
Chambers: First, I almost never talk to CEOs or government leaders about detailed technology. They couldn't care less about ATM vs Frame (Relay) vs Gigabit (Ethernet) vs XDSL. What they want to talk about are concepts. Can you, over one communication line to the home, do data, voice, video? What does it mean in terms of the advantages it could bring to people?
Second, what type of applications are really applicable in government that will make the government more effective, able to provide more with the same amount of money, or, actually, more with less, to their citizenry.
In terms of the social issues, we believe, just like in company politics, you should not get involved in country politics. So it's a more factual discussion.
Cisco has sales teams selling equipment to carriers interested in offering services to their customers, which include enterprise customers, and then selling the same equipment to the enterprises as a means of implementing these services themselves. Is there a contradiction here?
There's a little bit of a channel overlap to your point but not a contradiction at all. If you look at what we've done, we've never argued religiously about technology or how customers are going to buy. We basically say, "How are you going to buy?" and we're going to go to market through those areas.
If you only want a 10 per cent market share, you'd only go (through) one channel but our product market share is normally between the 40 to 70 per cent range. If you're going to be in that range you better go through the channels based upon how customers want to buy. Having said that, small and medium business will never buy directly from us or directly from the channels that touch them and the consumer won't either. Service providers are a huge vehicle to be able to reach those various markets.
You can use the US as an example. There were a lot of religious wars about whether the enterprise customers would outsource everything to service providers or whether the enterprise would do everything and service providers not add anything. In fact, it will be a combination, they'll do part service provider networks, part their own, part the Internet, in terms of the implementation. We just position ourselves for how customers make decisions and every move we make we follow what the customer is after.
In terms of evaluating Cisco against its competitors, what do you think is your biggest weakness?
The large telecoms providers really market well. They've done a nice job of saying, "I'm real reliable in voice with circuits so therefore I'm going to be real reliable in this new world," and saying, "You don't need to move real quickly there," when there's no correlation between if you're reliable and circuit technology. You can be reliable on IP and ATM. We've got to market more effectively.
Properly positioning ourselves against our competition in a way that the mass market understands is the second weakness we have to work on.
Cisco has rolled out ads targeted at the mass market which claim that most Internet traffic is carried by Cisco equipment. Given what has happened to your counterparts at Intel and Microsoft, are you worried that the US Government may start to perceive Cisco as a monopoly supplier in this area?
We will not have a problem with antitrust or the US Justice Department. You've got to spend time educating people ahead of time.
First, in the market that everyone today defines as data, voice, and video, we're less than 10 per cent of the total so no one is going to accuse us of having a disproportionate share within the market. Now having said that, you also know antitrust laws have nothing to do with market share, it's how you behave. No one that I am aware of has ever accused us of predatory pricing. I don't give anything away, except to education.
Our strategy toward competition is both by example and culturally different perhaps than some of the companies that have faced heat around the world. The third issue is my attitude towards competition is a lot different than some of my counterparts. You need good competitors. I subscribe to the philosophy that if you don't have competitors, you're going to get unseated completely.
Now people might say it takes too long for that to occur but it absolutely will happen. IBM got into trouble because they didn't have a good competitor. I will actually, as unusual as this might sound, be in a better competitive position, and probably with more market share in five to 10 years from now because I have good competitors and I don't try to hurt them in an inappropriate way. I actually get along with most of my counterparts pretty well.
On issues like encryption, where we might have been able to solve that ourselves with the government, I said 'No, this is an industry issue. We've got to do it with my peers as well.'
The last issue is that I don't have the barriers to entry that most people do. I don't have multibillion-dollar plants and I don't have an operating system where everyone writes applications to. The competitors I often worry about, particularly at the product level, are the startups with a million dollars and if they do it right they can be a tough competitor to Cisco. The top 25 startups that I'm really worried about and we're about to get beat up on by, are 10 times our size in terms of the number of employees and five times our size in terms of sales.
And make no mistake, some of the large people have literally put a bull's-eye on us and said: "This is our competitor of the future and we're going to kill them."
You've got players that are multiple times our size both in employees and revenue saying that they're going to come at us. So, for all of the above reasons, anybody who takes any time to understand will see that's not going to be an issue for us.
