Cisco Systems

Networking the Internet

Revolution
 Brandi Martin
         brandi@ucsc.edu
Table of Contents

Paper Objective

Section 1: The Network Equipment Industry

A. Industry Profile

B. Competitive Strategies within the Industry

C. Porter Model Evaluation of Industry Forces

D. Globalization of the Industry

E. Importance of Information Technology to the Industry

Section II: Company Perspective: An Analysis of Cisco Systems

A. Cisco Company Profile

B. Market and Financial Performance

C. The Competitive Strategy

D. Significance of Information Technologies

E. Strengths and Weaknesses of Cisco

Section III:

A. Strategic Option Generator

2
 B. Roles, Roles and Relationships

C. Redefine/Define

D. Significance of Telecommunications

E. Success Factor Profile

Section IV: A Final Analysis of the Success of Cisco Systems

A. Success of Business Strategy and Information Technology Use to Date

B. The Effective Position of Cisco for the Future

Objective of Paper

The purpose of this paper is to provide an analysis of Cisco System’s primary business 
strategies and its utilization of information technologies to achieve a competitive 
advantage in the network equipment industry. The paper is divided into four sections, 
starting with a broad industry analysis, then narrowing to concentrate on Cisco Systems 
Inc., followed by an analysis of their use of information technology. The conclusion is a 
final analysis of Cisco System’s success. 
The first section defines the structure of the network equipment industry. This 
complex industry can be defined with the help of detailed industry trends, universal 
strategies, effects of globalization and the significance of information technologies within
this fast paced industry. The second section will provide an analysis confined to Cisco. 
Included in this in­depth examination is a company profile discussing Cisco business, the 
business leaders, specific strategies, financial performance, use of information systems 
and a summary of strengths and weaknesses. Section III concentrates on the use of 
information technologies for this company. The role of information systems within Cisco 
is analyzed using a “strategic option generator” and a “value to customer model”. The 
paper concludes with a final analysis of the success of Cisco Systems, including 
strategies and information technology that gave Cisco a competitive advantage. Cisco’s 
current position in the industry for continued future success will also be addressed. 

3
SECTION I: THE NETWORK EQUIPMENT INDUSTRY

A. Industry Profile

The network equipment industry, although still in its infancy, is a booming industry 
made possible by the Internet revolution. Broad acceptance of the Internet has created
new models for business, new means to motivate, organize and inform the public, and
new thinking about how humans communicate. Successful companies within this 
industry have shown record growth in a world where everyone wants to be connected 
and speed is everything. To connect the planet, network equipment companies design 
and manufacture routing and switching equipment, communication and network 
access devices, security hardware and wireless networking products. These 
networking products are used to connect both WANs, wide area networks, and LANs,
local area networks. Large scale product solutions exist for corporations, 
governments, and universities while smaller solutions are available for individual 
consumers. 

4
Two main markets exist for network equipment industries, a telecommunications or 
service provider market and an enterprise or datacommunications market. Both 
markets buy networking equipment but the telco market is defined by customers like 
PacBell, Verizon and China Telecom whereas the datacom market consists of mid to 
large corporations in banking, healthcare, transportation and dozens of other 
industries. The ten dominant companies within the network equipment industry 
include: Cisco Systems, Nortel Networks, Lucent Technologies, Juniper Networks, 
Extreme Networks, Alcatel Fundamentals, 3Com Corporation Fundamentals, 
Foundry Networks and Enterasys Networks. Lucent, Nortel and Alcatel are leaders in 
the Telco market while Cisco rides high, estimated to own more than 90% of the 
enterprise market.

Cisco, Alcatel, Nortel, 3Com and Lucent are large corporations that offer a diverse 
range of products and services. Not all of their products and services would be 
classified as network equipment but their core businesses can be defined as such. 
Extreme, Juniper, Foundry, and Enterasys are much smaller companies that specialize
in one area within the network equipment industry. The discrepancy in size of 
companies focused in the enterprise sector can often be attributed to mergers or 
acquisitions. Traditionally, successful start­ups are often bought by larger companies 
such as Cisco before they have a chance to significantly grow in size. However, many
of the smaller successful network equipment companies today have not been acquired
due to the recent economic downturn.

Size of the Ten Dominant Network Equipment Companies

5
 Figure 1(1)

Recent years have dealt a major blow to the information technology industry including 
the network equipment industry. The network equipment industry has been riding a 
rollercoaster in the past decade, reaching unbelievable heights and terrifying free­falls.  
“In the last 10 years, more than $246 billion has been invested in networking equipment. 
In the Internet. In Intranets. Extranets. In the last 10 years, we [Cisco] have seen a stock 
market run­up of unprecedented proportions in Internet­related businesses. We have seen 
a dot­com boom. A dot­com bust. And worldwide business readjustment, realignment, 
retrenchment.” (2) In March 2001, still wounded from the events of September 11th, the 
United States economy entered a recession after ten years of growth. GDP fell; 
unemployment rose and companies stopped or delayed spending on large projects. The 
seeds to this economic downturn were planted in the preceding year.  Many companies, 
especially service providers were purchasing equipment on credit or purchasing 
equipment financed through the seller.  When a company went bankrupt the equipment 
was returned or simply written off as a loss. Cisco financed several equipment deals that 
resulted in losses for the company.

Net Sales for Top Ten Network Equipment Industry Companies (millions)

6
 Figure 2(1)
1. Hoover’s Company Profiles. Hoover’s Online< www.hoovers.com/cisco­systems/­­ID__13494­­/free­co­fin­factsheet.xhtml>
2. Cisco Systems. Manifesto Brand & Technology Ad <www.cisco.com/offer/powernow/docs/FINAL_MANIFESTO_Feb10_03.pdf>

Companies like Cisco, flying high in 2000, suddenly had to layoff thousands of 
employees and report net losses for the first time. Cisco, once the highest­valued 
company on the planet suffered a stock meltdown in 2001. By 2002, virtually all 
companies in the network equipment industry showed a massive decline in sales and 
revenues compared to previous years, shown in Figures 2, 3 and 4. This past year, 2003, 
showed signs of economic recovery but many companies are still struggling. Stock prices
ranging from $65.00 to 100.00 are now between $5.00 and $25.00. In the present 
economy, companies are not purchasing new equipment to build, extend or upgrade their 
network. This trend will continue to hurt this industry.

Profit or Losses reported for 2002

Figure 3 Figure 4

Companies with Largest Employment Changes in 2000
    Company # of Employees in 2003      % Change from 2000­2001

7
 Nortel 36960 ­31%
Lucent 34500 ­39%
Juniper 1542 26%
Ciena 1816 ­44%
3Com 3300 ­43%
Enterasys 1627 ­12%

Industry analysts are optimistic and continue to predict economic recovery, but the 
financial performance of the companies has not reached its high peak of 2001. Hope lies 
in the Internet. Internet traffic doubles every 12 months, increasing the need for Internet 
bandwidth and the demand for network equipment. As Korzeniowski from LinuxInsider 
explains, “Internet use will continue to grow and that bandwidth requirements, as a result,
will continue to increase, ultimately making high­end routers a necessity rather than a 
luxury”. Whether a company’s network is built with routers or switches or another 
product, as the Internet grows so will their need for equipment.

NW200 Compare­o­matic. NetworkWorldFusion. <http://www.nwfusion.com/nw200/2003/compare.jsp>

B. Competitive Strategies within the Industry

A competitive strategy is essential for a company to successfully compete in today’s 
dynamic environment where technologies and the rules of competition are continually 
changing. Companies in the network equipment industry must make critical decisions 
about product scope, alliances, markets, information systems, services portfolio and 
pricing packages that will define how competitive their company will be. In the network 
equipment industry the diversity of products and services offered will depend on the size 
of the company. Differentiation of features/functions/benefits for companies within this 
industry is fundamental. The main strategy for companies within this industry is 
differentiation. Companies differentiate themselves from competitors with products, 
customer service, acquisitions and using information technologies to improve their 
business processes. Information systems are a necessity for companies to remain 
competitive, allowing management to make better informed decisions by providing 
detailed current information and the tools to support business strategies such as 
differentiation, innovation, growth, low­cost and alliances. 

The Business Strategy Model, shown in Figure 6, defines the strategy choices specific to 
this industry. One of the first decisions a company must make is what products and 

8
services will they offer. Will they specialize on a single product, routers, or offer an 
extensive product line? Companies must also decide if they are going to sell end­to­end 
solutions which usually include network equipment, software and support or just the 
network equipment. Product choices are strongly related to the company’s chosen 
customer. Large corporations will need more complex technologies and have more 
financial resources than a home office customer. It is important that products match the 
targeted customer. Most companies in this industry have selected a global marketing 
strategy and are situated in the regions listed in Figure 6. Today’s hot question is: “too 
outsource or not to outsource”. Companies must decide if they want to save costs by 
outsourcing manufacturing to those more qualified, work with vendors or vertically 
integrate. Sales strategies can include online e­sales, independent dealers, a sales force or 
distributors. Given the choice of remaining independent, having joint ventures or forming
alliances, most companies in this industry chose the latter. The last strategy decision 
includes the business processes where it is possible to implement an information system.

Differentiation
 
To gain a competitive advantage in the network equipment industry differentiation 
strategies are maintained. This is the primary strategy that companies choose to focus 
their efforts on. Companies in the network equipment industry can differentiate 
themselves through the new products they develop and the product lines they choose to 
support. These products can be developed within the company or acquired in an 
acquisition. Some companies like Cisco have routers with so many features they can be 
compared to Swiss Army knifes while Juniper routers are fast and simple, comparable 
with a very sharp hunting knife. The quality of products and brand reputation is a huge 
differentiating factor. Is the equipment reliable? Will the network go down? Companies 
can also differentiate themselves through marketing campaigns that focus on 
strengthening their brand name. Some companies distinguish themselves through the use 
of information systems that add value to the customer.

Innovation

Network equipment is innovative technology. The network equipment industry is a 
ground­breaking industry. Twenty­five years ago networks didn’t exist, routers and 
switches had not been invented, the new buzzword was connectivity. Today, companies 
compete by racing to develop new products offering the best solutions to meet customer 
needs. For example, gigabit routers have recently been replaced by terabit routers, a feat 

9
once thought impossible. Customers want network equipment that is fast, but more 
importantly equipment that will not fail. Mission critical networks are not like individual 
computers or retail stores, if a network fails for a day or even an hour a company could 
lose millions. The banking industry is a good example of service offerings based on 
networks. Without wide area networks, ATM transactions would not exist (a service that 
people can no longer live without). If that network goes down, the bank is losing millions
due to lost transactions. On average banks charge about $1.50 for each ATM transaction, 
this amounted to $2.1 billion transaction surcharges last year. If one network goes down 
for one hour affecting two thousand Citibank ATMs, how much would Citibank lose? 
How much more would Citibank be willing to pay for network equipment and services to
ensure their network never failed? 

Growth

Growth has also proven fundamental to many companies who expand their internal 
workforce or grow through acquisitions. Incorporating a new company and possibly a 
competitor not only brings new products aboard but new talent. In a time conscious 
market it is often easier and faster for a company to fill a void in their product line by 
buying another company. Companies can gain immediate access to niche markets by 
incorporating/absorbing a purchased company into their own. Talent is also a key asset in
this young industry and companies often gain experienced engineers and executive 
leaders through acquisitions.

Expansion into international markets is crucial in this industry. The Internet is a global 
entity that appeals to people of all nationalities and ages. The North American market and
North American Internet has a mature network infrastructure in comparison to other areas
like Asia that have just begun to develop their network. In the US, almost all of the 
network equipment companies are global players and will continue to expand in the 
future despite recent downsizing. Expansion is focused on regions where network 
infrastructure is still largely undeveloped like the Middle East, Latin America and Asia. 
China is the current hotspot that many of the industry companies are targeting. Growing 
exponentially, China offers companies the opportunity to build a backbone network for 
its massive population, a substantial new market.

    
Industry Strategy Options

10
 Figure 6

Alliances

Establishing partnerships with other companies is another competitive strategy that has 
been implemented by numerous companies. Alliances allow a company to offer services 
or products to their customers that are not available from the company itself. Alliances 
can also improve a company’s position within the current market. Partnership agreements
allow companies to focus on their core businesses and still offer a complete solution to 
their customer. By forming a mutually beneficial alliance with one or more companies to 
deliver what the customer wants in the timeframe the customer is demanding, everybody 

11
wins. An example, IBM formed an alliance with Cisco to sell a digital media delivery 
package that was developed using technologies from both companies. IBM incorporated 
Cisco’s IP­based delivery and distribution system for digital media into their own suite of
digital media storage and management tools. Both companies benefited from the alliance 
that resulted in a new product which will benefit consumers and create profits for both 
Cisco and IBM.

Low­Cost Strategy 

A low cost strategy could offer a company a competitive edge within the network 
equipment industry with notoriously expensive products. Low costs are possible due to 
the development of new technologies. In particular Juniper Networks has focused on 
offering lower cost products as an alternative to Cisco’s high priced products. Overall this
strategy is not a logical choice because of the high input costs in this particular market. 
Strategies could also include offering price discounts when necessary. This strategy is 
used to drive out entrenched competitors and acquire new customers. Cisco utilizes this 
strategy with large corporations, offering a low cost to lure the customer away from any 
competition.

C. Porter Model Evaluation of Industry Forces

Five forces exist in the Porter Model that influence the competitive environment within 
the network equipment industry. Companies that directly compete within this industry are
listed with intra­industry rivalry. The most threatening competitors for the strategic 
business unit, Cisco Systems include Extreme, Juniper, Enterasys, Foundry and Nortel. 
Other competitors, not competing as directly in Cisco’s core markets, but still a threat are
Lucent, Ciena and 3Com. The Porter model recognizes specific customers and suppliers 
with power that affect industry rival competitive characteristics. Substitute products like 
used routers auctioned on E­bay, and possible new entrants that carry potential threats to 
the industry are also included. 

Intra­Industry Rivalry

Cisco’s core competitors are companies that compete in the Enterprise market. These 
rivals sell products comparable to Cisco’s core products, routers and switches which 
make up over 65% of Cisco’s sales. Although, Cisco has continually attempted to break 
into the service provider market they have had only limited success in selling to the major

12
Telco’s in the United States compared to rivals Lucent, Nortel and Alcatel. They have 
secured business with some smaller service providers in Canada, Europe and Asia. 
Recently, Cisco has been emphasizing their end­to­end customer solutions but has not 
had as much success as with their core products. Cisco has also tried to offer products 
and services to another customer, home and home office users. Again, Cisco has had 
some success in this smaller field but it is still a new push and will take time to develop.

Figure 7

The Bargaining Power of Suppliers

The bargaining power of suppliers is minimal for this specific industry. Cisco is a giant 
company and there are an abundant number of suppliers willing to compete for their 
business. Equipment vendors all have substitutes. As the number of competitors in each 
of the vendor’s industries increases, power decreases. Vendors are forced to have 

13
consistent quality and low cost or face replacement by an alternative supplier. 
Information technology vendors will have more bargaining power than other supply 
vendors, although the power has decreased in the recent economic downturn. With the 
craze for technology products temporarily paused, all vendors are forced to keep costs 
low to compete with competitors and stay in business.

Cisco has very rigid supply chain regulations that companies must meet to become 
approved suppliers. Time and money are saved by Cisco by allowing companies wishing 
to be suppliers apply and submit forms that are available online. Cisco does not need to 
go in search of suppliers, the suppliers come to Cisco and if they pass the specified 
requirements they must then compete in a pool with other suppliers. 

The Bargaining Power of Buyers

Buyers as a whole do not have much bargaining power against the Cisco giant. Examined
individually, it can be said that large corporations retain limited bargaining power. When 
a customer buys a network from a certain network equipment company it is very likely 
that they will return to the same company in the future for follow­up purchases. This 
makes it critical for network equipment companies to make certain their product is 
chosen in original network implementation. Cisco relinquishes power to the customers 
just to get their foot in the customer’s door. Cisco offers deep price discounts to large 
corporations to squeeze out their competitors. Cisco is notorious for doing anything it 
takes to knock a competitor out, even selling products at cost. Cisco has also been known 
to buy a customer’s old networking equipment to replace it with Cisco’s, knowing that 
they will benefit from the follow­up revenue in the future. 

Specifically large telecommunications customers like Verizon or SBC have a lot of 
bargaining power due to the size of their purchases.  An initial purchase of $50 million in 
network equipment can easily turn into a 400 million dollar purchase when the same 
equipment is installed in the entire region that the Telco provides service.  This may be 
why Cisco has not been successful with US telecommunications companies; they have 
not recognized how much bargaining power these buyers have. 

New Entrants

New entrants are defined as potential competitors in the future or an existing company 
that dramatically shifts its business strategies to become a direct competitor to the 
strategic business unit, Cisco Systems. The threat of new major potential competitors in 

14
the network equipment industry is always possible. This industry is characterized by 
technology start­up companies that focus on designing new or improved products. It 
would be possible for a company, sponsored by a venture capitalist firm, to develop a 
similar product that is less expensive, faster or encompasses more features. One of 
Cisco’s biggest threats is a privately­held start­up in Milipitas called Procket Networks. 
Interestingly, the current President and CEO of Procket Networks is Roland Acra who 
worked at Cisco as well as founder Tony Li and VP Brad Kashani. 

Network equipment companies based outside of the United States are beginning to enter 
the American market. Foreign companies, like Huawei Technologies, based in China, are 
entering Cisco’s domestic market ready to compete. One foreign company, Alcatel, based
in France already has a significant presence in the United States. As the Internet and 
networks continue to develop in Asia, the Middle East and Latin America new 
networking equipment companies will enter the market.

Cisco also faces the possibility of existing companies shifting their business strategy to 
directly compete with Cisco’s core market. Many companies currently compete in the 
networking arena or computer hardware but do not focus on Cisco’s core market and 
networking equipment. Several of these companies like Siemens or Dell are large and 
would have the resources required to shift focus. 
Threat of Substitute Products and Services

A substitute is a replacement or alternative to doing business with the strategic business 
unit. The largest threat Cisco faces from substitute products is actually from Cisco 
products, used that is. Used Cisco equipment is auctioned off by online companies like E­
bay. Consumers can purchase functioning network equipment for fractions of the original
cost. Thousands of Cisco products are sold on E­bay with price tags ranging from a few 
dollars to just under one hundred thousand. 

Customers also have the option to access the Internet or a network without building their 
own. Small companies or individuals could choose to purchase Internet space through an 
existing provider. Although business is not done directly with Cisco, it is possible that the
service provider chosen by the individual uses Cisco equipment. When the ISP needs to 
increase bandwidth they will turn to Cisco to expand their network and Cisco still 
benefits. Other alternatives, not as similar include mail, video conferencing and phone 
services. Land lines are supported by Telco companies that use networks and this 
alternative could again possibly benefit Cisco. Communication with the use of mobile 
phones that use satellites instead of traditional channels could be a threat. If 

15
communication is the issue these options are available but do not provide the same speed,
reliability or wide ranges of data transfer.

Conclusions Drawn from the Porter Competitive Model Analysis

The following conclusions can be derived from the Porter Model. Cisco is challenged 
with powerful intraindustry rivalry from many network equipment companies. There are 
numerous smaller tech companies that are currently not strong competing factors but that 
could become a threat in the future. The power of buyers in this industry exists but has 
limited Cisco only in the service provider market. The power of suppliers in this industry 
is minimal in this case. Cisco could easily find a substitute for an IT vendor or buy to 
maintain low buying costs or high quality levels. Large network equipment companies 
have an advantage over the suppliers who must compete for their business because they 
buy in large volume. Smaller start up companies would be at the mercy of suppliers in 
this market.  Companies that produce unique products like a specific chip can name their 
price with a small startup.  Suppliers, with Cisco or Nortel as their main customer, may 
choose not to do business with a start up networking company that may hurt their 
relationship to a key customer.
 
With so many start­up companies the threat of new entrants is always possible. The start­
ups would need capital and a way to differentiate their products or company. Venture 
Capitalist companies are continually looking for the next Cisco. Foreign companies have 
begun to move into the North American market and will continue to expand as the 
Internet and networks continue to grow worldwide. Overall Cisco has a strong 
competitive position within the network equipment industry.

D. Globalization of the Industry

The Internet connects the world; network equipment makes the Internet a reality. People 
utilize the Internet to efficiently and effectively communicate and conduct business on 
local, national and global levels. As Internet traffic continues to increase and gain 
momentum in other world regions the demand for network equipment will grow. 
Network equipment industry companies initially pushed their way into global markets, 
pursuing new business opportunities. As all major businesses come to rely on their 
networks to transact business they too will demand new products and services.

16
Currently, the majority of the dominate companies in the network equipment industry in 
the United States have gone global. Network equipment products are products that can 
easily travel across national boundaries. The current network equipment industry leaders 
are in an offensive position, focusing on entering new markets not defending their 
company from foreign competitors. Network equipment companies are pursuing new 
business opportunities abroad as the Internet continues to grow in popularity. Although it 
has been weaker in recent years due to economic constraints there is a customer demand 
for network equipment products and services offered by this industry.

E. Importance of Information Technology to the Industry

Most of the companies in the network equipment industry have recognized the 
advantages offered by information technologies. Cisco has served as a pioneer, a 
prototype that many companies have followed and based their IT strategy on. Industry 
companies have implemented information technologies in their core business that will 
ultimately benefit their customers. Value is passed to customers when each process is 
automated with information technologies. Core business functions that can be addressed 
with the installation of information technologies include human resources, 
manufacturing, engineering, sales and distribution, service and marketing.

Cisco’s Value Chain

Figure 8

Gaining Competitive Advantage Through Internet Business Solutions. February, 2004

< http://faculty.darden.edu/gbus885-00/Documents/Cisco_ppts.pdf>

Information technologies are essential for network equipment companies to be able to 
compete in today’s e­world. Connectivity and integration have changed the way 
companies do business with their suppliers.  Supply chain management exists primarily 
due to the World Wide Web.

17
SECTION II: COMPANY PERSPECTIVE: AN ANALYSIS OF CISCO SYSTEMS

A. Cisco Systems Company Profile

Virtually all Internet traffic today travels through networks built with Cisco Systems 
equipment. The Internet would not function without this revolutionary company. Cisco 
Systems is a success story, a company envied and admired by many. Cisco is responsible 
for paving the road that so many companies have seen traveled. They achieved record 
sales, market capitalization and revenues in less than two decades! Legendary leaders like
John Chambers, Cisco’s CEO have made these accomplishments possible. Cisco is also 
recognized as a great company to work for and has been included in lists like Fortune’s 
“Best Companies to Work For” and “Best Companies for Working Mothers” in Working 
Mothers Magazine. Cisco Systems has grown over 20 years from its modest beginnings 
in California to a global giant with over 34,000 employees and a name that is recognized 
worldwide.

Background

A love story is intertwined with the birth of Cisco at Stanford University. One couple, 
Sandra Lerner and Leonard Bosack, were frustrated with the mismatched computer 
technologies on campus that hindered their ability to communicate using the computer. 
At that time, Stanford had twenty incompatible e­mail systems and 5,000 different 
computers on campus. With the help of a few friends, the young couple linked the 
graduate business school building’s network to the Bosack’s computer lab network and 
the first router was born! In 1984 this revolutionary technological achievement inspired 
the couple to continue building routers which they named ciscos after the nearby city of 
San Francisco.

Two years and one house mortgage later Lerner and Bosack sold the world’s first 
network router. Soon business was booming. The young couple were earning over a 
quarter of a million dollars each month without the help of a sales staff or marketing 
campaign. Realizing the need for additional funding and professional staff, a sales pitch 
was developed and the mission to find a venture capitalist sponsor began. After 76 failed 
attempts, Bosack hit the jackpot with Donald Valentine from Sequoia Capital. Valentine 
provided the necessary funding and installed a top notch executive team. John Morgridge 

18
was installed as President and CEO in 1988 and the company altered its target customer 
from universities and the government to large corporations. Sales skyrocketed from $1.5 
million in 1987 to $28 million in 1989. This company was going places! First stop was 
going public in 1990. Unfortunately this is also the year Lerner was asked to leave and 
Bosack followed her. The small company that started in a garage was transformed into a 
worldwide giant, Cisco Systems. This transformation can be traced to the leaders of the 
company that included Chambers, Morgridge, Valentine and Solvik. 

Cisco credits most of its sensational achievements to their early adoption of the wide are 
networks and successful implementation of Internet technologies. Cisco has information 
systems for its customers, intranet systems for its employees, systems for it suppliers and 
more. The man responsible for the leading­edge introduction of these systems was Senior
Vice President and Chief Information Officer, Pete Solvik. Solvik was also responsible 
for changing the company policy on the implementation of information technologies. 
Pete Solvik, with the assistance of senior executive Doug Allred, developed a ground­
breaking IT authorization policy. They developed the Client Funded Model, a system that
allowed individual business units to make IT expenditure decisions. Core IT spending 
would remain centralized but the redistributed responsibility would increase sales and 
benefit customers. Although Solvik would continue to report directly to the CEO not all 
IT decisions would be required to be taken to the top level. This was a radical idea, that 
individual business units could purchase and implement IT as they saw fit with no 
waiting and no approval.
 

B. The Company and Current Business Leaders

Today, Cisco Systems is a dominant worldwide player. This young innovative company 
has become the most financially successful company in the network equipment industry. 
Cisco is a name recognized and respected in the technical world. Cisco stock has made 
people millionaires, Cisco products have saved companies millions of dollars and Cisco 
training programs have enabled people to advance their career. 

Cisco System’s main corporate headquarters is located in San Jose, California with 
offices in sixty­eight countries worldwide. Cisco’s core market is routing and switching, 
which make up 67% of sales. Cisco has branched in other related markets including 
optical, wireless LAN, network security, IP Telephony, home networking and storage 
networking by developing advanced technology products. Cisco divides its market into 
four segments: large enterprise (their principal market), small and medium businesses, 

19
service provider and recently added, home and home office. Products and end to end 
solution advice is given dependent on the customer’s needs and size. Cisco is a global 
company with the majority of Cisco’s sales, 56% made in the Americas followed by 27%
in Europe, 7% in Asia Pacific and the remaining in various countries.

Cisco is moving towards becoming a “networked virtual organization.” John Chambers is
an outsourcing proponent and has outsourced many of Cisco’s main business areas, most 
notably manufacturing. Chambers states that the core business, that is ­ what provides a 
company’s sustainable competitive advantage, should remain internal but everything else 
can be outsourced to those more capable. Chambers actually uses the term “out­pass”, 
differentiating the concept from outsourcing by stating Cisco maintains control of the 
strategy, the implementation, the systems and the inventory. The decision to outsource or 
“out­pass” was made when Cisco was still in its infancy. When Cisco first began selling 
routers they lacked significant manufacturing capacity. Knowing that speed was vital to 
survival Cisco’s leaders made the decision to outsource, they bought manufacturing 
capacity allowing sales to be made immediately. Cisco has gained a competitive 
advantage with this strategy, as 95% of present customers ordered Cisco products 
through contract manufacturers over the Internet who were also responsible for delivery. 
Other areas were “out­passed” like all customer service which is now handled online, 
decreasing the average customer call cost from $250.00 to $7.00.

More about John Chambers

John Thomas Chambers was born in Charleston, West Virginia in 1949 to two doctors. 
Growing up his parents taught him to value education and he was able to graduate in the 
top percentile of his high school despite his learning disability. He earned B.A. and B.S. 
degrees from West Virginia University and an M.B.A. at Indiana University. In 1976, 
Chambers got his first job at IBM selling mainframe computers. Six years later he moved
to Wang Laboratories where he worked for eight years before joining Cisco in 1991 as 
senior vice president, worldwide sales and operations. Chambers became CEO and 
President in 1995.

Chambers helped Cisco to grow from annual revenue of $1.2 billion to their peak of over 
$22 billion in 2001. Chamber’s has nurtured a friendly workplace environment with a 
positive culture that makes Cisco one of the “Best Companies to Work For”. He has won 
dozens of awards while at Cisco including “The Most Powerful Man in Networking”, 
“CEO of the Year” “Best Boss in America” and “Smithsonian Lifetime Achievement 
Award”. Part of the reason this culture is so strong is because of Chamber’s team-
building skills and primary focus on the customer. This was unique at the when other

20
companies were focusing on technology. "At Cisco, we make customers our No. 1
priority, not only by delivering innovative technology and good service but also by
listening to their needs and responding appropriately." Chambers spends a great portion
of time meeting with customers and has developed an ability to foresee which
technologies businesses will need in the future.

It was Chambers steadfast vision that the Internet would revolutionize the way all
companies conducted business that rocketed Cisco to the forefront of the tech boom.
Chambers has been nicknamed the poster child of the Internet. Chambers is a name that is
almost as well known as Cisco! John Chambers is revered as a visionary, a charismatic 
leader who preaches the Internet revolution. Chambers speeches are legendary; oozing 
optimism he states the Internet can make the world a better place by improving education
and the standard of living. This Internet evangelist sees the value in technologies but 
more importantly understands the impact of technologies on business results,
governments and the educational system. As Senior Vice President, Rick Justice states,
"John's greatest contribution is the vision he has for the Internet, not the technology, but
Hooper, Larry. “The Internet Evangelist.” 2002 Industry Hall of Fame. CMP Media LLC
< http://www.crn.com/sections/special/hof/hof02.asp?ArticleID=38526>
the vision of how it will change the way we live, work and play. Chambers' ability to look
beyond the technology is what makes him a leader.”

During Cisco’s glory days, Chambers was named “CEO of the Future” and was 
considered the industry’s superstar. When the bubble burst in Silicon Valley and the 
network equipment industry went sour, Chamber’s success was written off as luck as he 
received harsh criticism from many. Eight thousand employees were laid off and the 
stock plummeted. Cisco’s comeback has recently earned Chambers praises like 
“survivor” and “miracle worker”. “Resurrection” has become the new term to describe 
Cisco’s startlingly fast comeback from their magnificent fall suffered in 2001 when stock
plummeted. Chambers has been revered because his leadership skills have shined not 
only during the technology boom but during the tech bust as well. Chamber’s leadership 
is one, if not the reason that Cisco was able to weather through the recent economic 
downturn and maintains their competitive position.

More about Pete Solvik 

In 1993, Cisco was facing problems: customer ratings had fell to an all time low. Cisco, 
on average, was growing over 270 percent annually, growing so quickly that they could 
not keep up with their customer service. Pete Solvik recognized the inconsistency 
between Cisco’s predicted growth, future goals and current system. He prioritized 
implementing an IT infrastructure that would allow Cisco to quickly react in a fast paced 

21
environment. Solvik’s proposal included a massive system upgrade that was only 
approved after Cisco’s system collapsed and forced the company to shutdown for two 
days in the beginning of 1994. 

Cisco gained a competitive advantage by implementing the best IT infrastructure they 
could find before any of their competitors replaced their legacy systems. Solvik proposed 
a fifteen million dollar ERP, Enterprise Resource Planning system from Oracle that 
would integrate business functions such as manufacturing, marketing, sales, and 
accounting. Oracle’s system was approved and implemented, becoming the backbone of 
Cisco’s e­business. Solvik was also responsible for enhancing Cisco’s Internet site CCO, 
Cisco Connection Online, the employee intranet, Cisco Employee Connection, CEC and 
MCO, the Manufacturing Connection Online. These information technologies 
revolutionized the way Cisco did business and earned Solvik a place in CIO Magazine’s 
Top 100 CIO list. Cisco products not only run the Internet, but Cisco Systems is an 
inspiration, a model showing what the Internet can accomplish.

Brad Boston joined the Cisco team in 2001 as the new CIO and Senior Vice President. 
Boston is responsible for Cisco’s use of information technology worldwide. With the use 
of IT Boston hopes to increase Cisco’s productivity, efficiency, agility and speed. Boston 
was responsible for launching Cisco’s new website in 2002. Boston earned a place in 
BusinessWeek’s 25 most influential people within the industry.

Other current significant leaders include: Dennis Powell, Cisco’s vice president and chief
financial officer, Larry Carter, Cisco’s senior vice president, office of president, senior
vice president Howard Chaney and Sue Bostrom, Senior Vice President, Internet
Business Solutions Group and Worldwide Government Affairs.

C. The Competitive Strategy

Cisco has made its way to the top of the network equipment industry and has maintained 
this position over time. This elevated status has been achieved through differentiation, 
innovation, growth and alliance strategies. Cisco is considered a pioneer, as they were the
first company in the network equipment industry; in fact one of the first companies in any
industry to use the Internet for its own business practices. Cisco adopted the Internet in 
1991 and began investing in information technologies. Cisco can be differentiated from 
their competitors by their outstanding award­winning website, CCO, which offers 
unparalleled customer service by providing tools specifically designed for customers. 
Cisco continues to grow by acquiring new companies and branching into new product 

22
and geographical markets. Started by a few engineers twenty years ago, this company 
now has over 34,000 employees. Cisco is also differentiated from their competitors by 
their numerous acquisitions and available resources. Cisco offers their customers 
innovative industry­leading products and tools to meet their needs. Alliance strategies 
have allowed Cisco to quickly offer their customers services or products through partner 
agreements. The combination of these strategies has proven incredibly successful for 
Cisco, the network industry’s bellwether.   

D. Market and Financial Performance

Cisco is the mighty king within the network equipment industry. Revenues per employee 
and net sales for this powerhouse tower over competitors. Cisco’s growth in sales can be 
observed over the nineties in Figure 6, until their peak in 2001. Although it is Cisco’s 
peak sales year, it is also their only reported loss of $1014 million. Cisco was forced to 
layoff over 8000 employees and suffered a loss on surplus inventory in 2001. This 
occurrence can be easily viewed in Figures 7 below. 2002 showed little improvement as 
Cisco reported a gain but not as high as 1999 or 2000. This past year, 2003 showed a 
marked recovery for Cisco as their net income exceeded all other years.

Figure 9(1) Figure 10(1)

1. Hoover’s Company Profiles. Hoover’s Online < www.hoovers.com/cisco­systems/­­ID__13494­­/free­co­fin­factsheet.xhtml>

Cisco’s revenue per employee was $525, 417 in 2002. This is larger than all of their 
competitor’s and more than double the revenue per employee for a few including 3Com. 
The margin between Cisco’s revenue per employee is much greater for the larger 
companies like Lucent and Nortel than it is for the smaller companies like Extreme. 

23
Cisco’s profit per employee was $52,583 in 2002. Compared to competitors like 3Com, 
Lucent and Extreme who suffered losses in 2002, this number is phenomenal. Cisco was 
one of the few networking companies that reported profit in 2002.

Figure 11(1)

Cisco reached a market capitalization milestone of one billion dollars in 1998. Market
capitalization is the total dollar worth of a company's stock, or the price per share
multiplied by the number of outstanding shares. The most notable factor determining this
value is not the company's current size in terms of sales but the market's perception of its
future prospects. If investors think a company will grow rapidly, they are likely to bid up
its share price. Figure 9 shows that investors believe that Cisco has a bright future, with a
market capitalization value higher than the combined values of the nine competitors
shown.

Market Capitalization in Millions of Dollars for 2002

  Figure 12(2)

1. NW200 Compare­o­matic. NetworkWorldFusion. <http://www.nwfusion.com/nw200/2003/compare.jsp>
2. Companies Ranked by Market Capitalization. NetworkWorldFusion. 
< http://www.nwfusion.com/nw200/2003/marcap.jsp?_tablename=nw2003>

E. Significance of Information Systems

24
Information systems have been critical to Cisco’s success. It is possible to say that 
information systems are the single most significant factor responsible for Cisco’s success.
Customers would have sought out Cisco’s competitors or found substitute products if the 
customer service problems in the early nineties were not solved using innovative IS 
solutions. Cisco has implemented award winning, ground­breaking systems that benefit 
not only their customers but also their partners and employees. 

CCO, Cisco Connection Online sold over 75 million dollars worth of products within the 
first four months. Customer order errors dropped one­fourth, from 25% to 1%. Today, 
over 90% of customer orders are made online through this always accessible globally 
connected website. This year CCO was awarded “Best Business­to­Business Web Site” 
by Net Marketing. Cisco states that in 2003, information systems saved the company over
$2.1 billion in cost avoidance and time efficiencies.

CEC is Cisco’s intranet, Cisco Employee Connection, a system that incorporates most 
employee functions to simplify their process. Employees can do everything on this site 
from request a cubicle reassignment to track a shipment to order catering services for a 
scheduled meeting or review employee benefits. Cisco boasts that this system empowers 
employees, streamlines administration, optimizes workforces and improves recruiting 
efforts. Recruiting and retaining highly skilled technical employees could make or break 
a company in the 1990’s. These systems helped build and popularize both the culture and 
excitement of being part of the Cisco team by keeping individuals ‘plugged in’ to the 
corporate vision.

F. Strengths and Weaknesses

Strengths

Brand Name

Cisco Systems carries security as a name recognized by technology companies. In 
today’s struggling economy customers are conservative and are avoiding taking risks. 
Cisco is considered a network veteran with over 90% of the enterprise market, not a risky
startup that might disappear tomorrow. Customers feel confident choosing a brand name 
like Cisco, knowing that other big names like Sprint, Proctor and Gamble and NASDAQ 
have put their faith in Cisco. A failed mission critical network could cost a company 

25
millions and therefore the reliability of Cisco’s high­priced products justifies the extra 
cost. Network equipment can be quite costly and drastically change the way a company 
does business. The decision to purchase a router or switch or end­to­end solution from 
Cisco or any company is not a trivial decision. “People buy Cisco because they are the 
VP of IT at a company and the CEO won’t fire them if the network crashes and it was all 
Cisco equipment. The VP knows that any problems in the network can be fixed by 
Cisco.”

“This is the power of the network. Now.” This is Cisco’s newest global campaign 
launched in 2003.  The campaign focuses on how networks and the Internet are changing 
lives and how companies can benefit from information technologies. Printed 
advertisements and commercials show a variety of network beneficiaries from heart 
patients to schoolchildren to olive companies. Cisco’s goal is to convince companies that 
Cisco products will immediately save them money. These campaigns give Cisco an 
advantage over their smaller competitors such as Juniper and Extreme. Cisco has the 
resources to spend $150 million on a global campaign, an amount the smaller companies
could never afford.

Leadership

Cisco has accomplished what it has today because of strong leaders like John Chambers
and Pete Solvik. Both of these men are visionaries and risk takers. Solvik developed
revolutionary information systems like CCO and Chambers supported and funded the
implementation. Solvik can be credited with keeping Cisco on the forefront of the
technology wave. “In a two year period we replaced every piece of technology in the
company. We have a very low cost/high value technology architecture. We have no
mainframes, no mini computers and no legacy technology. Everything is current.”
Chambers not only played a major role in Cisco’s early success but in recent years with
the struggling economy. He carried Cisco through their darkest days, relentlessly
pursuing his vision to change the way we work, live and play.

Customer Satisfaction

Cisco Systems tracks customer ratings through web-based satisfaction surveys. Survey
results reveal what customers consider strengths, and areas that need improvement.
Feedback is important to the company, because understanding - and acting on - customer
input is one of the most valuable sources of Cisco's competitive advantage. John
Chambers has always insisted that the company's focus on customers is at the core of
Cisco's culture. In an interview in Darwin Magazine, Douglas Allred, Cisco Senior VP of
Customer Advocacy, explained, "If your customer satisfaction is decreasing, you're in a
death spiral. Customer satisfaction equals customer loyalty.” The fact that Cisco has a
VP of customer advocacy is proof they take customer satisfaction seriously.

26
Power over Suppliers

Cisco has abundant supplier sources and retains the power within the relationships. 
Suppliers for Cisco are not selling any unique products or services that lack substitutes. 
Cisco can dictate the terms of the agreement and probably has significant influence on the
price agreement. Cisco has such a large number of suppliers and values quality 
relationships that it gives out supplier awards for each supplier category like optical or 
transformation. Cisco’s supplier information and enrollment forms ensure that Cisco does
not waste time or money searching for new suppliers.

Worldwide Service & Support 

Cisco has one of the highest levels of customer service within the high­tech industry. 
Their website has extensive technical support centers that are backed by armies of 
support teams. Smaller companies lack the ability to match Cisco’s global high standard 
of customer service. Cisco also offers educational opportunities that include seminars, e­
learning programs and even a Cisco networking academy. Over the years Cisco’s 
website, CCO, and technical support center, TAC, have won a variety of awards 
including “Best Web Support Site” and “Best International Service and Support Site”.  

Alliances 

Cisco devotes a large section of their website to their partners, stating: “The Cisco 
Channel Partner Program is the most respected in the industry and offers significant 
benefits”. They provide their partners with the same tools they use, as stated in VAR
Business News “Partner Access OnLine (PAL) leverages the same technology Cisco uses
internally to monitor and score customer satisfaction levels. The idea is that the partners
can use the data, which they can access via the Web 24 hours a day, to get a better
understanding of the relationship they have with customers and identify the specific areas
where they need improvement.”

Weaknesses

Failed Acquisitions

Cisco has grown in leaps and bounds through nearly one hundred company acquisitions. 
Similar to their time­conscious decision to outsource manufacturing, Cisco purchases 
companies with products they deem important but are missing from their portfolio. Speed

27
is the key and Cisco understands that purchasing a company to gain entry to a market is 
infinitely faster that developing a product from scratch. Cisco has gotten significant 
product gains from this process but have a history of spending big and then losing the 
most talented people within the organization. They have also lost money on acquired 
products that never made it to market. John Chambers acknowledges these problems, 
“probably 80 percent of acquisitions during the 90s, failed” but still believes that the 
successful acquisitions make up for the bad. 

Failure to Break into the Telco Market

Cisco, throughout their history, has failed to make significant gains in the 
telecommunications market.  When the enterprise segment was soaring it may have been 
less important, but all customers are crucial in today’s economy.  Consider this sale 
announced January 7, 2004, that Nortel made which includes some of Cisco’s core 
products. “Nortel Networks Corp. announced a juicy VOIP contract with Verizon
Communications Inc. sending its stock up and adding more than $2 billion to the
company’s market value over the course of the day. Verizon plans to deploy all of
Nortel’s Succession line of VOIP equipment, including softswitches, media servers, and
gateways.”

Size

Large companies find it difficult to make changes quickly, adjusting to shifts in the 
market environment. Cisco has over 34,000 employees and has a large company 
atmosphere. Unlike startups in the industry, products at Cisco take a long time to be 
developed and often never reach the market. The company has trouble reacting quickly to
market, customer and competitor changes. One of Cisco’s main challenges is getting new
products to market quickly; their big company processes are too extensive and slow down
the overall process.

Loss of Talent

The famous “Brain Drain”, Cisco has not conquered their problem of losing talented 
people. It is a common phenomenon for both senior executives and individual 
contributors to leave Cisco to join a start­up company. Often this decision is made 
because the start­up, if successful offers huge rewards that are not possible at Cisco. 
Working on leading edge technology with top talent that can develop products quickly 
lures many talented engineers and managers away from Cisco. Many people believe that 
Cisco has lost so much talent they can no longer develop leading edge products on their 

28
own. Acquired company employees are more likely to leave than Cisco employees, but it
is also common for talented Cisco employees including the product founders, to abandon
Cisco. For example, Andreas Bechtolsheim, founder of Cisco’s gigabit Ethernet routers
left in 2003 to join a start-up called Kealia. Juniper as well as Procket Networks was
founded by frustrated Cisco employees.

SECTION III: INFORMATION SYSTEMS AT CISCO SYSTEMS 

Cisco’s use of information technologies has been instrumental to the competitive 
advantage they achieved, allowing them to dominate the network equipment industry. 
This section provides an analysis of Cisco’s use of information technologies, 
concentrating on: accomplishments, support from senior executives and significant 
contributions to their industry leading position.  

A. Strategic Option Generator

The Strategic Option Generator is a tool that can be used to identify strategic business
opportunities involving the use of information systems. This model can also be used to
analyze the successful use of information systems within an organization to gain a
competitive advantage. The Strategic Option Generator first identifies the business target
of a particular company and then defines their thrust (strategies), mode, direction (system
users) and execution. The correct combination of these factors enables companies to
successfully achieve and sustain a competitive advantage through the use of information
systems.

Strategic Option Generator

29
 Figure 12

Strategic Target

Customers were Cisco’s target in their strategy to gain a competitive advantage through 
the use of information systems. Customers have always been a focus at Cisco where 
customer satisfaction is not a priority but the priority. The first system designed to 
provide value to customers provided easy access to technical support and improved speed
and accuracy of orders. CCO, Cisco Connection Online is Cisco’s main information 
system that targets customers. This system has brought value to the customer by: 
decreasing ordering errors and time delays, providing 24/7 technical assistance and 
providing access to current reliable information. Customers benefit indirectly from two 
other systems, CEC, Cisco Employee Connection and MCO, Manufacturing Connection 
Online.

Thrust

30
This layer includes five business strategies: differentiation, low cost, alliances, growth 
and innovation. Cisco’s primary thrust was undeniably differentiation; they were 
providing a “revolutionary” service for their customers. CCO met the growing needs of 
Cisco’s increasing customer base. The company also differentiated themselves by doing 
what they preach: Cisco is the best example of how to implement and benefit from a 
networked infrastructure built on Cisco’s products. Innovation, growth and alliance 
strategies have been utilized by Cisco in addition to differentiation. Innovation is 
essential for Cisco’s products and services. Cisco divides its innovation strategy into 
three segments: price performance, intelligent services and evolutionary infrastructure. 
Employee growth and product line expansion has been accomplished most often through 
the acquisition of smaller companies. Alliances have also helped Cisco to improve 
products and services, quickened product to market time and maintain a competitive 
advantage.

Mode

Cisco is a pioneer in the internetworking industry. Cisco was and continues to be an 
offensive global player, leading others in both business strategies and extensive use of 
information systems. The decision to move online, to transform a brick and mortar 
company into an e­company was a wake­up call not only to companies within the 
industry but other industry leaders. Cisco took a risk with an Internet information system 
strategy that paid off. The idea to share information, especially technical information with
customers, suppliers and partners was controversial. By sharing information, by exposing
themselves, Cisco ran the risk of giving competitors information that could be used 
against them. Fortunately, Cisco customers, given access to Cisco’s product problems, 
now wanted the same access to competitor’s flaws. Cisco has been an aggressive leader 
with their deployment of information systems and other technologies.

Direction

Cisco information systems users include both individuals outside the company and 
employees within. For this reason, direction for Cisco is both use and provide. Cisco 
Connection Online, CCO an award winning site for high customer satisfaction is 
accessible to both Cisco employees and customers. Employees quickly transfer 
information to CCO, ensuring that customers, suppliers, partners and investors have 
access to timely accurate information. CEC is an internal system for Cisco employees’ 
use and MCO is a system that connects Cisco to their partners and suppliers.

31
Execution

Cisco became a leader with their implementation of CCO, CEC and MCO. The
combination of these factors has enabled Cisco to gain and sustain a competitive
advantage through the use of information systems. Their example has been followed by
numerous other companies attempting to follow Cisco’s example in the hopes of
achieving a strategic advantage.

B. Roles, Roles and Relationships

Behind the success of competitive information systems are employees and relationships.
The role of information systems is to concentrate on competitive priorities. Senior
management’s role is to understand and prioritize the competitive information systems.
The information systems organization is responsible for supporting operations,
understanding the business and capitalizing on future opportunities. Users, on an
operational level are the ones who actually achieve the competitive advantage with the
systems.

Role of Chief Information Officer

CIOs and information system managers need to position information systems to meet the
present and future demands of their company. New information technologies that
capitalize on future business opportunities must be provided without disrupting daily
business activities. Cisco’s current Chief Information Officer, Brad Boston “is 
responsible for the company's worldwide use of information technology. With a focus on 
improving the company's productivity, speed and agility, Boston is driving Cisco's IT 
foundation strategy to enable end­to­end business processes and IT efficiencies 
throughout the organization.” One of the most important responsibilities Boston has is to
manage an ongoing relationship with senior management. By understanding their needs,
IT can develop solutions before problems arise. This builds a fundamental trust between
IT and senior management. Boston has also deployed some of the telecommunication
technologies that will be discussed in the telecommunications section.

Pete Solvik, Cisco’s previous CIO played the role of ‘visionary’ for Cisco’s information
systems. During his time at Cisco, Solvik was responsible for worldwide use of 
information technologies, productivity strategies and Internet initiatives. During Solvik's 
era, Cisco's business operations became the quintessence of e­business. Practically all 
functions were virtualized: customer support, manufacturing, sales, the supply chain and 
accounting. Under Solvik’s leadership, the Cisco Connection Online Web site won 
dozens of awards including: CIO Magazine's “Web Business 50/50 Award”, 

32
WebAward’s “Standard of Excellence Award”, Momentum's “eMarketer Marketing 
Award” and “Top 100 Internet sites” by PC magazine. Solvik was named in the “CIO 
100” by CIO magazine for six years, 1997­2002 and included as one of the “50 People 
Who Make a Difference in Enterprise Networking” by Network World. Solvik had a 
tremendous role in building the technology foundation and Internet culture that Cisco is 
renowned for today.

Cisco Systems <http://newsroom.cisco.com/dlls/tln/exec_team/boston/ >

Role of Senior Management

Senior executives need to recognize the value of information systems and personally sell
this importance to the company employees. They are responsible for funding and
properly staffing the information system initiatives and IS organization. Cisco’s
implementation and commitment to CCO, CEC, MCO and other technologies required
senior management vision and approval. Luckily for Cisco, senior management has
always seen the importance of information technologies. Today, an investment equal to
5+% of annual revenue is spent on IT. John Chambers defines three perspectives a CEO
can hold about information technologies: as an expense, a necessary requirement or as
instrumental to implementing strategies. Chambers is a strong proponent of the last view,
stating that IT is the vehicle that drives a competitive advantage.

CEOs can not be the only business leaders to support the use of information systems.
Cisco has benefited from other senior management leaders like Larry Carter who have
prioritized information technologies at Cisco. Carter, now a senior vice president was
Cisco’s CFO for eight years. He can be credited with implementing Cisco’s
groundbreaking daily financial reporting that enabled their one-day worldwide virtual
close. A one day close is a phenomenal tool translating to real-time, ‘hands on’ the pulse
of the company.

33
 Figure 13

Gruknovnjak, Joek. “Cisco IT Financial Management Approach.” 2002 Cisco Systems.

<http://internet.fon.bg.ac.yu/download/cisco/Poslovna%20Primena/CiscoITFinancialManagementApproach.pdf>

Role of Functional Management

Functional managers should understand the competitive advantage of information

systems, identify new system requirements, financially justify systems and support their
use. Cisco’s functional managers have these responsibilities along with certain unique
freedoms. In 1993, Cisco developed a revolutionary process for distributing IT project
development and IT funding responsibility. CFM, the Client-Funded Model was
developed by Solvik and Doug Allred to delegate IT expenditures to business functions.
This decision allows business leaders to decide when, where and what technologies they
want to invest in to change the business. This unique IS structure shown in Figure 13, is
not a traditional hierarchy. IS decisions are made at each functional business level. In the
updated model of CFM, Boston explains that Cisco “encourages people to build
applications and systems that work cross-functionally and encompass the whole business
process. Business and IT are both responsible for sharing the necessary infrastructure
across all the parts of the business. Cross-functional funding helps the company integrate
systems and processes.” (2) This form of employee empowerment has enabled lower
level managers to make decisions, unleash their creativity, feel like they can make a
difference and ensures employee “buy in”.

CEO-CIO Relationship

34
To achieve and sustain a successful information system it is imperative that a strong,
continuous working relationship between senior management and the information
systems organization exists. Chambers and Boston believe their relationship, the
partnership between the business side and the technology side of the company is crucial.
Chambers views the CEO-CIO relationship as critical for success, stating that “This
[CEO-CIO] relationship must be a true partnership focused on business results. Cisco
CIO Brad Boston and I work very closely together on our company goals.”(1) Chambers
believes that IT and business must be aligned to increase productivity which helps
companies become more competitive. Chambers is responsible for communicating
Cisco’s long-term vision to Boston and the rest of the information systems organization.
Boston’s team must use IS to make the vision a reality.

C. Redefine/Define

Cisco has been able to provide value to their customers through their use of information
systems. By redefining their internal business processes, Cisco redefined or changed their
industry’s factors of competition. Cisco also used information technologies to better
define the nature of their business and products by placing emphasis on being their own
best model, a networked business. Some product development processes have been
redefined with use of information technologies but these changes have not been as
1. Greengard, Samuel. “CEO-CIO Synergy: The Leaders Speak.” Cisco Systems: Customer Care. April 2003. iQ Magazine.
<http://business.cisco.com/prod/tree.taf%3Fasset_id=89988&ID=44744&ListID=44694&public_view=true&kbns=1.html>
2. Cisco System <www.cisco.com>

instrumental to providing customer value as the changes to the business processes. Three
major systems, CCO, CMO and CEC redefined Cisco’s business processes,
differentiating Cisco from their competitors.

Cisco Connection Online (CCO)

In the early 1990s, Cisco was struggling to keep up with their rapid growth. They could
not handle the growing number of product orders and customer service problems. After
Cisco’s network crashed in 1994, Solvik convinced senior executives to purchase an
Oracle ERP system for $15 million. This single investment was huge, about 2.5% of
1993’s revenue and 3 times larger than the previous year’s entire IT budget. Once this
system was implemented, CCO was launched and soon customer satisfaction was
soaring.

CCO is a self-service system that offers a ubiquitous connection between Cisco

customers, employees, partners and suppliers. Customer usage and satisfaction with this
system have continued to grow since CCO’s introduction ten years ago. Initially, the site
was designed for customer technical assistance and product information, not online
purchasing. In 1996, the second phase of CCO was launched, the e-commerce side of the
system that permitted online ordering. Customers were given the ability to configure, 
price, direct and submit electronic orders to Cisco’s automated order­flow system. The 

35
majority of the orders go directly to Cisco's third­party suppliers, who will ship directly 
to customers, reducing Cisco’s product order cycle over 70%. Shipment status can be 
tracked with Cisco’s direction link to Federal Express and UPS. Today, almost all, over
90% of orders are made online. Over 80% of customer’s service or support issues are
resolved online. Error rates have decreased from over 30% to less than 1%. Real time
communication and vast access to information have helped increase customer loyalty.
Cisco.com, the CCO application, is a monster site today, containing over ten million
pages of information.

Other beneficiaries of CCO’s self service system include Cisco suppliers, partners and
employees. Companies wishing to be suppliers to the networking giant can find all the
necessary applications and information online. Suppliers profit from this streamlined
supply chain management that incorporates fully automated activities and accelerates
new product development. Cisco partners are given extended access to CCO secure areas 
and tools to effectively manage this relationship. CCO adds value to partner relationships 
by sharing access to: online training tools, a partner locater search engine and Partner 
Access online, PAL, a system that measures customer satisfaction and tracks trends. CCO
has led to higher employee satisfaction and retention levels and created a thriving Internet
culture. This can be attributed to the self-serving empowerment of CCO. Employees can
perform their jobs more efficiently with the use of CCO. Benefits to Cisco include:
increased employee effectiveness and efficiency, lower costs, accelerated time to market
and most importantly, increased value to customers. CCO has proven to be one of Cisco’s
main competitive advantages because of the increased customer care with the added
bonus of workforce optimization and integration of supply chain management.

Cisco Value to Customer Chart

36
 Figure 14

Cisco Employee Connection (CEC)

CEC, Cisco Employee Connection is Cisco’s intranet site, first launched in 1995.
Originally, the site had limited capabilities, only e-mail, information bulletin boards and
search tools. CEC was soon expanded to simplify employee’s daily tasks and boost
efficiency. Employees can do everything from order supplies, exercise stock options or
hold meetings. One of the first business processes to be redefined by this information
system was the Human Resources department. HR forms such as expense reports, health
insurance, and new hires were standardized and incorporated into this ERP for online
employee access. Employees are highly satisfied with this system that makes their lives
easier. A great example of these computerized processes in CEC is the expense report 
process. Charges can be quickly transferred from an employee’s American Express 
corporate card electronic statement to an electronic expense form. These forms are 
submitted automatically and employees can be reimbursed in as little as forty­eight hours.

37
IT has made employees more productive, contributing to Cisco’s profitability in this 
example. Another key process that was automated was accounting. Real­time 
management accounting was created with the goal of empowering management teams to 
improve decision­making with real­time information. Managers can access company 
orders, discounts, and revenues from the previous day. Accounting automation has also 
enabled Cisco to close their books in a day, a monumental feat for any large company. 

Manufacturing Connection Online (MCO)

One of Cisco’s first landmark decisions was to outsource manufacturing, a necessary

decision to meet the raging demand for Cisco products. Cisco redefined their
manufacturing process with the use of an information system that was developed in 1998.
Cisco Manufacturing Connection Online, MCO, is a business­to­business portal (web 
access gateway) that connects Cisco’s manufacturers, suppliers, logistics partners, 
assemblers, and distributors. MCO integrates and networks the supply chains of Cisco
and Cisco’s partners and contract manufacturers. Access to information about customers,
products, shortages and sales projections are shared through MCO, resulting in decreased
inventory costs and more accurate customer delivery dates. MCO is a highly automated
process that can reach the assembly line with little human intervention.

D. Significance of Telecommunications

Telecommunications describes the sciences and technologies that transmit various forms 
of voice and data electronically. Telecommunication technologies have significantly
boosted Cisco’s cost savings, productivity, and effectiveness. Cisco is considered the
network equipment industry’s most productive company because of their high revenue
per employee. Efficiencies have been gained with e-learning initiatives like IP/TV and
network access extensions like WLANs. Cisco estimates their use of Internet capabilities
saved them over $1.94 billion in 2002 through cost avoidance and time efficiencies. A 
common theme can be found in all of these technologies: an increase in employee value, 
productivity, a basis for a competitive advantage and tremendous cost savings.

Cisco’s Fiscal Year ’02 Benefits from Internet Capabilities
Application Cost Avoidance Time Efficiencies Total Savings
Customer Care $891M $8M     $899M
Workforce Optimization $300M $339M     $639M
Supply­Chain Management $208M $66M     $274M
E­Learning $73M $60M     $133M   
  Total             $1.94B

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IP/TV

Ongoing education and training is necessary to ensure employees understand new 
technologies and are moving towards the same company goals. This training is often 
expensive and time consuming for both the company and individual employee. Cisco 
recognized this problem and developed some innovative technologies to combat the 
dilemma. IP/TV is Cisco’s network streaming video solution that provides immediate 
results: cost­savings, wide­scale training, viewer convenience and real­time educational 
opportunities. Cisco trains their own employees with this IP/TV 3400 series server that 
they sell to customers along with software as an end­to­end complete network video 
solution. Employees watch training videos at their own workstations, at their own 
scheduled time. This unique approach to training employees virtually eliminates the need 
for costly travel and loss of productivity. Training can be scheduled during “down times’ 
like between software releases or completed from home. Cisco implements this 
technology for new product training, up­to­the­minute corporate communications and 
educational programming. Cisco benefits from this form of e­learning that produces a 
well­trained knowledgeable staff, provides continual cost savings and increases 
productivity.

IP Telephony

Once again, Cisco became their own "first and best customer" in deploying this 
groundbreaking new technology.  In 1998, Cisco began deploying integrated Internet 
Protocol networks to their worldwide offices. Traditional telephone systems were 
replaced with feature­rich, cost­efficient IP telephony systems. Although it was a risk to 
deploy integrated data, voice and video, Cisco believed it was a better alternative to 
Cisco Systems <www.cisco.com>
reinvesting in legacy technology. They started with a pilot program, with 200 employee 
volunteers and rapidly expanded. Today, over 100 Cisco sites have IP telephony, serving 
nearly 40,000 phones, and benefiting employees worldwide through reliable, cost­saving 
IP telephony applications. The knowledge Cisco gained through this implementation 
process helped Cisco become the world leader of IP Telephony with over 1.4 billion 
phones shipped.

Wireless LANs

Wireless local area network deployment or WLAN deployment was one of Cisco’s goals
at the turn of the century. Cisco wanted to integrate WLANs with their existing network
infrastructure to produce a global, scalable, secure wireless end-to-end solution. The

39
WLAN would be a secondary network, not meant to replace the wired infrastructure, but
used to increase employee productivity and safeguard against any unforeseen service
impacts. The process of deploying the Aironet WLAN solution began in early 2002 and
was completed in more than 380 sites in 79 countries by that summer. This “anywhere,
anytime” network connectivity allows Cisco employees to conduct business wherever,
whenever. Today, the WLAN is a fully deployed and used worldwide, with more than
3000 access points (about 25/user) and 32,500 clients. This is the largest single enterprise
deployment of a global wireless network. Every Cisco employee has been provided with
a wireless network interface card (NIC) or wireless laptop. Benefits for the employee
include ease of access, convenience, better responsiveness, a wire-free environment,
increased flexibility and portability. Employee access to the Internet, applications and e-
mail is no longer limited to cubicles but can include locations like conference rooms and
lobbies. A study by NOP World estimates a time savings of almost 90 minutes per
employee per workday with the use of WLANs. Cisco has profited from this cost
effective solution that reduces errors, enables quick decision-making and boosts
productivity.

IP VPN

Secure IP Virtual Private Networks, VPNs, allow employees to telecommute and 
virtually meet. Employees can access Cisco’s VPN remotely through a high­speed DSL 
or cable connection. Cisco estimates that VPNs have increased productivity one to two 
hours a day for each employee. IP phones allow users to hold virtual meetings and access
the same tools as employees within Cisco office buildings. Other advantages include 
retention of highly skilled employees who can not commute, travel cost savings and the 
elimination of long­distance phone tolls.

E. Success Factor Profile

The Success Factor Profile is a compilation of the strengths of over 150 organizations and
their strategic use of information systems. Sixteen factors that helped companies gain a
competitive advantage were defined. Primary factors vary between companies in the
networking equipment industry because of different company strengths such as:
strategies, management and product line. The majority of these factors could be used to
describe Cisco’s successful utilization of information systems. The following success
factor breakdown is limited to the major factors that helped Cisco successfully achieve a
competitive advantage with information systems.

Executive and Information Systems Management Partnership

A strong relationship between senior management and information systems management

is a crucial success factor for Cisco. There must be an ongoing working relationship
where communication between the two parties is open and frequent. In a recent interview
Chambers stated “the relationship between the CEO and the CIO is critical for success.”

40
Chambers meets with Cisco’s CIO frequently, believing that he has a strong partnership
with Boston. Through direct communication with Chambers, Morgride and Valentine,
Cisco’s most influential CIO, Pete Solvik, was able to understand Cisco’s business needs
and develop Cisco Connection Online.

Other important aspects of this relationship include senior management confidence in

information systems and information systems management business understanding.
Chambers is a great example of a company leader who believes in the dependability of
information systems and views them as a competitive resource. Pete Solvik, Cisco’s most
influential CIO and Brad Boston Cisco’s current CIO, understand Cisco’s priorities and
direction. Neither CIO is solely technical; both have a business perspective from their
previous companies.

Business Vision

Cisco is striving to “Change the way we Work, Live, Play, and Learn". This change will 
occur as Cisco "Shapes the future of the Internet by creating unprecedented value and 
opportunities for customers, employees, investors, and ecosystem partners." Cisco’s 
vision is defined and supported by Cisco’s visionary CEO. Chambers is the “industry 
spokesperson”, the “King of the Internet” who is campaigning for the Internet revolution.
His vision and prioritization of information technologies has spread through the 
company. Chambers has consistently been both a motivator and educator within his own 
company; he understands the power of all employees marching together. “I want Cisco to
be a dynasty. I think it can be a company that changes the world.” Chambers long­range 
goal is for Cisco to become the most powerful and influential company in history. This 
goal is fairly vague and gives Cisco room to make all kinds of changes needed to move 
towards this goal. Cisco’s vision to change the world is accepted by employees who are 
motivated to use the information technologies tools at their fingertips to move the 
company in this direction. Employee approval and vision support help foster a healthy 
culture within Cisco. 

Culture

Cisco has been honored by being in many annual “Best Company to Work For” lists. A 
healthy company culture keeps employees motivated and happy.  Chambers’ values have
been driven down throughout the organization. Slogans are transformed into reality by 
educating and uniting employees around the company’s goals. The message is clear:
customers are the priority, focus on their needs and providing solutions to make them
successful. Employees respond positively to culture that emphasizes customer
satisfaction because it translates into being part of an organization that believes in quality.
Given Cisco’s product line and e-business foundation it is no surprise that Cisco has been
identified as having an “Internet culture”. Employees are computer savvy; they recognize

41
and accept the use of computer based information systems. Many employees are able to
telecommute due to the IS systems implemented.

A big part of this healthy culture stems from employee empowerment and the motto,

“Don't ask for permission, ask for forgiveness later”. Encouraging employees to take
risks, to go forward with their ideas, creates an exciting work environment. People are
not stuck doing the same monotonous tasks day after day. Empowerment is also tied to
communication, the ability for every employee to ask questions and make suggestions. 
Each month Chambers holds a “birthday breakfast” session where any employee who had

Greengard, Samuel. “CEO-CIO Synergy: The Leaders Speak.” Cisco Systems: Customer Care. April 2003. iQ Magazine.
<http://business.cisco.com/prod/tree.taf%3Fasset_id=89988&ID=44744&ListID=44694&public_view=true&kbns=1.html>

a birthday that month can ask questions. The goal is to allow employees who are not
involved in senior management meetings to get a chance to listen and contribute.

Chambers believes Cisco’s emphasis on giving back to the community has helped shape 
Cisco culture. Other factors promoting a strong culture include unique employee centered
programs like the technically sophisticated childcare service in Silicon Valley. Cisco’s 
Family Connection is a childcare center for over 400 children. The center has classrooms 
and playgrounds with IP/TV technologies that let parents check on their child from their 
desktop at any time. Parents are delighted to have their children in this on­site childcare 
center. Lastly, educational opportunities and reward programs have helped facilitate a 
strong company culture. Cisco’s success and the individuals’ success are cemented 
through employee stock award programs

Information System Integral to the Business

If Cisco’s information systems stopped functioning for any extended period of time Cisco
would be wiped off the map. Cisco is synonymous with e-business, with online
applications. Not only would customers lose faith in a company that failed to keep their
own products working but virtually all of communication and transaction channels would
disappear. Cisco’s streamline business processes would be inoperative. There is no way
that Cisco would be able to resolve this problem quickly. How would the 90% of
customer orders currently made online be received and filled? How would the lost online
technical support information be accessed? Cisco Systems would face a major
irresolvable consequences if their information systems shutdown.

Linkage to Suppliers and Business Partners

Cisco’s global network was extended to their business partners and suppliers: sharing

accurate, timely data. This system has instantaneous sharing of data about supply, 
demand, design, finance and manufacturing. Through the sharing of critical knowledge, 

42
process times and decision making has been reduced from days to minutes or seconds. 
Partners , suppliers and Cisco benefit from this close relationship that improves 
responsiveness and efficiency. Suppliers now have the tools to do their own forecasting, 
to better manage their costs and inventory. The streamlining of supply chain management
has allowed Cisco to reduce costs, get products to market faster, increase value to 
customer and guarantee the delivery process. There is a definite competitive advantage 
in a link to suppliers that is so powerful that Cisco products get delivered to the customer 
without a Cisco employee ever touching the product.

Linkage to Customers and Customer Service

Through the use of information systems Cisco was able to redefine their connection to 
customers and customer service. As previously cited, customer satisfaction in the early
1990s was dangerously low, something had to change. There were too few employees to
effectively run a call center and the cost to employ the number of employees needed to
sustain the growth rate was exorbitant. Customers now diagnose network problems and 
access technical data through the Technical Assistance Center, (TAC) on CCO or use
TAC to communicate with Cisco employees.

Customers can also place and customize orders using CCO as well as research products 
and end­to­end solution alternatives. Customers’ primary interaction with Cisco is 
through CCO, making user­friendliness and user approval a must. Cisco runs one of the 
largest usability testing programs in the world for their website. Customers and engineers 
are videotaped and interviewed to identify parts of the site with navigation problems. 
This feedback allows Cisco to make frequent changes resulting in improved user 
convenience and experience.

SECTION IV: A FINAL ANALYSIS OF CISCO SYSTEMS 

THE SUCCESS OF CISCO SYSTEMS

Cisco has had their ups and downs, extreme ups and extreme downs. They had a 
momentous beginning with record growth and sales. By 2000, Cisco was named the 
“world’s most valuable company” with a market capitalization of almost $600 billion. 
They were one of the fastest growing companies in the world pushing the envelope with 
their innovative technologies. The tech recession hit the unsuspecting company hard and 
fast. By 2001, Cisco’s stocks had plummeted; they were forced to have layoffs and 
incurred a billion dollar net loss. Cisco was in pain and forecasters predicted the worst. 

43
Cisco surprised the industry critics by beating the odds with a strong comeback. Today, 
Cisco is recovering, doing well, but still struggling to regain the position they held a few 
years ago.

A. Success of Business Strategy and Information Technology Use to Date

Cisco is the leader in the network equipment industry. Their sales, profits, and revenue 
per employee surpass all competitors.  Implementation of bold strategies, including 
information technologies and e­business processes has made this a reality. Cisco has 
continued to grow and expand globally (with the exception of the layoffs in 2001) with 
the help of information technologies that connect their customers, employees, investors 
and partners. Business processes have been streamlined by information technologies that 
share accurate real­time data. 

Technology and Information Systems

There is no doubt that technologies and information systems have made Cisco the world­
class leader they are today. Information systems like Cisco Connection Online, CCO, 
Cisco Employee Connection, CEC and MCO, Manufacturing Connection Online have 
helped Cisco increase employee efficiency to become one of the most productive 
companies. These systems have also set Cisco apart from their competitors; they are the 
foundation of Cisco’s competitive advantage. They are the company’s main provider of 
value to the customer. These systems along with technologies like IP/TV and WLANs 
have saved Cisco money through cost avoidance and workforce maximization, while 
providing value to the customer. Telecommunication technologies have enabled Cisco to 
complete over 80% of their sales and technical training online. They have saved 40­60% 
in costs compared to the typical expenses of travel and traditional classroom training.

44
 Figure 15

Access to real­time information has been a critical success factor for Cisco. The 
company’s decision to link employees, customers, partners and suppliers through a global
network has been beneficial to all parties, Figure 15. Information technologies have 
empowered Cisco employees who can access reliable data to forecast and make 
decisions. An example of this access is the automated financial business process. One of 
Cisco’s most impressive technical achievements briefly mentioned above is their virtual 
close. Cisco is able to close their books within 24 hours before the end of a quarter, a task
that takes most companies weeks to accomplish. The accomplishment isn’t so much the 
quick close at the end of the quarter but Cisco’s continuous access to real­time hard 
numbers like revenue and orders, not just estimates. With real­time management 
accounting Cisco is better able to maintain control in a dynamic environment and avoid 
financial surprises. 

Accomplishments

Cisco is a trailblazer. They were the first ones to develop and market routers, the first 
network equipment devices. They were the first industry company to implement e­sales 
and e­support to enhance their value to customers. Cisco is not afraid to take risks. 
Projects like CCO and IP Telephony network integration could have failed and cost Cisco
“Cisco Systems: The Network is the Company.” Alliance for Converging Technologies. 1999 
<http://www.digital4sight.com/pdf/10_15cisco.pdf>
greatly. Some projects have failed but the positive gains far exceed the negative losses 
and Cisco will continue to sponsor new endeavors.

45
Cisco is an enthusiastic user of the products that they sell. They are their own best 
customer, providing a great example of how to benefit from network infrastructure 
technology. Every Cisco business process employs networked technology: streamlining 
their customer, employee, supplier and partner interactions to decrease costs and 
accelerate innovation. Ed Kozel, Cisco’s previous Chief Technology Officer explains that
“CEOs didn’t want to see a box [router]. They wanted to see how a company could be 
run. All of our competitors were saying, ‘My box is faster, it’s cheaper.’ They were 
competing at the level of boxes. They weren’t talking about what you can do with 
boxes.”(1) Customers want to emulate this model, to reap the benefits that Cisco has. 
Cisco’s decision to use their own company as a model has strengthened their company 
name and customer willingness to implement new technologies. 

Crucial Factors for Success

One of the fundamental factors of Cisco’s success has been their strong leaders. 
Chambers and Solvik had the vision that has driven Cisco to the forefront of technology 
and the essential focus on customers. Chambers is fanatical about customers and has 
instilled this customer satisfaction emphasis on employees. As Pete Solvik explains, "The
goal is to create a relationship where customers can get access to every aspect of their 
relationship with our company over the intranet or Internet". (2) Emphasis on customers 
inspired the development and adoption of information systems like Cisco Connection 
Online and its customer­facing applications.

Customer satisfaction and customer support are huge contributors to Cisco’s leading 
position. Cisco has prioritized the customer from their early days and implementation of 
CCO. Not only does this attention make customers happy and boost their loyalty but this 
focus provides Cisco with the means of predicting future trends. If Cisco can continue to 
anticipate customer’s future needs they will be able to maintain their competitive 
advantage.

In today’s stressed economy companies are reluctant to take risks. Customers need to feel
secure with their decision to purchase a product or end-to-end solution. Brand name
dependability and history are factors that have helped Cisco maintain their dominant
position within the network equipment industry. Networks today are implemented in
mission critical systems. Customers want to purchase equipment from companies with a
strong history and bright future. Cisco, unlike their small start-up competitors is an
example of a company that has weathered the test of time. Current and future marketing
campaigns are introducing Cisco to new customers and strengthening their company
name.

46
1. Slater, Robert. The Eye of the Storm: How Chambers Steered Cisco Through the Technology Collapse. 
New York: HarperCollins Publishers Inc., 2003.
2. Sherman, Lee. “A Matter of Connections.” Knowledge Management. July, 2000. KM Magazine.
< http://www.destinationkm.com/articles/default.asp?ArticleID=885>
B. The Effective Position of Cisco for the Future

Can Cisco System’s phenomenal strength and worldwide dominance withstand the test of
time? Four years ago investors, employees and customers alike were asking the question 
“Is Cisco going to survive?” During Cisco’s free­fall days people weren’t so sure of the 
answer. Chambers was confident though, he believed Cisco would rise again and he was 
correct.

Continued emphasis on the customer has postured Cisco well for the future. Exceptional 
customer support and service are strengths at Cisco and will continue to be an asset. 
TAC, Cisco’s technical assistance center provides customers with 24/7 access to all 
technical data. Systems monitor customer satisfaction and programs like customer 
usability testing are used to pinpoint areas that need improvement. Customer focus gives 
Cisco the ability to predict the future needs of customers and industry trends. Customers 
are growing more sophisticated and demanding. If Cisco understands the customer needs 
they will be able to offer innovative solutions and sustain their competitive position.

One of the major future concerns for Cisco is what will happen when the company loses 
John Chambers? “In the fall of 1999, John Chambers told the Cisco board that he would 
stay through 2004; he also said that he might stay for 10 years if everyone would have 
him.” It is 2004 and although there have been no announcements, this could be one of 
Chambers last years as Cisco CEO. Chambers has not identified a number two or group 
of potential successors, there is no apparent heir. Will Chambers’ heir be able to carry on 
Chambers’ legacy and built upon Cisco’s success story? Cisco grew from $1.2 billion in 
annual revenue to their current run­rate of approximately $19 billion under Chambers. 
Cisco stock increased 10,000 percent since Chambers took over as CEO. Is there another 
person who can persuade companies to join the Internet crusade? Can Cisco employees 
be motivated under someone else’s leadership? If John Chambers personally mentors a 
replacement and eases him or her into a leadership position, they will have a good chance
of success.

As the United States economy and global economy improves, network equipment sales 
and profits will increase. Corporations that delayed capital spending for network 
upgrades during the recession will not survive unless they invest in their network. Other 

47
less networked countries like China have begun to build their network infrastructure and 
more countries will follow. There is a large opportunity for growth in the future. The 
number of Internet users and e­businesses is growing at a phenomenal rate. Cisco is in an 
excellent position with a name that both companies and governments recognize and trust. 
Many smaller potential competitors did not survive the technology crash and new start 
ups will need to prove themselves. Cisco will continue to be profitable and has some time
before up and coming companies like Juniper and Extreme present a real threat. These 
companies are smaller, agile and are producing faster networking equipment, at a lower 
price. With a smaller product line, these companies are also able to get products to 
market much sooner than their giant competitor. However, many major corporations got

Slater, Robert. The Eye of the Storm: How Chambers Steered Cisco Through the Technology Collapse. 
New York: HarperCollins Publishers Inc., 2003.
burnt recently by failed start ups and will not trust another small company with their 
network. Cisco will profit from this experience. Cisco will also face problems if they 
continue to fail to break into the telecommunications market. This is a huge market that 
will continue growing and Cisco has not made any advances despite their many attempts.

The Internet Revolution is happening! In 1989 there were 80,000 Internet hosts, by 1996 
there were 14,325,000 hosts and 100,000 websites; two years later there were 29,670,000 
Internet hosts and 1,834,710 websites. In 2002, there were a staggering 147,344,723 
Internet hosts and 36,689,008 websites. The world is changing, Chamber’s Internet 
Revolution is happening and Cisco is playing a major role. Cisco is routing the future, 
changing the way you and I live, work and play.

48
Bibliography

Anderson, Philp, Trimble, Chris, Govindarajan. “Cisco Systems, Evolution to

E-Business.” 2002 Tuck Business School at Dartmouth
< http://mba.tuck.dartmouth.edu/cgl/downloads/10001_Cisco_A.pdf>

Bodeman, Scott. Cisco Employee, Telephone Interview. January 28, 2004.

Bunnell, David. Making the Cisco Connection. New York: John Wiley & Sons, Inc.,       
2000

Cisco Systems <www.cisco.com>

(Accessed everything from Senior Executive Biographies, to Awards, to Marketing
Commercials and annual reports.)

“Cisco Takes On Outsourcing” John Chambers speech at Accenture's Global

Convergence Forum, July 28, 2003.
< http://www.alwayson-network.com/comments.php?id=581_0_4_0_C>

49
Gruknovnjak, Joek. “Cisco IT Financial Management Approach.” 2002 Cisco Systems.
<http://internet.fon.bg.ac.yu/download/cisco/Poslovna
%20Primena/CiscoITFinancialManagementApproach.pdf>

Hoover's Company Profiles: Cisco, Juniper, Nortel, Extreme, Enterasys, 3Com, Lucent,
Alcatel. Hoover's Inc., January 20, 2004.

Kon, Ronnie. Previous Cisco Employee, Telephone Interview. January 30, 2004.

Korzeniowski, Paul. “Challenges Remain for High-End Router Suppliers.” October 9,

2003. LinuxInsider. <
http://www.linuxinsider.com/perl/story/31802.html>

“Managing the e-Supply Chain.” 2001 Business Intelligence.

< http://www.info-edge.com/samples/BI3033_Case_Study.pdf>

Mullins, Robert. “Revival seen for network equipment industry.” May 30, 2003. Silicon
Valley/San Jose Business Journal.
< http://sanjose.bizjournals.com/sanjose/stories/2003/06/02/smallb2.html>

Rizzo, Tony. “The Fallacy of Emulating Cisco.” The Product Development Institute,
Inc. < http://www.pdinstitute.com/systemthinknew/cisco-model.html>

Slater, Robert. The Eye of the Storm: How Chambers Steered Cisco Through the   
Technology Collapse. New York: HarperCollins Publishers Inc., 2003.

Sherman, Lee. “A Matter of Connections.” Knowledge Management. July, 2000. KM

Magazine. < http://www.destinationkm.com/articles/default.asp?
ArticleID=885>

Young, Jeffrey. Cisco Unauthorized Inside the High­stakes Race to Own the Future.  
Roseville, CA: Prima Publishing, 2001.

Chambers

“Chambers to Receive 2002 Spirit of Achievement Award.” National Center for Learning
Disabilities. <http://www.ld.org/news/OWfall2001/OWfall2001_chambers.cfm>

“Computer World Honors: John Chambers.” Computer World Heroes. April 19, 1999. 
< http://www.cwheroes.org/oral_history_archive/john_chambers/oral_history.pdf>

Dolon, J.P. “Why John Chambers Is the CEO of the FUTURE.” February, 2004. 

The Chief Executive Group, L.P.
< http://www.chiefexecutive.net/mag/157/cover1a.htm>

50
Hooper, Larry. “The Internet Evangelist.” 2002 Industry Hall of Fame. CMP Media LLC
< http://www.crn.com/sections/special/hof/hof02.asp?ArticleID=38526>

Maney, Kevin. “Chambers, Cisco born again.” USA Today January 21, 2004.
USA Today January 2004.
<http://www.usatoday.com/money/industries/technology/2004-01-21-chambers2_x.htm>

Business Leaders

Bort, Julie. Duffy, James. “The 25 Most Powerful People in Networking.” The Signature
 25 Series. December, 2000. Network World, Inc. 
< http://www.nwfusion.com/power2000/power­25/power­25netexec.html>

Greengard, Samuel. “CEO-CIO Synergy: The Leaders Speak.” Cisco Systems: Customer
Care. April 2003. iQ Magazine. <http://business.cisco.com/prod/tree.taf
%3Fasset_id=89988&ID=44744&ListID=44694&public_view=true&kbns=1.html>

Competitors and Comparisons

Cisco Systems, Inc. Fundamentals. MSN Money. February 2004 
 < http://moneycentral.msn.com/investor/research/wizards/srwfund.asp?Symbol=csco>

Direction Competitor Comparison. Yahoo! Finance. February 2004.      
< http://finance.yahoo.com/q/co?s=CSCO>

Heskett, Ben. “Cisco dukes it out with Juniper.” January 30, 2001. CNET News.com.
< http://news.com.com/2100-1033-251814.html?legacy=cnet>

Network Router Showdown: Cisco vs. Juniper. LinuxInsider. October 6, 2003. 
< http://www.linuxinsider.com/perl/story/31759.html>

NetworkWorldFusion: NW200 Compare­O­Matic. Network World Inc. 
 <http://www.nwfusion.com/nw200/2003/compare.jsp>

Partners & Suppliers

Cirillo, Richard. “Cisco's Customer Satisfaction Tool: A Partner's Best 'PAL'.”

VARBusiness. April 4, 2001. CMP Media LLC.
< http://www.varbusiness.com/sections/News/breakingnews.asp?ArticleID=25469>

51
“Cisco Systems Shows its Appreciation.” September 22, 2003. Finistar Corp.
<http://www.electronicstalk.com/news/fni/fni115.html>

Hartsock, Netty. “IBM, Cisco partner for corporate streaming.” eBusinessIQ. Connexus
Media Network
<http://www.ebusinessiq.com/industries/Education%20Government/415-
eBusinessIQ%20Eductation.html>

Technologies

Blackwell, Gerry. “Cisco's Wi-Fi Challenges.” September 10, 2003. Wi-Fi Planet
< http://www.wi-fiplanet.com/columns/article.php/3075681>

Chugh, Manoj. “Putting the IT in productivity.” January 2003. Network Magazine.

< http://www.networkmagazineindia.com/200301/cover8.shtml>

“Gaining Competitive Advantage through Internet Business Solutions.” February, 2004

< http://faculty.darden.edu/gbus885-00/Documents/Cisco_ppts.pdf>

Top Three Sources!

The absolute most informative source was Cisco.com. There is an unbelievable amount 
of accessible information. I watched short speeches given by senior executives and their 
most recent commercials. They may be a bit harder to find but there are a lot of great 
PowerPoint presentations and referenced articles.  

52
Slater’s book, “The Eye of the Storm” was also a helpful reference because it written 
recently and discusses Cisco’s comeback with the help of John Chambers.

I also liked the Dartmouth article, “Cisco System Evolution to E­Business” as an 
introduction to Cisco. The article gives a brief overview of Cisco’s beginning, major 
systems and successes.

For financial information and comparisons www.nwfusion.com and Hoovers’ are useful.

53