Insight

Looking beyond the core

Cisco's strategy of targeting SMEs and going hammer and tongs in new market segments has potential but it's not an unqualified success...yet, says Prashant L Rao.

What does a company do when it climbs to the top of the mountain? If it is hungry for growth, the answer is obvious; it searches for new vistas that will help it keep the growth meter ticking. That’s exactly what Cisco is doing as it aggressively targets new technology areas that are growing faster than its traditional LAN stronghold—IP telephony, wireless LANs, security and storage switches. The US market for core routers and switches is maturing. IDC forecasts that the market for networking equipment will grow in mid-single digits in 2004. “These three segments are growing much faster than the market for routers and switches. Globally too, the same trend gets reflected,” says Nitin Gupta, analyst, GTM Services, IDC India. These new areas account for about 15 percent of Cisco’s sales. Analysts expect that to double by 2006.

Among the new technologies that are being tapped for growth, the company has been most successful in WLANs and IP telephony. In security, it’s hard to measure Cisco’s success or failure as its security strategy involves tying up with market leaders and embedding security into its products. In storage switching, Cisco has yet to open its account in the country.

IP Telephony for SMEs

As per IDC India, the top three vendors in the Indian market for IP Telephony are Avaya, Cisco and Nortel (for CY2003). That said, Cisco’s performance here has been quite strong. The company has succeeded in selling no less than 15,000 IP phones per quarter up from 10,000 per quarter last year. Now, after tapping the large enterprise segment, Cisco is going after SMEs.

Traditionally its IP telephony solutions have involved running Call Manager software on a separate server. Mathew Varghese, principal consultant, Cisco Systems (India) says, “Till the beginning of 2003, we had an IP telephony solution only for companies with more than 150 users. The Call Manager IP PBX was dedicated software that ran on its own server.” That’s changed and the company offers CCME (Cisco Call Manager Express) that rides atop a router. The call processing agent runs on the router and depending upon the router model, the capacity changes. You can support 24 users on an entry-level router and an IP telephony deployment is now possible for less than $20,000. Other costs saving devices include an analogue telephony adapter that hooks up two analogue phones and converts analogue voice to IP. However, there’s no support for intelligent applications with this adapter.

In some cases companies allowed to use one phone for both PSTN and internal networks, doing away with the need for redundant lines, network and IP PBX Mathew Varghese Principal Consultant Cisco Systems (India)	People are consolidating storage and port requirements per box are rising Sanjay Kharade Regional Manager-System Engineering Enterprise-West Cisco India

One barrier to the adoption of IP telephony has been the fact that companies are required to maintain two sets of phones, one for calling PSTN numbers and the other for internal CUG IP calls. “BSNL gives a common infrastructure approval based on a company’s history. In some cases companies allowed to use one phone for both PSTN and internal networks, doing away with the need for redundant lines, network and IP PBX,” says Varghese.

Applications on IP telephony include unified messaging, video telephony (popular with software EOUs) and speech enabled apps (no keypad, all voice commands) including speech enabled IVR. India Inc is adopting these revealing a change from the days when IP telephony was being sold purely on the basis of cost savings. SBI uses the technology for running applications that let its employees access the Web and retrieve email from an IP phone. They can get stock quotes and query the employee directory. The bank has deployed no less than 6,000 IP phones. Says Ramanathan, DDG–IT, SBI, “Cisco’s IP-based core routing and switching solutions offer centralised management, ease of use & deployment and an open architecture-based system which allows us to create advanced applications. We have deployed a host of Cisco’s advanced technology solutions such as IP-Telephony.“ SBI has one of the largest IP Telephony networks with 6,000 IP phones which runs on the existing leased line network–and offers inter-branch connectivity at marginal costs. “Our savings on STD costs itself almost justifies the entire investment into the network!” adds Ramanathan.

A Wi-Fi point in every office

This is the only new area where Cisco leads the pack. As per IDC India, Cisco, D-Link and Netgear were the top three vendors for Wi-Fi equipment (Q2, CY2004). Shrikant Shitole, business development manager, Service Provider Business, India & SAARC, Cisco India says, “Service providers (hotspots - public and hospitality), manufacturing (shop floor), courier and cargo companies, warehouses and banks (wireless ATMs) are some of the early adopters.” Cisco is pitching Aironet Access Points (AP) for enterprise applications due to their greater coverage (three times that of an AP targeted at the consumer) and Linksys APs for the SOHO market. A trend that is emerging is that of Voice over Wireless. “Service providers are selling broadband with Wi-Fi and IP telephony,” says Shitole.

Security comes from within

When it comes to security, Cisco is integrating it into every appliance. For instance, the ISR router comes with a built in firewall and VPN. “It doesn’t impact routing performance as the functions are implemented in the hardware,” says Jagdish Mahapatra, business development Manager, Cisco India. While it’s doing this, Cisco continues to sell standalone security appliances. The company is propounding the concept of a multilayer defence.

Cisco will unveil its Network Admission Control (NAC) architecture on its switches in FY05. NAC lets an organisation provide network access to devices such as PCs, PDAs, and servers that fail to comply with established security policy in terms of patches, updates and the like. Through NAC, non-compliant devices can be denied access, placed in a quarantined area, or given restricted access. It is the first salvo in Cisco’s Self-Defending Network initiative.

Smart storage switches

This being Cisco’s most recent business, it has yet to open its account in storage networking in India. That said, it would be foolhardy to underestimate the company. After tripling its market share in H1 2003 to 6%, Cisco doubled that to 12 percent in Q1 2004. (Source: Dell’Oro Group)

In storage networking, it aims to sell very high-end products with 200 ports. “People are consolidating storage, port requirements per box are rising,” says Sanjay Kharade, regional manager–System Engineering, Enterprise–West, Cisco India. MDS SAN switches from Cisco support fibre channel, iSCSI or FCIP on every port. Some of its existing routers, the 7200 and 7400, can support FCIP for data replication across a WAN. Innovative technology is on tap through blades, two routes are provided to virtualise storage—IBM’s SAN Volume Controller and VERITAS’ Storage Foundation.

Globally, it would be right to call Cisco’s moves a ‘de-risking’ strategy but in India that’s not true as IDC’s Gupta points out, “You de-risk when the traditional segments are about to be in a state of decline. But, routers and switches have a long way to go, especially in countries like India. In addition, routers and switches are seeing rapid changes in transmission technology as well as form factor-which means a good replacement market as well.”

Cisco’s strategy is not without risks. It is quite possible that none of the new segments it has set its sights upon may ever grow to match the market for LAN and WAN equipment. Even if they do, there’s no guarantee that Cisco will be able to get the kind of lock it has on the market for routers and switches. Still, one thing is clear. The company has no choice but to take the path it has. It’ll take a combination of new markets such as India and China and new technologies to bring this ship safely home.

prashant@expresscomputeronline.com