by Martin Veitch

Cisco’s Phil Smith on telepresence, spread costs and direct dealing

Mar 23, 2010
IT Strategy

With connectivity and collaboration at the heart of modern business computing there’s an argument made by some that the biggest mover and shaker in the ICT business today isn’t Microsoft, IBM or even Google but Cisco. Today, as well as providing the essential networking for the IP-driven universe, it is rapidly expanding organically and through M&A with strategic moves into areas from the Flip consumer camera to telepresence videoconferencing. I met Cisco UK and Ireland CEO Phil Smith recently for a catch-up on the company and its local business.

Smith, a Scot and veteran of Cisco after 16 years of service, said CIOs he meets are “a changing bunch”.

“There’s no doubt they’re pushing to be more business relevant. It’s waxed and waned over the years but being at the top table is coming into focus again. When you’re in a market that’s starting to turn again it’s timely.”

He finds it odd that more CIOs aren’t involved in the greening of their organisations citing research suggesting that while almost half of CIOs in the US are involved in setting strategic environmental objectives, just one in 15 CIOs locally had been involved in forming strategy despite all being involved in execution.

“That’s strange because if there’s one thing that’s going to change [carbon footprint], it’s the exploitation of technology. It has the ability to change behaviour. The CEOs we spoke to had said ‘we’re going to reduce carbon by 30 per cent’ rather than looking at changing their business using technology as a key enabler.”

He says that a problem for CIOs is that with consolidation projects improving utilisation and general efficiency, saving on IT can’t remove big chunks from company budgets.

“Ken Harvey [of HSBC], Neil Cameron [Unilever] and [government CIO] John Suffolk are doing pretty radical things but if you think about IT as a cost to the business, it is typically five to 10 per cent of the cost of running a business. If you make IT twice as efficient you’re only saving two per cent of the company.”

That’s relatively paltry compared to improving, for example, sales productivity by 10 per cent, he says, but what is more interesting is the ability to underpin fundamental changes to business processes, notably through productivity and collaboration.

“Telepresence and other technologies are changing the way we do business,” he says. “I used to go to the US 12 times a year but I haven’t been there in 18 months. Now we’ll sit customers in a telepresence room and [Cisco CEO] John Chambers will do a two-hour meeting with them. Most people look at telepresence as an executive communications tool but you change the business process, you can engage in product reviews more often and in a more ad hoc way than in the past. At Cisco, global travel spend was about $750m per year and we took that to less than $250m in less than six months.”

Part of the reason why telepresence isn’t everywhere is also that familiar bugbear, lack of interoperability between vendors.

He agrees that “we’re just scratching the surface” and that more needs to be done if the technology is not to be seen as an “executive toy”. Another problem for telepresence, I suggest, is upfront cost so is Cisco moving towards dealing with customers on a consumption basis so costs are spread out rather than spiky and capital expenditure is replaced by operating expenditure.

“We do see a lot of [moving] capex to opex discussions. People say ‘I’d like to pay on a consumption basis per unit, per week, per month.’ We recognise the trend towards subscriptions or cloud-based services. People want to ramp up and ramp down in a secure and robust way.”

This occurs sometimes directly and sometimes through Cisco’s reseller channel, Smith says, so, I ask, is Cisco seeking to do more direct business engagements? The answer would appear to be ‘yes’ with caveats.

“People are looking for more skin in the game,” Smith says. “They say, ‘Cisco, it’s alright for you to be there but we want you to be one step closer to us’. So we’ll often have our own people there, especially in early-stage technologies. It’s more consultative and advisory. That helps accelerate the partner model as well [because partners] want to talk about what their outcomes are. We’re not an IBM that is obviously a services company but seeding new technologies is a significant part of what we want to do.”

He feels that the whole business could be about to undergo a sea change.

“It feels to me to be on the verge of something that could become very pervasive. Public sector can’t use the models they have had until today. It needs to be a step change. That’s going to be true of any business. And it’s a very interesting time for CIOs.”

Cost is still king, he believes.

“If you have a green strategy it’s saving cost. In 2008 there was a lot of ‘let’s save the planet and it will save cost as well’. In 2009, it was ‘let’s save cost and by the way we’ll save the planet’.”