Significant changes are needed in today’s enterprise networks, to move on to a common infrastructure for voice and data communication, one that can provide various services—irrespective of the kind of information that will pass through it. One, the networks have to be very fast; two, central equipment should be able to handle both voice and data communications; three, the network has to be really robust and redundant now that valuable information is residing on it; and four, the network must have some sort of security mechanism to restrict unauthorized access of critical information.

With e-commerce getting implemented in all business communities around the world, companies cannot afford to not have an Internet strategy. While service providers spend huge amounts of time and money on finding out what their subscribers would want, for enterprises the challenge is a bit different. It is finding out which information/communication services would result in not just cost saving, but useful usage of the infrastructure for company benefits.

First, these changes require some understanding by the enterprises. Most enterprises would be from various industries other than IT or communications and hence would require some handholding in deploying networking technologies. Second, a host of LAN and WAN equipment would be required. And third, maintenance of the already installed equipment would be needed. The Enterprise networking equipment market comprising Ethernet switches, ATM switches and routers is an estimated $18 billion market. This is expected to touch $40 billion by 2004.

The Cisco Opportunity

The Cisco solution for the enterprise is modeled upon the company itself—an $18.9 billion company, which has grown 18.9 times in the last five years. A company which has created over $250 billion of marketcap in the same period, to now be among the top three. And a company whose web site transacts $17 billion worth business. A true leader among Internet generation companies.

Cisco eschews companies to make an Internet ecosystem—to serve Internet-connected customers. Like itself, it believes companies can make use of the Internet for creating competitive advantages, apart from reducing operational cost. Also, it sees new trends like virtual close—allowing company to close its books within one day—and virtual manufacturing to equal, if not surpass, the impact of e-commerce.

In a period where the technology life cycles have got much shorter, Cisco says companies must plan around open standards so that it minimizes duplication across functions, and creates a scalable robust architecture for the enterprise to ensure future re-usability. By establishing standards at all three levels of infrastructure—foundation technologies, enabling technologies, and information repositories—applications can be easily deployed quickly and economically. Says Pete Solvik, CIO, Cisco Systems, "Our architecture is not a tactical architecture, but a strategic, enterprise-wide framework that doesn’t change each time Cisco deploys a new application. The architecture is iterative and grows as projects are executed rather than all at once."

According to Cisco, the flexibility and economy required by the networks can be achieved on IP technologies. It sees IP playing the main role to bridge the gap that exists between voice and data applications in an enterprise network. And when convergence happens, Cisco would be ready with its Architecture for Voice, Video, and Integrated Data (AVVID) solution that consists of business applications along with a network platform of routers, switches, servers, and security products.

Cisco also has an IP contact center solution for call center and CRM applications of an enterprise. Cisco now represents a fair amount of software and application expertise among its ranks. It has acquired several software companies and put up software development centers (the largest after the US center is in Bangalore, India) to add the crucial software and application components to its enterprise solutions portfolio.

In the data communication space, the competition views the enterprise opportunity almost from the same perspective as Cisco, though many like to differ on issues like switching versus routing. Cabletron Systems, a major proponent of switch routing, believes switches can do the routing part as well, thus reducing one element, in effect, from a LAN which was getting complicated due to several new access technologies mushrooming up at the edge of the LAN. New Layer 4-7 switch players like Alteon believe the current data communication architecture in the LAN space is quite dumb. Alteon says switches made by the incumbents are hardly intelligent enough to differentiate between packets and not fast enough to handle applications like application service provision and data centers.

It is on the voice side that Cisco’s views get vociferous, challenging responses from competition. Companies like Lucent, Nortel, and Siemens hardly see a drop in sales of voice communication products due to Cisco’s IP phones and EPABXes. In fact, Lucent’s now sister-company Avaya and Nortel say Cisco cannot now complain that the products in this space are proprietary. The customer premise voice systems have been opened up a long time ago, and there is already a host of application services vendors applying logic into their technologies – to develop new voice services. This market is one that is growing rapidly.

The Forecast

Cisco is expected to benefit a lot due to the equity that its brand has come to be associated with in the enterprise data market. With its Internet business model, analysts believe it will continue to make an impact on the data networks of the top Fortune 500 companies and other leading names in individual countries.

In a $12 billion market for 1999, Cisco is clearly ahead of its competitors in the LAN packet switch market. However, on the high-end Gigabit switch market, Cisco is starting to feel some pressure from competitors like Extreme, Nortel, and Cabletron, whose marketshares increased in the last fiscal. Here Cisco might still feel safe as it has also seen an increase in marketshare and it is more likely that the competitors have grown, capturing a large space left by 3Com’s exit from this market. It is in the Layer 4-7 switch market that Cisco has tensions. According to analysts, the entrants in this market like Alteon, F5 Networks, Foundry, and ArrowPoint are offering innovative technologies and products that are becoming components of the LAN infrastructures of service providers. Though, Cisco is the incumbent in this market with its existing products, its sales here are not growing as fast as the competitors.

Though it will see tough competition in the low-end switch segments due to a host of small competitors which are fighting this space on dirt-cheap prices. This, however, is likely to be more than compensated by its high value switch and router sales. Because it commands such high ASVs in the market, Cisco can look forward to top the enterprise switch and router markets for the time being, though it need not necessarily sell the largest volumes. On the enterprise router scene, Cisco is clearly far ahead of any competitor. Here, Nortel is still its main competitor though Juniper recently made an entry with its edge router.

Though on the enterprise data networking equipment market, Cisco might be in a very firm position, it is not so when it comes to the enterprise voice market. Cisco’s IP solutions for voice are only starting and have not yet made a major impact on telephone solutions of companies like Lucent, Nortel, and Siemens, which together, according to Philips Infotech research group, dominated about 30 percent of the total $79 billion enterprise voice market in the year 1998. The trend is likely to have not significantly changed as Lucent and Nortel saw steady growth in their enterprise divisions in 1999. And this year, in a smart move, Lucent has spun off its enterprise division into a new company called Avaya, which will be no mean player in this market. On the software and application front, Cisco encounters, in addition to the incumbent voice market leaders, competion from a host of unique players like Quintus, Kana, and Oracle whose core competency, unlike Cisco, has been on software.

So, if Cisco has to expand its sales in the enterprise market, it needs to have the voice and data networks converging fast. Cisco is best in a converged world. And hence, the focus on AVVID and VoIP.

Nareshchandra Laishram