Emergic: Rajesh Jain's Blog

Emergic: Rajesh Jain's Blog header image 2

Competiton for Cisco

December 2nd, 2002 · No Comments

Fro m Fortune:

Even as [Cisco CEO John] Chambers widens the company’s lead over smaller rivals and knocks on new doors, other competitors smell blood–most notably Dell, which has already sold more than 100,000 low-end switches. Even more fearsome than having Dell as a competitor is the change its arrival signals: Commoditization has come to the networking market. For now, Dell’s market share is so small that it doesn’t even register in surveys, but Cisco is worried enough that this past summer it banned Dell from selling Cisco products. Huawei, a $3-billion-a-year, privately owned Chinese company, is causing a similar stir in Cisco’s China operation by developing and selling its own switches.

Cisco likely has some time before Dell-ification starts eating at its margins. But the mere mention of the Austin PC giant sends Volpi to the whiteboard in his office to scribble an illustration of why Dell won’t succeed. His argument is that, unlike players in the markets for PCs and servers, Cisco controls the router and switch game from start to finish. In computers, Intel makes the chips, companies like IBM, HP, and Dell assemble the machines, Microsoft makes the operating system, and hundreds of companies make applications. Industry standards help the products interact, but often force companies to compete on price alone. In networking, by contrast, Cisco owns the hardware, the operating system, and the applications. Any company that wants to compete has to start anew. “For anything to become a commodity, it has to be sufficiently simple that you could send your mom out to fix it,” says Jim Reese, who runs the network at Google, the search-engine company. “Networks just aren’t there yet.” For its part, Dell says that commoditization is coming faster than Cisco believes.

Tags: Management

0 responses so far ↓

  • There are no comments yet...Kick things off by filling out the form below.

Leave a Comment