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Saturday, January 15, 2005

Cisco Moving Into Software, Consulting, Services ?

Lightreading speculates based on a series of convergent developments that Cisco has laid out plans to move into software, services and consulting.Excerpts with edits:

Cisco has already set up a special software group to develop middleware, Web applications, and services products, says one reliable source who is close to the company but asked to remained unnamed. Other sources say Cisco has indeed set up a new software group but that it may have less dramatic goals.
Cisco's goal with the new software group is to create "application-aware" networks, a move that could tread on the turf of partners IBM and Microsoft Corp
. "This has been kept totally quiet by Cisco because they do not want Microsoft to get mad enough to hurt other lines of business," the source says. With networking technology becoming increasingly commoditized - and with a looming fret from low-cost hardware competitors in China, Cisco could help insulate itself from these trends by moving up the software stack and marketing consulting services and developing more sophisticated software. "They're going to need something like [a software group] to bulk up those consulting services. It's part of their move to quietly become more like IBM". Other sources believe the group's task is less grand, possibly relatEd to future developments with XML and Layer 7 traffic engineering. At Cisco's analyst meeting in December, John Chambers outlined a strategy to make Cisco more of a consultant, showing customers how to change their business processes to take advantage of new capabilities in the network. Cisco's new Integrated Service Router (ISR) product line reflects that thinking by making routers to become the roosting place for network applications such as voice over IP (VOIP).Cisco's superpowers in routing could prove useless in the software dimension. "It's a different set of rules and a different set of customers. The buyer [of applications software] is not the one that buys the routers,". "No one would believe you're talking about putting your crown jewels in the hands of a communications company." It's more likely the new software group targets "higher-order Layer 7 things like XML." Crucial adjustment needed include that in services - network designing help, for example - aren't supposed to be free any more. "That can be a tough transition" for a sales force that's given away services "all their lives," Given the company's dominance in routers, something like consulting might be Cisco's best way to create new revenue streams.

We earlier covered that dominant acquisitions made by Cisco in 2004 were software enterprises.An important development in the more and more convergent world and moving forward Cisco has serious challenges to create new revenue streams and maintain its marketcap and image as a dominant player in the communications and information technology sector.
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