Cisco Business Strategy

Introduction to Cisco Cisco Systems, currently employs over 61000 people, is a $43 Billion revenue business, and is the global leader in networking, transforming how people connect, communicate and collaborate over multiple networks or companies. Put simply, we are in the business to sell Networking solutions (Table 1). For Emerging Markets, our Africa operation is one of the strongest for the company and Egypt is the main cause for it. With sales figures (a key performance evaluator) and headcount for Egypt growing at a steady rate these past few years, even the revolution did not hamper annual growth (Table 2). Our specific focus for Egypt is on the Financial Vertical within the Enterprise Segment. Within the Egyptian Financial Services Industry, we will focus on the National Bank of Egypt (NBE), which is the largest bank in Egypt, in refreshing their four Data Center networks. With over 500 legacy servers, NBE is looking towards a virtualized and cost effective solution that allows them to migrate towards cloud computing and offer eBanking services to their customers over the internet (Table 3 and 4). How well Cisco compares against these requirements versus our competitors, will determine who wins the $10 million business over 3 years (Table 5). The key decision makers within this process are the Chief Information Officer (CIO) and CEO. The key influencers are the Data Center and Networking team, consisting mostly of engineers and managers. As the bank currently uses legacy servers from competitors (IBM and Hewlett Packard), Ciscos current position is considered to be in Alien Territory (Table 6). Using a cost and differentiation advantage, Ciscos core value proposition is to deliver a scalable data center solution to NBE, by building a strong relationship with the key decision makers and influencers in order to position our Unified Computing Server (UCS) blades and virtualise NBEs Data Center at a cheaper price than our competitors (Table 7). The Tag line One Fifth of the Data Center cost, with twice the performance signifies the value proposition. The Cisco UCS blades will allow NBE to virtualise each of the 500 servers, reducing their physical rack space and power consumption costs by 80% (Table 8). Audit of Cisco Operating Model against NBE DC Project When considering the KSF and KPIs, (Table 3) we have done limited work to penetrate NBEs Data Center. This is due to the lack of trained and specialized channel partners (also known as systems integrators) locally in Egypt for UCS. As a result, we have targeted partners of our competitors since they have existing knowledge of Data Centers and relationships with the Data Center team in NBE. The Cisco technical team has been running multiple trainings for these partners to familiarize them with UCS and gain partner loyalty. Through these partners, we established introductory meetings with the NBE DC team whom we have started to educate on UCS. We began by differentiating our product against legacy server architectures. As one UCS blade can accommodate up to 50 virtual servers and fits inside existing Cisco networking gear, this immediately gained interest for an on-site demonstration. We have seeded 2 units with NBE that allows them to test and run UCS with their customized requirements for cloud. This Proof of Concept will run for 3 months and was started 2 months ago. At the same time, we introduced our Cloud Alliance partners (EMC and VMWare) to discuss an end-to-end Data Center solution with the CIO and DC team, so far this has proved of little effect due to NBEs price conscious attitude. Another KSF that has made little progress is convincing NBE to add more weight to the requirement of deploying a scalable solution. As their Cloud services grow, they will need more Server processing power and legacy servers from Cisco competitors cannot scale. With UCS, NBE will only need to apply for additional licenses in order to unlock support for adding on more virtual servers. This capability does not seem to resonate with client and a revised strategy is required. In terms of NBEs key requirements (Table 10), the key hurdle for Cisco is to initially reduce pricing for the UCS blades in order to compete with competitors. As low price is a major factor for NBE, Cisco

currently charges almost twice the price of competitors. However, value is currently added by Cisco when NBE requires Performance, Cloud support, Security, and Virtualization. In each of these areas, Cisco outperforms the competition due to the product differentiation features UCS has against legacy servers. Our main gap lies with the lack of trained partners for the UCS solution. As in any new market that Cisco moves into (such as UCS for Data Center), dedicated and trained local partners are required in order to sell and deploy the Cisco product. Finally, though the gap is a strategic advantage for Cisco currently, NBE gives little weight to a Scalable solution as a requirement, thereby minimizing the impact of this advantage. More work must be done to ensure a higher weight is given by NBE in order to strengthen the brand resource (Table 11). Internal and External Linkages Cross-functional coordination within the business is essential. Internal linkages are reliant with the Technical Business Unit (BU) for Data Center which ensures sales engineers in the field receive the necessary information on new features and competitive differentiations. This linkage can be improved if the sales team can relay back new features and bug fix requests to BU engineers directly as currently there is no visibility in which engineer supports which product/feature. From US Head Quarters, specific linkages come from general training budget for technical courses that are essential to stay competitive in the field. This budget should be allocated to local technical managers in Egypt so they can decide which engineers should focus on which trainings versus a generic corporate course to be taken by all. External linkages include Alliances with key reputable Data Center companies that can enhance the Cisco brand and evangelize the UCS product. Focused information sessions for key NBE decision makers with a price competitive solution would help to position Cisco and these alliance companies more favorably with NBE. Finally, linkages to local partners are reliant on successful implementation of the UCS solution at NBEs Data Center. Continuous training, relationship building, and incentives for more discounts wi ll help to ensure loyalty and avoid competitive intervention. Management Agenda (18 Months) As Table 10 highlights the desired position for Cisco within the NBE Data Center, it is clear to see that Cisco should work on reducing price, increase the amount of trained partners and convince NBE to place a higher weight towards deploying a scalable solution. These three choices complement and reinforce each other and result in higher growth and profit. With respect to pricing, using the Cisco capital financing team and low interest rates, Cisco could offer competitive purchase or lease options to NBE that would drive up our immediate costs but would ensure DC penetration and a 3 year run-rate business. Cisco will need to ensure local partners have consistent trainings and work with Cisco Channel relationship managers to ensure technical resources are available to support partner development. Cisco should also loan some demonstration gear to our select 3 partners that will deploy UCS to NBEs network. Also, delivering on key incentives (such as rebates and higher discounts) to these partners will ensure loyalty. Though this will drive up cost slightly, the long-term benefit of locking out competitors is essential. Finally, in order to convince NBE of a scalable architecture, the Cisco account team should take NBE decision makers and influencers to the Executive Briefing Center in London and spend the week educating them on the UCS solution and engaging reference bank executives that can discuss the advantages of such a scalable solution (Table 9). If we can achieve these three milestones (Table 12), Cisco has a strong chance to lock out server competitors unless they change their product (i.e. from servers to server blades) since substitutes are legacy server architectures which NBE will migrate away from. Competitors will have to build a new product which usually takes over 2-3 years in the IT industry. Overall, Cisco has strong chance to obtain strategic control by using the hard to copy, end-to-end UCS solution.

Tabulations

Table 1: Cisco Vision, Strategy and Goal

Table 2: Sales and Headcount for Cisco Egypt

Cisco Egypt
Sales Head Count Total Profits ($Mil) Enterprise Service Provider Public Sector Commercial Profits per Employee

Fiscal 2010 Fiscal 2011 Fiscal 2012 16 17 21 $21.6 $23.2 $31.0 $4.6 $6.2 $8.2 $5.6 $7.3 $8.1 $5.3 $0.6 $3.5 $6.1 $9.1 $11.2 1.35 1.36 1.48

Table 3: Key Success Factors and Performance Indicators for Cisco in the National Bank of Egypt Data Center Project

Table 4: Weight-age of Quality Attributes required by NBE for Data Center Project

Table 5: Spider Graph of Cisco versus Competitors in NBE Data Center

Table 6: Ciscos current position within the NBE Data Center Project 6.1 Heartland (Cisco must move to Heartland)

6.2 Value Map (Cisco must reduce price)

Table 7: Cisco Strategy Canvas for NBE Data Center Project - Current

Table 8: Cisco UCS: Product and Price

Table 9: Cisco UCS: Place and Promotion Audit (actions to be taken)

Table 10: Strategic Canvas for Cisco and Competitors with Target Positioning

Table 11: Appraising Ciscos Resources and Capabilities in NBE DC Project

Table 12: Management Agenda for Cisco in NBE DC Project