Cisco Systems: overview and business operations

Cisco Systems: History, Overview, And Outlook

Cisco Systems, Inc. is the largest maker of networking equipment in the world. For a long time, Cisco was considered to be a forward-thinking but rather stogy company, a kind of an old warhorse in the battle for market share and capital in the Internet age (Vance 2009). It was founded in 1984 by Stanford University computer scientists and pioneered the development of Internet Protocol (IP)-based networking technologies ("Corporate overview," Cisco Systems, 2009). Cisco Systems was once best known for its routers and switches, which were used by businesses, government institutions and homes. It continues to dominate that market, making most of its $40 billion a year in revenue, and 65% gross profit margins, from such products (Vance 2009). However, it has lately moved beyond the company's core functions of routing and switching, and undertaken more flashy and lucrative ventures with greater potential for growth and competition including: application networking, data centers, digital media, IPICS, mobile technology, security systems, storage networking, Telepresence technology, unified communication systems, video, and virtual technology ("Corporate overview," Cisco Systems, 2009). It has used its name and its considerable reserves of capital for research and innovation, not merely doing 'more of the same.' Thus Cisco Systems continues to strive to prove itself as durable economic presence on the world stage and to improve its image for shareholders and investors ("Cisco Systems," the New York Times Topics, 2009)

One of its most recent innovative efforts has been its promotion of teleconference communications. As companies grow more cash-strapped in terms of hiring employees and travel costs in the age of globalization, Cisco's technologies are likely to become more attractive and important in the future. "The company is introducing a new Telepresence system that utilizes one 65-inch plasma screen and three cameras to allow up to six people to use the services. The previous generation system involved three 65-inch plasma screens and cameras against a half of a conference room table to produce the effect of people sitting across from you at the table" (Diaz 2009). This Telepresence service will be affordable to small-to medium-sized businesses, as well as to large offices that wish to use them in branch offices and multiple conference rooms. For a relatively paltry sum of $299,000 a room, a company can conduct a virtual meeting across a building, across the nation, or across the world with Telepresence and feel as if they are speaking directly to the person on the plasma screen (Vance 2008). This increases efficiency and effective communication, enabling even an enterprise with a small staff to be 'hooked into' the global economy.

Call the modern Cisco the 'Madonna' of networking, enthused one analyst, impressed at its ability to move beyond its core constituency and product base. Today, the company has also expanded into e-mail software and cable TV as well as the aforementioned video teleconferencing. Through its new philosophy of unified communications, the company plans to even challenge Microsoft's supremacy on a trial basis, bundling different applications that will allow companies to provide a common set of tools that workers can use to make calls, send e-mail messages, hold Web conferences and send instant messages. Cisco has "bought 36 companies, including WebEx, a Web meeting specialist, for $3.2 billion…Cisco also picked up PostPath, a maker of e-mail software, and Jabber, a leader in corporate instant messaging" (Vance 2008). At present, unified communications is a small part of Cisco's annual revenue, but one it intends to grow.

Another ambitious venture it intends to embark upon within the next few months is its introduction of a computer server computer equipped with sophisticated virtualization software. Some analysts fear that this will disrupt Cisco's traditionally friendly relationship with current manufactures of makers of computer hardware, such as H.P., I.B.M. And Dell. However, interest in virtualization software has expanded at an exponential rate. "Virtualization products let companies run numerous business applications, rather than just one, on each physical server, allowing them to save electricity and get more out of their hardware purchases" (Vance 2009). Cisco seeks to become a pioneer in this field. Analysts estimate, Cisco could only obtain 50% gross margins with the initial server product, but Cisco hopes to become a first-mover in this new technology.