It's a Sail, Sells too

Bernard Trudel chose to pull out this Mike Tyson quote for a glued audience
of 400 at Bangalore-"Everyone has a plan, until he gets hit". Trudel
was in the Garden City to attend the Cisco Showcase 2004. He is the principal
consultant (security), advanced technologies, APAC, Cisco Systems.

Network security is tactically high on Cisco's agenda these days, even as
IP continues to remain the company's strategic mantra. Cisco had placed its
big bet on IP early enough, and waited. Now, with IP-based applications gaining
wider and faster acceptance, it's time to reap benefits. Or is it?

Cisco's cruise on the IP way may get rougher without a strong sail (read security)Â

The Spoilsport

Security-related issues threaten to spoil the party, or pale it, at least.
And more the number of apps using IP, the greater the threat is, thanks to the
openness of the protocol. Consider the voice-over-IP application. A
denial-of-service attack, for instance, can effectively bring down a VoIP
network in no time. To complicate matters, entry into a VoIP network can happen
through numerous endpoints, viz. servers, PCs, and VoIP phones.

Now, that's not something users of telecom services will accept, and, pay
for. The proprietary nature of legacy telephony protocols virtually shuts out
all software-based threats for them. The onus to make IP networks more robust
and reliable lies on vendors and service providers-in their own interest. The
interest, incidentally, is a $2 bn global IP telephony opportunity by the end of
this year, as projected by market research firms.

In India, according to IDC, the market will be $60 mn this year, as compared
to $30 mn last year. It is expected that the Indian IP telephony market will
clock a CAGR of 60% over the next three to five ears. Cisco is keen to realize
the huge opportunity and grow it, possibly. The company is estimated to have
shipped more than 2 mn IP phones globally in 2003 and enjoyed more than half of
the handset market share. The competition in the handset space came mainly from
three players-Siemens, Nortel, and Avaya.

In India, however, the story is somewhat different. Here, according to
Voice&Data estimates, Tata Telecom (bought over by Avaya) held 45% of the
enterprise-wide IP market share in fiscal 2003-04, as Cisco trailed at 40%.

Putting up Safeguards

Trudel said Cisco spent 10% of its overall R&D budget-$300 mn in
figure terms-on security-related R&D. Also, the company has made some key
acquisitions in various areas of network security to complement its own
offerings, over the past one-year period.

Only last month, Cisco announced its intent to acquire Perfigo for $74 mn in
cash.

Another buy was of Twingo Systems, for a small sum of $5 mn. Cisco hopes to
plug the gap in the happening space of SSL VPNs, a technology that has proved
particularly effective in the area of remote access.

Cisco plans to incorporate the acquired technology into its existing WebVPN
solution. To begin with, the Twingo solution will be featured on the VPN 3000
Concentrator series.

The Super Six

Network security is among the six "advanced technology" areas that
Cisco is focusing on today. The other five are-IP telephony, wireless LAN,
home networking, storage networking, and optical. Together, the above six techs
already contribute over 20% of the company's worldwide revenues. (Network
security revenues are often a component of other product revenues, determined
internally through a complex accounting process.)

Talking of storage networking, Cisco entered the space just two years ago
globally, and one-and-a-half years ago in India.

Sanjay Kharade, regional manager, system engineering (enterprise), west,
Cisco India, who's busy touting the merits of IP-based SANs to potential
customers, is very upbeat on the tech's uptake. "We are leveraging all
our expertise in the LAN space for SANs," he says.

In the storage networking space, the competition comes from the likes of IBM,
HP, Hitachi, and EMC. Cisco will most likely to gain some market share as the
shift from fiber channel SANs to IP-based Ethernet SANs takes place.

"We are already No. 2 worldwide in director class switches," says
Kharade. Director-class switches are the ones that have in-built redundancies
for three things-power, CPUs, and ports. (Other switches have redundancies for
one or two factors only.)

Enterprise-only?

Well, that's how Cisco has been known as a vendor. No more. It's already
entered the service provider space and has been trying hard to impress with its
spoils.

That didn't seem to have given John Chambers enough peace of mind; the
company is now looking at the home networking space too. That brings Cisco close
to end-users, a community Cisco hasn't directly addressed so far.

Will the existing channels work when it comes to addressing end-users'
needs? "We will continue to use the existing distribution model. There are
no immediate plans to change that," Ranajoy Punja, V-P, marketing, India
and Saarc, Cisco India, stresses.

Apart from home networking, IP telephony will also open up the mass market
for Cisco, particularly after the regulatory hurdles get lifted.

The focus on enterprise communication is not lost though. Cisco has keenly
initiated the concept of triple-play conferencing, aka IP-based audio, video,
and Web conferencing, for enterprises.

Carrying on with the Core

Around 80% of Cisco's revenues continue to come from its bread-and-butter
lines-switches and routers. The most premier switch series continue to be
6,500 and 4,500.

In the router category, the focus today is on the integrated services router
(ISR). "ISRs are today's answers for enterprises' tomorrow's
networking needs," Suprabhat Chatterjee, national business manager
(enterprise), India and Saarc, Cisco India emphasizes.

Historically, routers formed Cisco's most important business line in India.
In the last quarter of 2003-04, however, switches outperformed routers,
according to Voice&Data 100 survey.

India has also been a feather in Cisco Asia's cap.

Not that the competition is not a threat in India, but setbacks for Cisco
have not been serious. On the contrary, in China, the largest telecom market in
the APAC region, Cisco was in for a big disappointment early this month. The hit
came from Juniper Networks, which claimed that China Telecom had selected the
company's routing platforms exclusively for ChinaNet Next Carrying Network
(CN2), the carrier's next-generation IP network.

Looks like the cruise on the IP way will get rougher. A strong sail (read
security) could make a difference then. Does Cisco have the strongest one?

Deepak Kumar

The Specials in the Menu

Six "advanced technology" areas already give Cisco 20% of its
revenues.

Security, one of the above six areas, is tactically at the highest on the
company's agenda. Without robust security, other areas like IP telephony will
have no takers

While enterprise remains Cisco's main turf, it's also getting aggressive
in the service provider and home networking spaces. "Home networking"
is one of the six new business lines that the networking giant is pursuing.

For enterprise communication, a forthcoming special will be Cisco
MeetingPlace, for audio, video and Web conferencing.

Action is also imminent in the storage networking space, especially in the IP
SAN switches category.