A new strategy

Cisco Systems Inc.'s new Carrier Systems Group, last week announced as the twelfth technology group of strategic importance to the company, is viewed as a determined effort by Cisco to increase its penetration into incumbent carriers.

The group consolidates Cisco's carrier-oriented business units and systems. Those business units include Multi-Service Switching, Remote Access, Carrier Voice Gateway and DSL (digital subscriber line). The systems incorporated into the new group include remote access aggregation, voice-switching systems such as voice-over-IP (Internet Protocol) and voice-over-ATM (asynchronous transfer mode) gateways, and products based on ATM, frame relay and DSL.

The Carrier Systems Group is charged with assembling "carrier-class" systems out of these piece parts that will appeal to interexchange carriers, incumbent local exchange carriers (ILEC), post, telegraph and telephone administrations and wireless carriers. Cisco has been less successful selling its IP products and convergence vision into traditional carriers than it has with competitive local exchange carriers, greenfields and other start-up or emerging service providers.

But many of these alternative service providers have gone belly up with the crash of the dot-coms and the downturn in the telecom industry. As a result, Cisco needs to buck up its profile and reputation with the incumbents.

"We are going to be extremely focused on the ILECs and PTTs, and they have a lot of challenging problems to be solved over the next few years," says Kambiz Hooshmand, vice president and general manager of the new organization. We hope that with this additional focus, we'll be a lot more successful going forward."

Analysts say it's imperative for Cisco to build the same rapport with incumbents that Lucent, Nortel, Alcatel, Siemens and Ericsson enjoy.

"Cisco's ability to build successful relationships with the established service providers will be its most important goal to achieve in 2002 and will largely dictate its future success in becoming a top three player in communications equipment," says Bill Lesieur, director of Technology Business Research in Hampton, New Hampshire. "The question that remains about Cisco is if the company's strategy to penetrate the service provider market with communications equipment is on target and can the company be as successful in executing this strategy as it has been in the enterprise market. At this point, Cisco's future in the service provider market is still uncertain, especially since incumbent carriers are still happily buying equipment from Lucent and Nortel."

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