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Analsys & Opinion The Right Angle It's not what you say it's the where that you say it
Analsys & Opinion The Right Angle It's not what you say it's the where that you say it | It's not what you say it's the where that you say it |
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| by Stuart Corner | |
| Saturday, 21 January 2006 | |
  
In 2003 Cisco paid $US500 for consumer and SME network gear maker Linksys, the market leader in the US at the time. This was followed by its purchase in mid 1995 of KiSS, a leading technology provider for networked entertainment devices with a product portfolio that includes home video products such as networked DVD players and networked DVD recorders. Cisco followed these with the larger acquisition of set top box maker Scientific Atlanta late in 2005. Blind Freddy could have seen that Cisco has the consumer market in its sights. Much more interesting, and insightful, was a Q&A put out by US magazine Network World a few days later with none other than the big boss himself, Cisco president and CEO, John Chambers. I did not see anyone else pick up on this one. A pity, because it was more revealing that Giancarlo's comments. Giancarlo - chief technology officer and senior vice president at Cisco, and president in charge of Cisco's Linksys division to give him his full title - told the Financial Times that changing requirements from consumers for devices that could link to the Internet had given Cisco an opportunity to enter a new market. True, and the FT quoted him as saying: "Consumer electronics companies have been able to compete on a stand-alone device but the dynamics of the market are changing...The internet and new networking requirements are enough of a disruptor for us to enter a new market." Also true, but entering is one thing, succeeding and dominating is another. And were is Cisco's strategic advantage here? Sure, Linksys had a huge share of the US home and soho networking market, but that was not replicated elsewhere and even so, it's a big leap from what is still rather specialised and 'techie' computing and networking gear into the real mass market of stereos, TVs etc. It's a not insignificant leap for a company like Linksys, and it's a really big leap for a company like Cisco that sells sophisticated communications gear to the enterprise and carrier market. And when you have ambitions that match your size, it’s a real challenge. As Chambers told network World: "When we go into a market our goal has always been to be No. 1 or 2 with, ideally, 40 percent market share." One of the first things Chambers was asked to do in his Network World Q&A was to defend the growing scope of Cisco's market. His answer was that the distinctions we see today will disappear tomorrow: "We think the enterprise network, the commercial/SMB network, the consumer network and the service provider network will completely blur." He foresaw this fusion being driven by the service providers with many of the services delivered to the consumer market being network based. "We think the network will become the platform that will deliver services, applications [and more] to all four markets." So Cisco isn't going to crack the consumer market by selling an ever wider range of boxes to do this that and the other and talk to each other and the world at large over IP networks, it's going to deliver technologies as part of integrated offerings from service providers. In which case, I suspect it is going to have work hard not only to acquire or develop the right technologies, but to get service providers around to its way of thinking, which might not be so easy. How is Cisco going to get to No. 1 number 2 with 40 percent market share? I don't know, but I do know it has been working on for a good number of years already and only in the last two, starting with the acquisition of Linksys, have we seen any real market action. Back in 2000 Cisco Australia was one of the lead backers of the iHome, a high tech home of the future set up in inner Sydney. This was no quick demo: a town house was bought, kitted out with an impressive range of futuristic gadgetry and after a couple of years, sold off lock stock and barrel as a working high tech home (I'd love to know where it's at now. Support for all that technology might have become an issue). At the launch, in November 2000 the then head of Cisco Australia, Terry Walsh, said: "A large proportion of consumers will soon be connected to the Internet all the time...we believe this will lead to the emergence of 'home service providers', smart companies that focus on delivering imaginative and profitable services to people in their homes...The home is the next multi-billion dollar frontier for many players, particularly telecommunications providers, utilities and others that are seeing their traditional services quickly become commodities." See, you could have written last week's FT headline five years ago! It's easy to be wise after the event. So let's try and predict instead. A key component of this scenario is the so-called intelligent home gateway that interfaces to a whole range of domestic devices: entertainment, monitoring and control (turning lights on and off remotely, reading the electricity meter etc). There are a number of manufacturers of these, two founded in Australia that have enjoyed modest success, one has moved to Singapore having had its technology picked by Singapore Telecom for a large scale tria. I'd say it's a piece of the technology jigsaw that, at present is conspicuous by its absence from the portfolio Cisco will need to deliver on its vision of being a major player in the home of the future. So watch this space. |
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