News

Cisco's Chambers at NetWorld+Interop: Back to Basics

• By John K. Waters
• May 5, 2003

The key to future economic growth lies in the ability of the tech sector to deliver productivity gains to the enterprise, particularly those industries that have not yet realized significant gains from the Internet, such as construction, government and manufacturing. This is according to Cisco Systems CEO John Chambers, who delivered the opening keynote address at last week's NetWorld+Interop trade show in Las Vegas.

"If there's one message I want you to take away from this conference," Chambers said. "It's this: It's about productivity, and it's about high-tech network Web-based applications driving that productivity."

Chambers told attendees that he believes technology will continue to be the driving force behind our overall recovery, even though many market segments are now in a "show-me economy."

"Until the CEOs see their own revenues and profits turn up for a sustainable period of time, they aren't going to spend on ... technology or hiring," he said.

Consequently, business leaders will focus their tech spending strictly on software and hardware that increases productivity, Chambers said. "Technology for technology's sake is not only on the back burner, it's off the stove," he said. And for the tech sector, this means a return to "the basics."

"It's not just about speed; it's also about brand, culture and talent ... And it's not just about market share; it's about profitable market share, with profits and productivity playing the key role," he said.

Chambers told his audience that he expects IT spending to pick up two to three months after business leaders see an improvement in their own operations. He also believes that enterprise spending on new equipment will precede spending on new hires as the economy improves.

Chambers acknowledged that few industry leaders, many of whom expect tech spending to lag behind a recovery, shared this outlook. But the doggedly optimist chief exec insisted that technology, focused on producing productivity gains, will be the driving force behind future economic growth. Some analysts are seeing a similar light at the end of the downturn tunnel.

Both IDC and Aberdeen Group forecast that tech spending would rise globally this year. In a recently published report, industry watchers at IDC predicted that worldwide IT spending would increase 2.3% in 2003. The researchers did, however, expect U.S. growth to be a bit slower, with a 1.5% rate this year and a compound annual growth rate of 4.9% over the next five years. And researchers at Aberdeen Group have projected a spending increase of as much as 3.9% globally.

For its part, Cisco has been shifting its own research over the past year into technologies that will debut in the next one to three years, the firm's Chambers said. Cisco has identified 13 new business areas that each stand to contribute $1 billion or more to the San Jose, Calif.-based company's sales, he said.

Among pending Cisco product offerings is the company's Wi-Fi-based mobile phone. Targeted to on-site mobile workers, such as warehouse workers and nurses, the new Cisco Wireless IP Phone 7920 is not the first Wi-Fi phone, but Cisco's support of the technology may bode well for its future. Symbol Technologies launched a Wi-Fi phone last year, and Vocera currently sells two-way, voice-controlled devices that use Wi-Fi networks.

In addition, Cisco's pending acquisition of Linksys puts the networking giant squarely in the home wireless market.

Chambers offered no predictions about when we might see the economy turn around, but he did say that he was seeing "positive signals."

"Technology was an expense over the past seven years, in my opinion," Chambers said. "But from 1995 going forward, you begin to see this permanent band of productivity that I believe will continue."

Meanwhile, Dell Computer, a relative newcomer in the network computing market, but still widely considered a threat to Cisco's low-end business, used the Las Vegas trade show to roll out three new switches targeted at small- to medium-sized businesses. The Dell PowerConnect 3324 and 3348 Fast Ethernet switches, both of which will offer two built-in copper Gigabit Ethernet uplink ports with option fiber connectivity, are expected this summer. The Dell PowerConnect 5212, a 12-port Gigabit Ethernet switch aimed at mid-sized and large companies that need high-performance connectivity to servers or desktops, is available immediately.