Cisco To Expand 30 Market Adjacency Initiatives To 50


Cisco Systems has long sought to branch beyond its core networking business as the expansion of the router and switching markets slowed.

First it was into advanced technologies, such as home networking, unified communications and IP telephony.

Then it became “market adjacencies,” named as such because they were seen as adjacent to the company’s existing markets. Cisco is presently developing businesses in about 30 adjacencies, including the smart energy grid and what it calls smart connected communities, where cities use networks to drive economic development and deliver services.

That list will grow shortly to 50.

During a fourth-quarter conference call on Wednesday, CEO John Chambers said an expansion of the initiatives was likely. “Assuming we are successful, you will see us expand well beyond (the) 30 we have today,” he told analysts.

He pointed out that all adjacencies are designed to expand the role of the network and are opportunities that could grow into billion dollar businesses. They are in various stages of evolution, he added.

But he didn’t specify the extent of the expansion Cisco had in mind.

During a Thursday evening panel discussion, however, Cisco Senior Manager of Workplace Resources John Hailey let the number slip. There soon will be 50 initiatives, he said while discussing Cisco’s efforts to become a green company.

It will be interesting to discover what they are.

LED Lighting Will Be Big As Companies Go Green


Going green has many meanings at Cisco Systems.

It means monitoring energy use at 600 buildings across the globe to reduce a $130 million electric bill. It means locating data centers where power is not just cheap and plentiful, but where it comes from less-polluting sources.

And it means looking ahead to new technologies, such as LED lighting, which is destine to be big and smart enough to adjust to daylight conditions and instruct nearby lights to follow suit.

“Our customers and partners are demanding we be a green company,” Cisco’s Senior Manager of Workplace Resources John Hailey said Thursday evening at an SDForum Green & Clean event in Menlo Park. That’s why “we are now re-evaluating how we locate data centers and labs (looking) as to whether it is clean or dirty energy.”

While many companies justify environmental projects based on their expected cost savings, others have begun to look at a broader calculation. Customers, partners and suppliers now expect carbon reduction to be part of a company’s DNA – as can be seen in Cisco’s effort to seek cleaner power sources.
While the growing desire to be a good corporate citizen is nothing new, what was interesting was its emphasis at last night’s forum. With the Bush Administration a thing of the part, companies appear to be genuinely taking green to heart.

In other word’s, Cisco isn’t alone. At Hewlett-Packard, the company installed SunPower solar panels on six San Diego buildings last year. The benefits include an estimated $750,000 in savings over 15 years. But the company now realizes they go beyond that.

Customers want to see green data centers at their partners, notes Anne Marie Feldhusen, a marketing manager for the company’s green business initiative. The benefit is less tangible, but nonetheless important.

There will still need to be prodding, says Matthew Denesuk, a partner at IBM’s venture capital group, which is why large-scale environmental improvements will require government regulations.

But smart companies, it appears, are thinking a step ahead – to a time when green is not just good for business but necessary for business.

Because altruism will take a while to go mainstream, and because cost savings will motivate many projects even after, IBM’s venture capital group is seeking technologies that integrate with existing ERP systems and other widely used software, says Denesuk. A separate focus is on products tailored to an industry vertical, he says.

Products need to be flexible so they can respond to changing regulations and company initiatives, he says.

Cisco Sees Tipping Point And Revs Engines For Growth


Cisco Systems may have disappointed Wall Street with its fourth quarter results.

But the network giant says its recently completed fourth quarter may have been the “tipping point,” where sales declines from the global downturn began reversing themselves and growth resumed.

As a result, “we are now moving the entire focus of the company to growth,” says CEO John Chambers. It is possible a couple of quarters from now “we will look back and see that the tipping point was the fourth quarter.”

At first, the growth may be hard to see. The company projected first quarter sales would decline 15 to 17 percent from a year ago. But they will be up 1 to 3 percent from the fourth quarter, compared with the typical 1 to 2 percent rise expected from a fourth to a first quarter.

This is an “aggressive, bold statement,” Chambers said on a conference call with analysts. “Overall, this is business as normal.”

While a second quarter of positive quarter-to-quarter growth would be a welcome sign for the company (the fourth quarter also had quarter-to-quarter growth, the company’s first quarter in a year) it is not guaranteed. Cisco’s key router and switch businesses continued to decline in the fourth quarter, with router sales were off 27 percent and switch revenue slumping 20 percent.

But it reflects what Chambers said were improving business trends in the United States, Asia Pacific and in emerging markets. Only Europe appears to be lagging.

Cisco hopes to take advantage of the improving market place by investing in approximately 30 new business opportunities. These include what Cisco calls its smart connected communities (marketed to overseas governments) and its smart grid technologies for improving energy efficiency.

“It is too soon to call a recovery,” Chambers says. But the fourth quarter saw the first positive economic signals.

That means it is time for the aggressive equipment supplier to rev its engines.

Salesforce Described As The Old Guard Of The Software Industry


When a company is first in a market, it becomes a target. This appears to be what has happened to Salesforce.com, the startup that pioneered the software-as-a-service model.

A decade ago, Salesforce launched an attacked on the then old guard of the software industry (Oracle, SAP, Microsoft). It steadily built a business renting its software over the Internet instead of selling products customers install in-house. Quarterly revenue is now over $300 million.

After dismissing SaaS (for years), Oracle, SAP and Microsoft all mounted their horses and raced to develop offerings of their own.

The same rules of engagement are now turning against this leader. Software industry experts have begun asking whether its reliance on proprietary and expensive components (EMC storage gear, the Oracle database) creates a disadvantage when competitors, such as Zoho and RightNow, rely on open source

Zoho is quick to say yes. CEO Sridhar Vembu argues the differences create a “fundamental inefficiency” for Salesforce. This inefficiency is stubbornly reflected in the $65 a month price it charges, Vembu says in a recent blog post. Zoho charges $15, which includes a necessary mail account.

Maybe that is why Salesforce resorted to a $50 percent off promotion, he adds. “That gap, or may be I should call it the Grand Canyon (in price) is exactly what you have to resort to when you have a fundamentally inefficient business model that precludes you from dropping your price the honest way,” he says.

He could be right. While this disadvantage may take months, or perhaps years, to show up in business results, it is likely something Marc Benioff and crew are mulling. It is one thing to stay ahead with features and AppExchange partnerships. It is another to have cost on your side.

Switching Market In A Permanent Swoon


With Cisco Systems set to report earnings on Wednesday afternoon, it seems timely to report this downbeat view of the switching market.

Dell’Oro reported Tuesday morning that the Ethernet switching market, which Cisco dominates, should tumble 20 percent this year – its sharpest drop since 2001.

“Given the severity of the decline during the first quarter of 2009, it will be difficult for the market to rebound quickly to the revenue and port levels we saw in 2008,” said Alan Weckel, director of Ethernet switch market research.

Evidently Weckel expects some market improvement during the second half of the year. That may give some lift to revenue at Cisco. And he also predicts the market will begin expanding again in 2010, with purchases for busy corporate data centers and interest in new high-speed 10 gigabit Ethernet switches leading the way.

“However, it will be difficult for the market to return to the robust growth rates it enjoyed over the past five years,” says Weckel. (Some of those growth rates weren’t so robust, as a matter of fact.)

It will be interesting to see what Cisco says about the future of this key networking market. Permanent slowing would be an ominous sign for the company. However, it is clear corporate networks will need to expand dramatically in coming years as video is more routinely incorporated in reports and on Web sites.

There are reasons to think a wave of new buying could be on the way several years from now.

Ambitious Outlook For Mobile Internet Traffic


During the dot-com boom, research firms were beside themselves to project gargantuan growth for the Internet and Internet traffic. Many of these forecasts proved to be wildly overstated.

Could this be happening again?

A New York research outfit weighed in with an astonishing prediction Tuesday which at first glance seems like data deja vu. Five years from now, according to ABI Research, mobile data traffic to cellular handsets, such as the iPhone, and to computers with cellular modems will exceed all the Internet traffic (wired and mobile) in 2008.

Computers with cellular modems will lead the growth. Computers with built-in cellular modems (both 3G and 4G) will account for 50 percent of mobile traffic in 2014, the firm said.

In that year, mobile traffic volume will total 1.6 Exabytes, with a quarter coming from video and audio streaming. Peer-to-peer file sharing will account for just 1 percent of traffic.

ABI should be commended for putting a stake in the ground. Let’s see how the prediction holds up mid way through the next decade.

Can Cloud Computing Scale At Amazon And Elsewhere?


At the heart of the cloud computing debate is the assumption that the cloud can scale to significant heights. But can it?

Some customers say services, such as Amazon’s Elastic Compute Cloud, or EC2, are already bumping up against capacity limits – even at this early stage.

The three-year-old Internet-based service from Amazon allows customers to rent computers in the Amazon cloud, or data center, to install and run their applications.

Need more computer power? Pay for the extra CPU time by the hour. But some customers say it isn’t as easy as that. That’s because Amazon can’t install new equipment fast enough. The consequence is customers say they have difficulty getting the full number of machines they want, when they want them.

The customers asked not to be named for fear of endangering their relationship with Amazon.

But one entrepreneur said he asked for 1,000 additional servers and got only 500. Another recently requested an expansion of his compute farm by an additional 1,000 servers and couldn’t get the extra power.

The explanation appears to be that Amazon is unable to handle the spike in traffic that would occur if the new facilities were required simultaneously. In fact, the company appears to be working on a scheduling application that would allow it to better plan for spikes in customer needs.

The application would let customers schedule their workloads.

So will the cloud ultimately deliver the ease of use and flexibility advocate say it should? Only if it is big enough to replicate the in-house computers companies rely on to run their businesses.

That would make it one awfully large cloud.

Baidu Giving Google Fits In China


Baidu, the upstart Chinese search engine, is giving Google a run for its money in the world’s most populous country.

In June, the 9-year-old company passed Google in market share for the first time, riding a head of stream.

The switch in leadership illustrates how intense of a two-horse race the Chinese market has become. Yahoo trails in a very distant third place.

According to Net Applications, Baidu had 51 percent of the market at the end of the month compared with Google’s 44 percent. Yahoo had 1.6 percent and Microsoft, less 0.9 percent.

“Baidu is on a major growth curve” and benefiting as Chinese users migrate from Google, Net Applications says.

Baidu now accounts for 9 percent of global search usage (topping Microsoft). It will prove a formidable foe for Google.

More Experimentation With Online Ads


The need is clear: the Internet requires a new type of ad for the next stage of Web 2.0 (or Web 3.0, you attach the number).

Display ads work well for search engines and adequately for static Web sites. But real-time, interactive social networks and video sites require something different.

Companies such as Facebook, Twitter and You Tube continue to experiment. You Tube, in fact, claims it is finally making some progress. Users have begun to accept pre-roll ads, and the site’s search pages are soaking up an inventory of more traditional postings.

Experimentation outside the majors continues. JiWire, a company that earns its living selling ads at Wi-Fi hot spots, is rolling out an ad that promises an immediate payback

In short, not only is it potentially lucrative for the advertisers and JiWire, it rewards consumers - who are typically business travelers - killing time in an airport or hotel. If they watch a 30-second spot, they get 20 minutes or so of free Internet access.

JiWire, which groups the ads under its Ads for Access program, says it ran a test campaign for Hyatt Place hotels in the first quarter. One third of people attempting to go online clicked on the ad and 68 percent of those watched the 30-second viewing, which included a virtual tour of a hotel, says David Staas, senior vice president of marketing.

“We think that’s exceptional,” compared with the 0.1 percent conversion rate of a typical Internet ad, says Staas. The test was conducted at major airports in the U.S., including JFK and O’Hare.

Among the ads’ big advantages: advertisers got the attention of consumer for an extended period of time.

JiWire says more campaigns are prepared to roll out. While the ads may prove to be successful brand awareness tools, they accomplish a second goal. They engages consumers at a time when many people are adept at ignoring the ads they see as they search for information or conduct business.

Rewarding consumers for their time spent may be the new formula advertisers have been looking for. It will be interesting to see how it does.