Cisco has a problem of its own making. Its business model demands market domination and very high margins backed up by double-digit growth. If any of those slacken off, the vultures gather.
One way to grow is to buy other companies, and Cisco has in the past treated the networking industry as a game of Supermarket Sweep. But Cisco's margins approached 70 percent last year, some of the highest in the business: any acquisition can only dilute these. That's before the post-operative shock which besets many hi-tech acquisitions -- integrating people, ideas and products into an existing strategy and company culture can often kill whatever it was that made the purchase seem like a good idea in the first place.
Another way to grow is to find new markets. The trouble with that, as Microsoft has found, is that dominance in one market does not give you any guarantees in another -- and as your main market begins to look jaded, that dominance begins to look like a long-term weakness. Moves into telecommunications and VoIP have met fierce competition from smaller companies such as Juniper and Avaya, who cheerfully sell more product at smaller margins. Even Cisco's core market, network routers, is under attack from an unexpected quarter -- the rich pickings have proved too tempting for Huawei Technologies, which seems intent on matching Cisco's product line feature for feature, except for the price tag.
A third way is to play the lock-in card, making it too expensive or plain impossible for your customers to leave and then charging them what you like. That's hard in the open world of networking, but more tempting when it comes to security and trusted computing. Strip Cisco's current marketing message of its fashionable adjectives, and the Adaptive Threat Defense boils down to making each part of the network responsible for guarding its own turf. That's sensible. One way of doing this is to create a web of trust, where each component only talks to guaranteed friends; here, the people who issue the guarantees are the people in charge.
Cisco's emphasis on network wide security is laudable and essential. Its concerns about the threats of the future are genuine. Yet it must resist the temptation to categorise its competitors as such threats, and we should demand not just promises, but proof of a continued commitment to open standards and collaborative security. The temptation for it do otherwise can only get stronger.
