Cisco refocuses on service providers

Mike Sapien/Ovum
17 Jun 2011

Cisco has been making changes recently to refocus its organization, increase revenues, and improve margins. One of these changes was shutting down the Flip camera business unit, which was one of its less successful consumer investments. But these changes and Cisco’s refocus signal more than just a reduction in its efforts to target the consumer market.

Ovum believes that Cisco will seriously consider selling off the Linksys division, which has put pressure on its margins but also its traditional channels. Linksys products also cannibalize its enterprise wireless portfolio because Linksys consumer products offer many advanced features at commodity price levels. However, the consumer products which many industry pundits blame for Cisco’s recent poor performance are just one of the areas for improvement. Consumer products and WebEx create challenges for Cisco with its traditional channels, as well as putting pressure on its margins.

Despite recent setbacks for the vendor, we mustn’t forget that Cisco is still the leader in many markets and was able to create a new market for immersive room-based video systems (telepresence). Ovum believes that by improving its decision-making processes and management structure, increasing focus on supporting service providers, and removing any conflict with its strategic service provider partners, Cisco will achieve better margins and growth.

Changes to its senior management structure and councils are also key

One of the recent changes that Cisco announced was the restructuring of its management and a reduction in the number of councils. This structure had created an overlay of bureaucracy that had slowed down its decision-making and led to many executive departures.

These management changes will allow for faster decision-making and quicker response to market changes. This may appear to be a subtle change, and it seems to have been ignored in other reviewers’ analyses of the major refocus and changes at Cisco, but the ability to make decisions faster and hopefully increase Cisco’s responsiveness to the market and its customers will make a significant positive difference.

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