Cisco CEO says he will remake the company before retiring

I have to admit I am always dubious when some CEO of a giant tech corporation plans to reorganize the company as the last thing before retiring. So when I read that John Chambers, the CEO of Cisco, is a) planning to remake the network giant, and then b) retire, I immediately discount the whole initiative as gold plating on his retirement watch.

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On Friday, Mr. Chambers will announce plans to take Cisco from simply making the boxes through which most of the Internet’s traffic zips, to being a company that designs and sells software and services for a world of pervasive information technology.

Cisco, the chairman and chief executive says, will shift toward customers in government and large businesses, handling projects like designing and managing systems for efficient traffic and clean water across entire cities. Cisco’s plan is to create networks of sensors and data analysis systems, working closely with government officials and civil engineering companies. And it will work with companies to set up efficient mining, manufacturing and distribution systems.

“It’s a $4 trillion market,” he said. “The days of boxes are over.”

For many years Cisco was one of the fastest-growing technology companies, and it is still the largest player in the networking business. But its growth has shrunk because of the global economic slowdown and new types of competition.

Mr. Chambers, who says his latest strategy will be a legacy for the next generation of Cisco leadership, has tried to fix this in part by acquiring companies that rely on high-profit-margin software and moving into growth areas like video.

Mr. Chambers has been reorganizing Cisco, consolidating a number of divisions and buying companies to prepare for his new strategy. Parts of the plan, however, seem to have large gaps, in particular how Cisco will move from a focus on technical engineering to producing social and economic results. “We’ve got some of the horses,” he said. “We need a lot more.”

The new focus, which will be echoed in a marketing campaign that starts Monday called “Tomorrow starts here,” was introduced at a meeting of Cisco’s top 200 salesmen last weekend in Hawaii. Mr. Chambers and his top lieutenants worked on some of the organizational rules on his plane home, and broke the news to Cisco employees on Tuesday.

The underlying pressures behind the change, however, have been building for years. The boom in smartphones and tablets has increased the range of devices that a computer network has to manage, along with the amount and diversity of data, from two-way video to sensor data and social network updates. These devices are connected to supercomputing clouds, which collect and process enormous amounts of information at low cost.

This looks like the turnaround blueprints from IBM, but Cisco arguably is starting with even less expertise in modern software and business services that IBM had. And when the ‘networks’ that large companies use are actually dynamically configured and managed by software, Cisco is something like a buggy maker at the start of the automobile revolution.

And there is no mention of the rise of social business. Chambers seems to have completely missed that, although competitors like IBM, Oracle, Citrix, VMware and HP haven’t.