Cisco's Chambers: Internet of Everything will change business forever

CEO John Chambers pulls no punches when laying out the challenges facing the channel in the IoE era


Cisco CEO John Chambers took to the showfloor at Cisco's Partner Conference 2015 in Montreal to outline his updated vision for the company, which is rapidly moving to evolve its business model to suit the era of the Internet of Everything (IoE; Cisco's Internet of things).

One of the key facts of life for any modern business will be digitization, and that will inevitably lead to fall out not just among vendors, but their partners and distributors.

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Of today's Fortune 500, only 24 per cent of them existed 25 years ago. "A third of them will not only not only not be on the list in the next 25 years, but they'll be out of business," Chambers said a year ago.

Now he has revised that figure even further, claiming that he was "way, way too optimistic" and that the figure is probably around 40 per cent now.

"Its a tough time to be a CEO, they are under immense pressure," he said.

The rate of disruption as more industries are becoming fully digitized, especially in the face of more nimble startups and as IoE becomes more mature, means that CEOs need to fundamentally rethink their businesses.

"Startups don't think like we do. They dont think linearly in terms of growth, they think exponentially," Chambers said. "They don't think about the amount of resources they can throw at a problem, but 'how can I run my organization unbelievably lean, how do I pare it down to the network edge, and have less layers?' They want to move with a speed that is not one or two times faster, but 10 to 20 times faster," he said.

So many companies have fallen by the wayside, simply because they missed a single technology transition.

"I've always thought the best thing to do for shareholders is to make decisions two to three years out, and don't let the quarter or the year impact your view," Chambers said.

"You can't do that anymore today. You have to strike the balance between the long term and the short term. You miss one market transition, and you will be left behind in this industry. Look through all the companies that used to be great companies -- Alcatel, Lucent, Nortel, Digital Equipment, Dell... look at where they are today."

Not that Cisco has been without fault, just two years shareholders were baying for blood as the company felt the pressure from white label hardware vendors.

"Cisco has many faults, and lord knows I do as the CEO of Cisco as well, but the issue we don't miss on, is our market transitions."

Chambers is picking the next 10 years to be a period of "explosive growth" not seen since the 90s glory days of the Internet.

"This new digital age will be five to 10 times the impact of the Internet today," he said. "$19 trillion dollars was what we estimated last year over 10 years. That's the entire U.S. economy plus some. That's now considered a conservative number.

"McKinsey said the other day we were off by at least two- to fourfold. And that's just via profits and cost avoidance, not the actual investment these companies will make."

Cisco estimates that the public sector will account for $4.9 trillion, retail $1.5 trillion, manufacturing $3.9 trillion, education $0.9 trillion, telecommunications and information $1.3 trillion, energy and mining $0.8 trillion, financial services $1.3 trillion, and healthcare $1.1 trillion.

Cisco itself had to make some tough changes to build the agility required to compete, streamlining the company to suit its new vision -- one based on solutions based outcomes, rather than simple product sales.

The engineering team was cut from 28,000 to 23,000 globally. In two months, 24 of the company's top 92 engineering leaders were cut. The sales organization similarly had to slim down its client interfacing sales team by 21 per cent.

"We restructed around outcomes. We reorganized to move horizontally with a speed we haven't been able to do before.

"It allowed us to win big deals at a pace we've never done before. Outcome-based selling also meant the deals went up in size. We had to make the changes now, before our peers did.

"Over the last four plus years, we've grown our revenue by $4.9 billion, and our expenses by $300 million. That's 6c on the dollar. That is world class. Really good is 30-50c on the dollar. We've got our IT expenses down 5 percent on the year."

But IoT is a double-edged sword, Chambers claims 38 percent of the advantages will be from analytics. But security remains an issue, and the company is focusing on its network architecture, especially in the new IoE age, to help combat security risks. It also believes that unified standards will help.

"Security can do more brand damage with one violation, than almost anything that has ever happened before," he said. "Ninety two percent of apps used by employees have major privacy and security issues. once a company is broken into, most of the data the thieves are after is gone in less than 12 hours."

Chambers believes that the scale of his company's ambition now matches nation states, not just companies or cities. Cisco recently signed a partnership with France to digitize the country -- a French first with a corporate.

"They basically said 'we want to transform the country.' They want to do job creation, they want to do training, they want to do R&D together on how to transform their businesses. It's a partnership to literally change how the whole country runs," he said.

France is now the number two country for startups in the world, he said, and the announcement didn't see a traditional press conference -- it was announced by Twitter, a sign of the times. Other countries, such as Germany, have signed up for similar deals, as have a multitude of cities, such as Barcelona.

"We want to drive every single company, regardless of size. Until every single city, every single country becomes digital. This is not over the next 20 years, but over the next five to 10," he said.

His pitch to partners was simple:

"I truly think this next year will be the inflection point where every company becomes a digital company. We are positioned in this eco system in a manner in which no one else is, we should lead this one, challenge ourselves and really push each other hard," he said.

This story, "Cisco's Chambers: Internet of Everything will change business forever" was originally published by ARNnet.

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