Editor’s note: Cisco Systems celebrated its 20th anniversary last week, and in conjunction with a series of events CEO John Chambers discussed the company’s past and future. Local Tech Wire asked for and received permission to publish the following Q&A with Chambers as conducted by Cisco staff.In December 1984, Len Bosack and Sandy Lerner, two scientists from Stanford University founded a small company, Cisco Systems-named for San Francisco, the gateway to the Pacific Rim. The two, with the expertise of technologists Greg Satz and Kirk Lougheed, worked in the first years of the company to enable disparate networks to talk with each other and share information reliably-inventing the first multi-protocol routers.
In 1984, an internetwork, hooking entire networks together, was largely in the realm of the imagination. Twenty years later, Cisco has grown from four employees to a workforce of over 32,000, and networks are an essential part of business, education, government and home communications. Cisco Internet Protocol-based (IP) networking solutions are the foundation of these networks.and the mission of the company has remained consistent-fundamentally changing the way we work, live, play and learn.
In Cisco’s twenty years, John Chambers has been at the helm for almost half of the company’s history. Since January 1995, when he assumed this position, Chambers has grown the company from $1.2 billion in annual revenues to its current run-rate of approximately $18.9 billion. In reflecting on Cisco’s history, Chambers recently spoke with News@Cisco about the company’s past, present and future.
What is the biggest impact that Cisco has made during the past 20 years?
Cisco has a unique and rich history of enabling the Internet to change the way the world works, lives, plays, and learns. We helped build the foundation for the Internet by providing the routers that fueled it, and today our innovative networking and software technology allows individuals, organizations, and countries to improve productivity in ways we couldn’t have even imagined 20 years ago on a global basis. I truly believe that the best is yet to come in terms of the productivity gains, GDP implications, and standard of living increases that can come from technology innovation from companies such as Cisco.
Of what are you most proud about Cisco’s history?
Cisco has a long history of technology innovation, with product introductions such as today’s CRS-1 announcement, of financial strength and stability, and strong business fundamentals. But I am truly most proud of the people that make up this company. This team has continually stayed focused on the things that are most important, both in good times and during the challenging times. Their focus, execution, and ability to achieve even stretch goals, both within Cisco and in their personal lives never cease to amaze me. This is part of our culture, part of our DNA. Especially when it comes to giving back to the community.
Through our Corporate Philanthropy organization and also public/private cooperation, our goal at Cisco is to build strong and productive global communities in which every individual has the means to live, the opportunity to learn, and the chance to give back. Which is why, during the year of our 20th anniversary, we will continue this rich history. I have challenged Cisco as a company to give a collective 20 years of service back to the community by our 20th anniversary date in December. This breaks down to a little over five hours of service per employee. I am encouraging leaders to lead the effort to organize ways in which employees can achieve these goals. I am confident that not only can employees achieve this, but that they can even achieve the stretch goal of 8 hours of service.
Over the past 20 years, Cisco’s business and stock has seen tremendous growth. Will the company continue to grow?
Cisco has been blessed with tremendous growth in the last 20 years. I do believe that there is some luck involved in this, but I also believe that luck comes to those who are prepared. Our strategy has always included a continued focus as a company on our execution, catching market transitions, and listening to our customers. Moving forward, this strategy will not change. We remain focused on three broad areas for potential growth: our core technologies, routing and switching; the service provider market; and our Advanced Technology markets, which include security, optical, IP telephony, home networking, wireless, and storage. In fact, 40% of Cisco’s overall R&D spend ($3B in FY03) was devoted to Advanced Technologies, which currently represent approximately15-20% of Cisco’s revenue. These six markets are areas in which I believe Cisco can grow revenue to $1B, and I hope eventually to expand that number to 10-12 markets in the next several years.
How has Cisco continued to fuel innovation internally over the years?
As I said earlier, innovation is part of our history and a critical element to our future growth strategy. As a pioneer in routing and switching technology, we continue to shape the future of the Internet with innovative technologies such as the CRS-1 and the Catalyst 6500. Cisco has a long history of innovation in hardware and software, and provides the industry’s richest suite of switching features and functionality with its Catalyst series of multilayer modular and stackable switches. We continue to make solid progress in our Advanced Technologies, especially in the areas of security, wireless LAN, and IP telephony. Cisco’s internal innovation, ability to form successful partnerships, and effectively integrate acquisitions is a competitive advantage and helps us to accelerate growth into new and existing markets.
What is on the horizon for Cisco in the next 20 years?
The past 20 years have been truly amazing for Cisco, but as a global company built to last, I believe that the best is yet to come. We focus our technology innovation on where the market is going, not where it has been. From an architectural perspective we continue to see the evolution of what we believe will be four generations of network architectures. First, the basic convergence of data, voice, and video into system-integrated best-in-class networks. Second, end-to-end IP networks. Third, what we believe will continue to evolve into network of networks, and fourth, what we discussed in our analyst meeting last December, an evolution to the Intelligent Information Network.
As this evolution continues, we believe that networks will grow to include the embedding of resources into the network and the virtualization of applications and services. This is what we call the Intelligent Information Network, our three- to five-year vision for the evolution of networking, from connectivity products to intelligent systems.
Over the next decade, if these process and productivity applications are implemented across an organization, the productivity and profitability implications can be huge. Time will tell if this concept is fully realized. However I believe that we are uniquely positioned with a deep management bench of seasoned industry leaders who will lead Cisco through the next 20 years, and longer.
In your view, where can technology take us in the next 20 years?
I believe that innovation can truly change the way the world works, lives, plays, and leans, not just from a business perspective, but on a global scale. Therefore, I believe it is the responsibility of those companies, countries, and governments who benefited from the technology in the 20th Century ensure that no one gets left behind in the 21st Century. We must all find ways of working together in today’s environment to reduce threats and increase the prosperity of countries and individuals. In my view, technology can increase productivity and the standard of living for communities and countries on a global basis.
When productivity of a country increases at 1 percent per year, the standard of living doubles ever 70 years; at 3 percent the standard of living doubles every generation; and at 5 percent the standard of living doubles every 14 years. (Bureau of Economic Analysis and the Bureau of Labor Statistics). In the U.S., there is a direct one to one correlation between percentage of capital expenditures on IT and productivity increases. Over time, this correlation is also occurring on a global basis. Technology can help bridge the gap between the world’s developed and least developed countries and raise the standard of living through better health care and educational opportunities.
Copyright, Cisco Systems. Reprinted with permission.