John Katsaros

Collaboration

A big word - News of Cisco's scaling down of its efforts in the collaboration arena doesn't surprise us. We've always said – collaboration is the hardest topic to chase after because it's about everything – every computer that's running – from those that were built decades ago to those that are yet to come onto the market. It's really hard for technologists to "get it right" when it comes to working in the collaboration area because for every idea that you'll have you're bound to find someone who thinks it's a good idea. So bad ideas can't be dismissed as easily as in other markets. For instance, Cisco's acquisition of PostPath was unfortunate in that it took time and money away from other areas where Cisco needed to be. Cisco didn't need to be in the e-mail software business. Microsoft has been defeating all comers in the e-mail space for almost two decades – you name it – Oracle, IBM, Lotus, Novell and many more – were defeated in the business. And it's not clear what Cisco would have had to gain in the process. But that word "collaboration" can be used to justify a lot of things.

Cisco Flips Flip

And speaking of unfortunate acquisition decisions, the award for most troublesome has to go to Flip. In March, 2009 Cisco acquired Flip Video for $590M and last month shut it down after just two years. If you're going to buy a company like Flip, then you're going to be competing with Steve Jobs. It's hard to imagine the CEO of Cisco calling the product manager of the next Flip phone in the middle of the night saying something like "you know, I don't understand why we put the button over here and not a quarter of a centimeter over where it would be..." That's not the kind of stuff that Cisco does well. Chambers has built Cisco to be a really great company. Cisco didn't get to be the success that it is by its user interfaces – in fact, a user doesn't need to know that he is using a Cisco product. As they say, interacting with the user is not in its DNA.

Home Run

Cisco's Tom Gillis' keynote on Wednesday is worth replaying.  He walked away cleanly with the Oscar for best performance.  First of all, it was relevant – he was looking for the business value that you get from security - namely the ability to use modern consumer devices like smart phones and iPADs on corporate networks.  Plus, he figured out the solution to the "no demo" situation (which we think RSA frowns upon) – he used an attention getting animated PowerPoint presentation to illustrate the use cases that he was speaking about.  The best part was pointing out how security spending, if you think about it right, isn't just about protecting things – it can also be about making a business more flexible.

The Synthetic Mainframe Vendor

During the EMC Analyst Conference we had a session with Michael Capellas who joined VCE six months ago as Chairman and CEO — VCE is the Virtual Computing Environment company set up by Cisco, EMC and VMware. He's got a huge personality and the resume to back it — most recently he was Chairman and CEO of First Data. Before that he was head of Compaq and drove the merger with HP where he was president for awhile after which he moved on to rebuild MCI which ended up being acquired by Verizon. He's definitely what you would call an industry heavyweight. In May when it was announced that he would run the VCE coalition we pointed out in this newsletter that VCE would change to suit Capellas' goals and not the other way around and that he most likely would want to create something new and visionary in the computer business. With his credentials and capabilities it's unlikely that he took this job just to create some best practices building blocks. VCE has progressed rapidly since Capellas joined but they're still tight lipped about the long term plans. It's our guess that Capellas is building a modern mainframe company — you might want to call it a synthetic mainframe vendor since it sources key technology from other entities so that it can continuously take advantage of the best stuff that's available. Today the big three dominate the server market — HP, IBM and Dell. A year from now we may be talking about the big four.

"We Can Work It Out"

Air Pocket — That's what Cisco's CEO John Chambers called it when earlier this month he was talking to financial analysts about Cisco's expectations that 2011 sales would grow more slowly ( 9% to 12%) than what analysts expected (13.1%). That news sent the shares falling from above $24 to around $19. "Air Pocket" is a really great term as it describes something that you didn't expect but that quickly passes by without too much harm. Let's hope that's the case here.

Musical Chairs

How did that go? Play the music, move around, remove a chair, stop the music — odd man out moves on? Last week Cisco's Tony Bates left the mother ship to take over the helm of Skype (exciting stuff going on there) opening up his positions as General Manager of Cisco's Enterprise, Commercial and Small Business Division and GM of the service provider division — total of about $30B in sales annually. Interestingly Cisco's CTO Padmasree Warrior will take over the SVP/GM role of the $20 Billion Enterprise, Commercial and Small Business development group in addition to her role as CTO. Isn't the best part of being a CTO not having to deal with all of that boring P&L stuff? Now she'll have the opportunity to do both! Next thing you know Cisco will buy Skype.

Holy Cow

HP's announcement this week that it's acquiring ArcSight for $1.5B is a huge event in the infrastructure space for a number of reasons not the least of which is ArcSight's strategy. Five years ago there were 10 to 15 Security Event Management companies mostly funded by venture capital. Back then it was hard to tell the differences between these companies as they kept leapfrogging each other with new features and capabilities. Eventually ArcSight became the market leader when it re-engineered its user interface with a very graphic visualization of the network topology and the events being monitored. The company kept its leadership by continuing to enhance its value proposition by adding adjacent functionality like event correlation and compliance onto the ArcSight platform and by continuing with its direct sales model. For reasons which we may never understand, the competitors had trouble keeping up as ArcSight continued to gain market share. Cisco, IBM, Novell and EMC all made acquisitions in this space and in one way or another dropped the ball without gaining significant market share. But HP's acquisition of ArcSight is a big event for another reason - the consolidation of security. Last month it was Intel's acquisition of McAfee. This month it's HP and ArcSight. What's next? Who is next?

The Azure Appliance

One of the most interesting announcements of the year was Microsoft's Azure Appliance — a container of 1,000 servers, delivered to your data center, running an up-to-date private version of the Azure Cloud platform. Last year we saw the introductions of Cisco's UCS, the Cisco/VMware/EMC VCE consortium, V-Block system blueprints and Acadia JV, all intended to help their customers achieve utility computing more quickly. Well if that's the goal, isn't something like the Azure Appliance an even better answer? Of course you have to have some respect for the importance of the Windows software and business ecologies, and you have to think Azure is pretty interesting on its own, but with those caveats isn't the appliance version interesting! The initial package (presumably similar to the container level packaging which Microsoft uses to build out Azure and their other large properties) is inappropriate for most but not all (huge chunk of platform, specific cooling and power requirements) but is a natural first step. With the issues of non-Microsoft multi-tenancy and new network topologies understood, a next step of creating smaller packages seems pretty straightforward (Microsoft has already said they are moving to a smaller granularity for their own data centers). What Microsoft clearly understands (or at least Bob Muglia clearly understands) is the difference between having a customer build their own utility solution out of the pieces (Windows Server, Hyper-V, System Center and Virtual Machine Manager, SQL Server, Exchange, SharePoint,...) and giving them an up-to-date and evolving platform is pretty dramatic. UCS and VBlock customers are still dependent on the product development and release cycle of VMware, EMC, Cisco and others, and still fully responsible for the pain and anguish of integrating new versions.

Welcome Cisco Cius

 At the Cisco Live conference in Las Vegas today Cisco introduced Cisco Cius "The First of its kind mobile collaboration tablet designed for business." It's the ending of that sentence that's important — "designed for business" — as opposed to the iPad which Cisco is pointing out wasn't designed for business. Which brings up a good point — what's the purpose of a tablet — is it about a user interacting with content or is it about users interacting with each other? It doesn't have to be one or the other — you can use Skype on your iPAD and Cisco has free apps for iPad WebEx online meetings but the point that Cisco is making is that they'll make sure that there will be a boatload of business collaboration functionality that Cius will have. In Sept. Cisco said it shipped 22 Million VoIP phones which more or less gives Cisco the opportunity to define a tablet that fills the gap between a VoIP handset and a laptop. And maybe through interconnectivity with VoIP switches is the place where Cisco will go to build the initial user base and delivery for Cius. If that's the plan, do you think Cisco can ship a million Ciuses in its first year? Let's see what happens next. TechCrunch isn't waiting and has already posted a skeptical blog.

New kid on the bloc or the birth of a new computer company?

Last month, Cisco and EMC appointed Michael Capellas to lead the VCE coalition and named him CEO of ACADIA the Cisco-EMC joint venture with investment from Intel and VMware where he reports to Joe Tucci, John Chambers and the ACADIA board (consisting of two EMC execs and two Cisco execs plus Capellas). It's hard to imagine anyone able to have that many top level bosses but Capellas certainly isn't your average CEO. Capellas was Chairman and CEO of Compaq in 1998 leading up to its acquisition by HP where he spent time after the merger as president. After that he ran MCI during a difficult rebuilding phase. You might wonder why Capellas would take on an assignment like ACADIA - we've been told since it was formed in November 2009 that ACADIA was set up to sell Vblocks - preconfigured versions of Cisco's UCS server, EMC storage and VMware software. But maybe there's going to be more to this story than that - what might interest someone like Capellas is the launching pad to build something bigger - more than an entity selling preconfigured packages - more like a new computer company. ACADIA could be the perfect platform for doing this — with a birthright consisting of networking, server, storage, software and with Capellas as CEO can it grow quickly enough to compete with the likes of computer giants IBM and HP?