Charlie Giancarlo, a 10-year Cisco veteran, took over as the company's CTO five months ago. In that role, he contributes to and communicates the company's overall technology strategy. What's more, he leads Cisco's US$500 million Linksys division, which serves consumers and the small office/home office market.
How are you handling the two jobs?
It keeps me out of trouble. Linksys is a very different business model. It's one that's of great interest to Cisco for a number of reasons. One interest is purely the products themselves. As the Internet starts to incorporate more and different types of services for consumers, Linksys will be the brand of devices that converts packets into useful services. It's important to us from that standpoint . . . What we do at Linksys is of so much interest to our current customer base, especially to service providers, because Linksys and service providers are largely selling to the same customer base.
Linksys is also important to us because it is the first time Cisco has gone into a business that has a really different business model. So we're learning a lot in the area of running the two different business models in the company. That's an important lesson for us because as we continue to expand as a company, we foresee the possibility of going into yet other areas that may not only be different from a product perspective, but also from a business model perspective.
What's behind Cisco's recent spate of high-profile VoIP wins, such as with Boeing, Ford and Bank of America?
Things have been building up. We've had a very large number of customers - over 40 - with over 5,000 phones. A significant number, over a dozen with over 10,000 phones, operating on a single IP environment. Cisco itself has almost 60,000 phones operating in an IP telephony environment - the largest in the world by a significant amount. Customers have been planning for quite a long time to converge their networks. That's been happening with larger networks, and now we're getting to the kinds of numbers that people sit up and take notice of, with [Bank of America] or Ford. What they're seeing are cost savings and operational improvements with VoIP - all of which were promised. A long customer list makes other customers feel comfortable about VoIP. And that's what we're seeing right now.
You've been evangelizing about residential VoIP services lately, but will IP Centrex types of services ever evolve the way analysts initially thought they would?
I don't think any of us yet know exactly which VoIP business models will be truly successful. What we are seeing is that IP PBXs are a powerful concept and becoming big business. We also see that VoIP is happening in a big way in the consumer space. I would predict that half the U.S. consumer market will be on VoIP by the end of the decade - residential voice. Exactly how does that play out in the small and medium business market? I would hazard to guess that, just like with other technologies, it will be a combination of the enterprise model and the consumer model. Larger SMBs that style themselves as smaller enterprises will look at IP PBXs. Smaller SMBs may go more the consumer route, meaning they'll look at small IP key systems with carrier VoIP service behind that.
If more companies and SMBs want IP telephony delivered as a service, does that cannibalize your IP PBX market?
That's effectively how Ford is getting VoIP - as a service. SBC is serving Ford, utilizing our IP PBX. In the case of IP telephony, no one knows where it's hosted. That's the important concept. In the case of IP PBXs, whether it's owed or managed, whether it's hosted on or off the premise, no one is the wiser.
Cisco CEO John Chambers has said he expects your top competitors to come from Asia, and particularly China, in the near future. In what markets do you expect to see the strongest competition from these vendors?
We have to separate out China as a market and China as a source of competition. We do see China as a great opportunity for us. We have very high market share in China, and if anything, we're going to increase our investment over there. At the same time we realize China is almost the second-largest unified market in the world next to the U.S. We're going to see companies grow up in China first, competing in the Chinese market; then they'll start to compete in the rest of the world.
The predictions that Cisco's markets will be commoditized have been constant over the last 15 years. It hasn't happened yet and we don't expect to have it happen. But we do expect new sources of competition to come out of China.
What's the first big market in which you expect to clash with Chinese competitors?
The biggest market in China is the service provider market. As compared to the U.S., the [ratio] of capital purchases by service providers in China, as compared to the total telecom market in China, is much higher than it is here.
What's the status of your Network Admission Control program, for integrating anti-virus and firewall capabilities into LAN switches?
We've very much on track. . . . We are building it into all of our switch products. That is not to say they will all come out simultaneously. But we are being very aggressive in terms of rolling out the first phase of the self-defining network across all the switches. I can't pre-announce when those will come out, but it is probably one of the most important initiatives in the company. Our partners [IBM, Trend Micro, Network Associates and Symantec] give NAC momentum.
Ultimately, regarding the future of NAC, does the LAN switch become more of a security product as opposed to just a basic connectivity hub?
When you fill a glass of water from the tap, you don't expect to get viruses and worms. We see security being a fundamental component of the network itself. When you plug into a network, you shouldn't expect viruses and worms to be coming out of that spigot. That's obviously not where we are today. But where do we expect to be as an industry five years from now? Anti-virus, anti-spam, anti-worm, anti-whatever will be fundamental components of the functions of the network. This means routers and switches and whatever elements we have in that network infrastructure.
Is this what you hope will stave off commoditization in the router/switch market?
It's one of many things. [Another factor is] wireless/wireline integration, which allows IT staff to manage and secure a wireless environment the same way they manage security in a wired environment. Another factor is technology that lets you manage the network for telephony as well as for data - really integrating all of these things so that what you have is a communications fabric that is secure, multi-modal, that understands things like presence and your personal identity and so forth.