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Cisco’s Commitment to Smart+Connected Communities: Transforming Cisco from an Internet Plumber into a Solutions Architect

Sunday, May 29th, 2011

This is a summary of the report on “Cisco’s Commitment to Smart+Connected Communities”. For information on how to obtain the entire report, email the author, Tom Kucharvy, at TomK@Beyond-IT-Inc.com

Cisco is on a self-described mission to transform itself from what CEO John Chambers called a networking “plumber” into a trusted architectural adviser and provider of “platforms for innovation”. This requires a fundamental transformation in the company’s value-add, its sales model, the types of services it provides and, perhaps most challenging, in the type of partners the company recruits and in the ways it engages with them.

The company, as discussed in a series of my blogs beginning in May 2010, effectively began this journey by developing a solutions-based approach to promoting its video and other collaboration technologies, virtualization, and borderless networks—all by leveraging its core strength around the network as the underlying platform. It has since extended way beyond horizontal solutions by unveiling initiatives around a growing number of solutions-based “market adjacencies.” These adjacencies, which include healthcare, education, energy, transportation, sports, entertainment and public safety and security, are also being combined into more comprehensive and ambitious efforts such as its Smart+Connected Communities (S+CC) initiative, in which it provides the intelligent, integrated network solutions across multiple adjacencies to help cities drive economic, social and environmental sustainability and efficiently deliver 21st century services.

These efforts will serve as critical proof points of whether the company can indeed extend beyond the maturing and increasingly competitive market for switches and routers to become a globally recognized provider of solutions that improve businesses, societies and Cisco’s own bottom line.

Building the S+CC Value Proposition

Although Cisco has been providing tools for addressing specific, narrowly-defined industry initiatives for the last several years, its effort to pull all of these and other complementary point solutions into a comprehensive network-based, city-wide architectures began in 2008, when real estate developer Gale International selected Cisco as its networking partner in developing the intelligent infrastructure for a totally new city, the Songdo International Business District, which Gale was developing in South Korea.

New Songdo is the most expensive privately financed real estate project in history. It will be a green, LEED-certified community, designed from the ground up to emit one- third of the greenhouse gases of a typical city its size. It will also be one of the world’s first smart cities, with Internet-monitored and controlled traffic, water, power, transportation and public safety. Every wall socket and appliance will be connected to the IP network and every home and office will be able to monitor and orchestrate its own heat, air conditioning, lighting, appliances and energy usage. Each will also have its own Cisco TelePresence videoconferencing system—which Cisco claims will be the “killer portal”—though which all types of urban services (healthcare, education, safety, shopping and so forth) can be accessed.

As ambitious as New Songdo may sound, Gale and Cisco view it only as a starting point. Given the rapid growth in Asian urbanization, the duo plan to use New Songdo as a template from which they will build more than 20 new “instant cities” across Asia. Cisco will also apply the same platform to helping cities of all ages refresh their current infrastructures and enhance and automate the delivery of each individual service (from distance learning and health monitoring through energy management and security services) for which they have a need.

Although Cisco already has many of the infrastructure capabilities required for a platform on which to run and from which to deliver this broad range of services, its history as a box-pusher and plumber has hardly prepared it—much less give it the credibility—to effectively evangelize the vision of a world of vertical services, much less that of the architecture of the city of the future.

It began developing these capabilities gradually beginning with discrete initiatives, as around its Telepresence system and suite of collaboration tools, and then extended these efforts into discrete verticals, such as education and healthcare. As I discussed in a series of blogs in mid-2010 it began this process by:

  • Hiring and training salespeople and consultants steeped in these areas and created a five-stage, services-based process for guiding customers through the entire process, from solution ideation through implementation; and
  • Created a three-stage, service-led solutions incubation process that used its Internet Business Services Group (IBSG) and Advanced Services (AS) organizations to incubate new markets and create lighthouse accounts for promoting its solutions.

It promotes these solutions in its own demonstration centers and highlights them in high-profile venues such as the 2010 Shanghai World Expo. It even created its own virtual, nonprofit S+CC think tank, the Smart+Connected Communities Institute, to spur joint research and knowledge sharing, foster best practices, explore governance models, create training and education programs and eventually, create certification programs around new models of public-private partnership for achieving economic, environmental and social sustainability.

The Platform Ecosystem

But while Cisco recognizes the need to establish itself as a thought leader and to lead the recruitment, design and implementation phases of early accounts, Cisco is, first and foremost, a partner-centric company. Its goal is to package its learnings from initial lighthouse accounts, train and certify partners to use them and then work with these partners to scale new businesses (see my blog on Cisco’s Value-Added Services Partnering strategy for more details).

Cisco’s first step in creating this partner ecosystem was to create an open, standards-based platform. Its City Cloud Platform provides the network infrastructure, complete with a set of underlying horizontal collaboration and Telepresence services and open APIs on which partners can write and deliver their specialized, vertical applications and services. Its initial recruitment efforts are focused primarily on two broad classes of partners:

  • Technology partners, including industry-specific ISVs and system/software providers and providers of complementary horizontal tools such as analytics; and
  • Strategy, market development and consulting partners, primarily SIs with particularly strong positions in specific geographies and market niches.

Given the complexity and large number and range of partners required to design, develop and deliver managed services to cities, Cisco will rely even more heavily on partners for S+CC than it does in its other markets. It will, itself, focus primarily on the communications and collaboration infrastructures required to run these communities. This combined with the fact that Cisco does not plan to build vertical software or create large consulting or managed services businesses, will help it minimize conflicts within these inherently complex S+CC ecosystems.

Cisco is certainly making big investments and incurring big risks in its efforts to jumpstart and establish itself as a thought leader around its broad range of Smart+Connected Communities initiatives. But while its risks are very real, they will, in all likelihood, be relatively small. After all, even if Cisco’s “instant city” vision proves to be a bust, many of its component initiatives, as around telepresence, connected maintenance, energy management, clinical collaboration, distance learning and video surveillance, are already coming to fruition and have the potential of emerging into large, sustainable markets.

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Partners as Preferred Channels for Cisco’s Value-Added Services

Sunday, June 13th, 2010

This is the third in a series of blogs that demonstrate the critical role that Cisco’s consulting groups are playing in transforming Cisco (my June 6 blog) from a box pusher into a solutions vendor, and in expanding into new, “adjacent markets” (my May 31 blog). This blog highlights a third role that Cisco’s increasingly strategic consulting groups play in the company’s growth strategy—enabling and helping the company’s partners to open new markets for Cisco technologies though the company’s build/package/scale model.

Cisco’s strategy for migrating technology services out to its partners is quite well understood. As I discussed in a 2008 report, “Cisco Services 3.0—Transforming Product Support into a Competitive Differentiator”, the company’s new generation of “Smart Services” will allow Cisco to sell services to customers that cannot be reached by the company’s direct sales force while simultaneously, helping Cisco’s partners diversify away from rapidly commoditizing maintenance services, into higher value-added diagnostic and planning services, and build more reliable annuity-based revenue streams. As I discuss in this blog, the company’s consulting services play an instrumental role in helping Cisco and its partners extend their current positions into new markets. Both initiatives, not coincidentally, will also help bind these partners even more closely to Cisco.

The Expanding Roles of Cisco Partners

Cisco is already a very partner-friendly company. For example, it distributes 100% of its SMB products and more than 80% of its enterprise products through partners and encourages and often brings channel partners into these accounts. It is doing the same with its newest support services. Cisco Smart Care Services, for example, is sold and delivered exclusively through partners to SMBs and it plans to provide some of its enterprise network-level offerings (which are just now being rolled out) to some of its most capable and sophisticated partners.

Partners will also play increasingly central roles in delivering Cisco consulting services—especially to smaller and mid-sized customers, but also to the company’s 500 largest, most strategic “Transformational Accounts—those customers with whom Cisco’s Advanced Services consulting group directly engages (see my June 6 blog).

Although most of Cisco ‘s partner relationships are intended to sell, implement and support large volumes of the company’s traditional products and services, the vendor increasingly sees partners as a critical vehicle for helping to launch new products and services into broad new markets and for capturing customers with whom Cisco has little experience or direct relationships. As I will examine in greater depth in future articles, the company is:

  • Expanding its channel presence well beyond traditional networking partners to establish a presence in channels with deep experience and established customer bases in four particularly critical target markets (borderless networking, data center virtualization, collaboration and video);
  • Recruiting and developing new engagement models with services (such as systems integrators), technology partners (such as ISVs) and influence (such as management consulting) partners, in addition to reseller partners; and
  • Dramatically expanding its partner presence in emerging markets in general and BRIC countries in particular.

It is also changing what it looks for in partners and the ways in which it supports them. It has moved beyond its historical focus on attracting and rewarding partners that sell large volumes of products to add partners that can help the company build demand for new, increasingly sophisticated products and services and consistently architect and implement successful customer implementations.

The company, for example, now has more than 1,000 system integrator partners and a growing number of OEMs, such as SAP, who integrate Cisco collaboration software into their own products. It is now in the process of developing new programs that will create much deeper relationships with a relative handful (probably a few dozen worldwide) leading–edge partners that develop “big architectural plays around Transformational Accounts in transformational technologies (such as collaboration and virtualized data centers) and initiatives (including Smart Grid and Connected Real Estate). Meanwhile, Cisco has created a new strategic partner organization to identify and engage with new types of strategic influencer partners. Under this program, Cisco will indirectly engage with pure management consulting firms, such as McKinsey and Bain, who do not directly work with Cisco products or deliver Cisco-verified services.

The company is increasingly segmenting and rewarding partners on the basis of demonstrated skills, established market presence and industry expertise and has added new certification levels and requirements. Those partners that go through advanced training and demonstrate strong capabilities and commitments to Cisco offerings receive benefits including enhanced training, larger discounts, earlier access to sophisticated new products and services and priority access to leads. They are also more likely to be invited to partner with Advanced Services in leading-edge implementations in large accounts. The company will even work directly with a small number of particularly strategic partners to help them build new service practice models around key architectural focus areas.

But while Cisco is clearly committed to extending its build/package/scale model, it will release no new offering before its time. Rollouts of new consulting services, such as the collaboration services suite discussed in my May 31 post, will not occur until initial partners are fully trained and up to speed. Even then, additional authorizations will be controlled and selective to ensure that current channels are strong and profitable.

Launching and Supporting New Partner Consulting Services

Overall, the company’s Advanced Services group facilitates new partner consulting service roll-outs in three primary ways. It:

  1. Develops, tests and codifies the intellectual property on which new partner consulting services, designs and methodologies are built;
  2. Works with Cisco’s Advanced Services Education and Global Services Partners & Alliances team to create partner training and certification programs and with Cisco’s partner enablement team to to help key partners develop and optimize service practice models; and
  3. Directly supports partner consulting projects by providing partners with the tools and skills required to deliver successful engagements.

Once partners are trained and certified to provide Cisco consulting services, Advanced Services can support the partners in a number of ways. For example, it often brings partners into Cisco-led engagements as sub-contractors or participates in partner-led projects as a sub or as a consultant. It can also help in those engagements where the partner wishes to be the only face to the customer, as by providing virtual access to remote Cisco experts. These background support services were recently enhanced through an expanded version of Cisco’s virtual partner support service, called “managed capacity release”, in which Advanced Services consultants help partners who have been trained and certified to deliver particularly sophisticated consulting services, such as those surrounding Cisco’s collaboration and virtual data center products.

So while Cisco’s Advanced Services group devotes much of its efforts to working directly with large, leading-edge customers, it also plays a central role in making these services available through the company’s large and growing partner base. It packages its consulting services in ways that make them accessible to third parties, helps deliver the methodologies for training these partners, brings them into corporate accounts and provides much of the go-to-market and technical support to help these partners succeed.

This may lead one to surmise that Advanced Services is effectively trying to put itself out of business by training partners to deliver the services that it developed. This is, to an extent, exactly what it is doing. While Advanced Services will continue to work directly with those 500 Transformational Accounts that require its help as well as other accounts involved with pre-chasm technologies, it will channel consulting projects to all other customers through partners and will also increasingly bring qualified partners into Transformational Account engagements. This will free Cisco’s own consultants to develop new services around new pre-chasm technologies and then, when the services and market are ready, package and roll these out to partners to drive scale in the market.

I will discuss Advanced Services role as partner enabler in more detail in future blogs.

Posted in Cisco, IT Company Strategies, IT Industry and Companies, IT Industry Trends, IT/Business Consulting/Outsourcing | No Responses »
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Cisco’s Collaboration Services Incubation Model

Sunday, June 6th, 2010

Cisco is committed to delivering the vast majority of its value-added services through partners. It has traditionally kept its own consulting units very small and used them primarily to support its partners. The company, however, has dramatically expanded its push into dozens of new, increasingly complex and leading-edge markets. It is, for example, currently targeting about 40 “market adjacencies”—new segments that, while complementary to its core networking markets, have the potential of growing into fundamentally new, high-growth markets.

Some of these adjacencies, such as Telepresence and Smart Cities, are relatively new market opportunities. Others, such as virtualized servers and collaboration software, are well established markets that are already occupied by entrenched competitors. The vast majority of these adjacencies, however, share some common needs. Most, for example, require extensive services, including:

  • Evangelism, both around the value of the technologies themselves and also around the value that Cisco—a traditionally self-confessed “box pusher”—can deliver relative to other providers;
  • Consulting services, around everything from identifying and quantifying the business value of the solution, to architecting and integrating it and managing organizational change; and
  • Managed services to implement, operate, manage and pay for these solutions, including delivery of software-as-a-service and utility-based pricing.

But as important as it is to provide these services, Cisco had to manage them within the context of a commitment that it made from the earliest days of the company—to establish deep partnerships with, create markets for and avoid competing with its channel partners. As I discussed in a 2008 report, “Cisco Services 3.0—Transforming Product Support into a Competitive Differentiator”, the company anticipated these expanded services needs and proactively developed a strategy for addressing them. Its strategy for building and delivering services around its Collaboration offerings provide an example of this strategy in action.

Incubating New Service Offerings

As I discussed in my May 31 blog, Cisco has developed a comprehensive line of services to support its collaboration offerings—services that range from business case development though architecture design, governance and change management. Such services, however, do not spring fully formed from John Chambers’ brain. They are often:

  • Conceived, tested and tuned within the Cisco organization, where it is often the first to use its own products;
  • Incubated, catalogued and formalized by the company’s own consulting organizations; and then
  • Rolled out through, and gradually scaled across partners

Let’s begin with a brief overview of the role that two of Cisco’s in-house consulting organizations—Internet Business Services Group (IBSG) and Advanced Services (AS) play in incubating, maturing and programitizing Cisco’s services in general, and its collaboration services in particular. Then I’ll examine how Cisco’s channels organization rolls these services out through its partner channel.

Cisco has continually pioneered the use of networks in transforming organizations and redefining business models, typically beginning these experiments within its own company. A decade ago, corporate customers asked how they could use the Internet to transform their own organizations. Five years ago, they asked how to use Internet-based collaboration tools to transform their business processes. Cisco responded by redefining the company into a living case study as to how to use the Internet as the foundational infrastructure for transforming the company’s organizational and management models, creating a flat, globally distributed, agile organization that distributes decision making down to virtual teams that span the globe. (See my characterization of this transformation and its results in my January 24 and January 31 blogs.)

These in-house implementations provide invaluable learning experiences, proof points and the foundations for the methods that Cisco uses in promoting and implementing its technologies and architectures in thousands of customer organizations worldwide. The process begins with the company’s Internet Business Solutions Group (IBSG), which helps drive these in-house implementations and then applies Cisco’s learnings to a handful of Cisco’s largest, most strategic customers. This group, which consists of only about 200 thought-leader consultants, works with customers’ C-level executives to:

  • Identify promising opportunities for business and business process innovation within the customer’s specific industry and organization;
  • Create technology roadmaps that will enable business transformation; and
  • Develop business cases required to achieve buy-in from business and technology groups.

These consultants certainly provide great value to customers by identifying and creating technology roadmaps for achieving strategic advantage. They provide even greater value to Cisco, as by identifying and leading development of innovative network-based processes that have the potential of opening new markets, by creating the foundations for the business cases and process methodologies that Cisco will leverage across multiple customers and by creating long-term strategic relationships with some of the company’s most important customers. This group, however, is not intended to be a profit center (Cisco does not even bill for its service) and is not intended to scale to the needs of multiple customers (it is not likely to grow to more than a few hundred consultants). Its ultimate value is in creating new business opportunities and incubating new services that will be mined by the entire Cisco organization.

Bringing New Services to Market

The company’s Advanced Services (AS) team is the next link in Cisco’s commercialization chain. This organization is responsible for applying the learnings, business cases and methods that were developed in Cisco’s in-house and IBGS-led lighthouse implementations, out to broader range of “pre-chasm” customers. This group, which consists of about 3,000 consultants, has four primary responsibilities:

  1. Help large enterprise and service provider customers develop business cases and ROI justifications for—and especially architect, implement, integrate and develop governance and change management models for—pre-chasm solutions;
  2. Test, fill out, codify and bulletproof methods and best practice models for all of the processes involved in the previous bullet; and, once the solutions, methods and best practice models methods are ready for broad-market implementation;
  3. Transfer these models to, and continually update them for, Cisco’s Technical Services team (which catalogs all learnings into Cisco Methods and Customer Intelligence Platform support database) and Cisco’s partner organization; and
  4. Support channel partners’ efforts to sell, architect and manage implementations of these technologies into broader markets (see next week’s blog).

Although the 3,000 consultant AS team is tiny by the standards of IBM, HP and Accenture, it is not intended to perform the same role as these companies’ organizations. AS, unlike its IBSG sibling, is a profit center. But unlike most other vendor consulting organizations, it is not intended to develop ongoing practices around, or generate long-term revenue streams from specific technologies. It is intended to facilitate and ensure the successful implementation and adoption of new Cisco solutions within a relative handful—about 500 in total—large, “transformational” customers and to prepare these solutions for high-volume sales through Cisco’s channels. Once these jobs are completed, the AS staff dedicated to these solutions is reduced and consultants migrate to new technologies.

Given AS’s hybrid role as solution evangelist and system integrator, consultants must have deep knowledge of both the technologies and of the business objectives and business processes needs of their clients. The vast majority of these 3,000 consultants have deep skills in one or more of Cisco’s pre-chasm technologies, such as those related to collaboration, virtualized data centers and borderless networks. About half have deep understanding of the needs of specific industries in which their technologies are particularly applicable (such as healthcare, financial services and education for its communications technologies) and about half are field-based, working with specific customers on long-term projects. (Most of the others shift among individual project-based engagements with many customers.)

The value that such consultants can provide to customers is well understood. But, to truly understand the value these consulting teams provide to Cisco, one must also understand the value they provide to Cisco’s channel partners.

Posted in 21st Century Careers, Cisco, Creating the 21st Century Workforce, IT Company Strategies, IT Industry and Companies, IT Industry Trends, IT/Business Consulting/Outsourcing, Skills Requirements, STEM Careers | No Responses »
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The Role of Value-Added Services in Building Cisco’s Collaboration Market Presence

Monday, May 31st, 2010

Cisco is on a self-described mission to transform itself from a box pusher, into a solutions vendor and trusted architectural adviser. Although its goal is certainly ambitious, such a transformation requires a big dose of high-value services—including many of the type of services that Cisco repeatedly emphasizes are the domains of its partners, rather than of Cisco.

Just how far will Cisco go in creating such high-value services and what role will they play in the company’s value propositions? Just as importantly, how will the company reconcile its rapidly growing value-added consulting line-up with its long-term commitments to delivering the vast majority of its services through partners?

The rapid growth the company’s Collaboration Services portfolio provides a valuable window into Cisco’s entire value-added services strategy. This article briefly profiles the role of services in Cisco’s collaboration value proposition and the range of collaboration consulting and hosting services it currently offers. Two additional articles will follow:

  • One that examines the composition, growth and unique roles of Cisco’s two consulting organizations in bringing new services to market.
  • A third that examines the role of these consulting groups in rolling new solutions out through and in driving success of Cisco’s channel partners.

The Critical Need for Collaboration Services

Collaboration is one of the largest, most strategic and fastest growing of Cisco’s 40 “market adjacency” opportunities, with its collaboration product line, consisting of products ranging from instant messaging and mail though Web conferences and Telepresence-based video, growing at about 25% per year. While Cisco’s enterprise customers are rushing to embrace collaboration solutions as a means of better engaging with customers and improving their own organizational effectiveness and agility, few of these customers are currently prepared to design or manage their own implementations. Fewer still are able to transform their processes and organizational cultures in ways that will allow them to derive optimal value from these solutions. A recent Cisco-commissioned study by the IESE Business School, for example, found that:

  • Only one in seven companies has a formal process for managing deployment of social networking tools;
  • One in five have policies in place for managing social networking; and that
  • IT organizations are directly involved in only about one in ten implementations.

Business value assessments of collaboration implementations are often cursory, organizational ownership responsibilities are vague and integration with established enterprise tools and processes are limited And this does not even begin to get into the corporate culture and organizational model changes that are required to transform traditional command-and-control companies into agile, collaborative organizations.

Effective assessment, preparation, implementation and management, not to speak of effective use of these new tools, requires a broad range of expert services. However, as with most new IT and communications technologies, such skills are in short supply. Vendors who want to create a market for such tools must often develop and initially deliver such services themselves. Cisco is no exception.

Cisco’s Collaboration Services Portfolio

Cisco recognizes that customers need help through the entire collaboration planning and implementation process; from justifying business value and ROI, to understanding what tools are necessary and how they integrate with each other and into legacy environments, to planning organizational adoption and support and often, to managing the entire process.

The company has, therefore, introduced a services-led process to help customers plan for and address the business, as well as architectural and technical issues entailed in an enterprise-wide collaboration implementation. This five-step service-based process entails:

  1. Discovery Sessions and Collaboration Index, a Telepresence-delivered session designed to help stakeholders envision and prioritize the business benefits of different forms of collaboration within their specific organization and industry;
  2. Readiness Assessment, an online self-assessment tool that evaluates the organization’s current collaboration capabilities, assesses and suggests remediation measures for its network infrastructure, suggests program management and governance models and evaluates customer readiness;
  3. Collaboration Solution Design, which designs Cisco/Microsoft –based collaboration solutions that can be integrated with the organization’s current collaboration tools;
  4. Collaboration Infrastructure Deployment, which includes architecting and implementing an in-house solution or designing and planning a SaaS implementation; and
  5. Collaboration Strategy and Architecture, which develops detailed business and use cases, identifies the highest-value applications and users, outlines business process and cultural changes that will be required and defines a deployment program.

Cisco’s Services Collaboration Methodology, meanwhile, helps customer’s identify implementation and adoption challenges, suggests and helps them set up governance and incentive structures and define and implement required business process changes.

Cisco will then use its 800 Advanced Services collaboration specialists to design and implement the customer’s solution, train its staff to manage the system and support the ongoing operation with its 1,000 collaboration technical services specialists. (My June 6 blog will have more information.)

New Delivery, Payment and Optimization Models

Although the majority of Cisco collaboration solutions are implemented at the customer’s site, few IT organizations, as mentioned above, have the time, the people or the experience required to manage today’s sophisticated, mission-critical unified communications environments. Nor, in the current era of tight corporate budgets, can all corporations afford or justify paying for all of this out of increasingly tight capital budgets. Cisco, therefore, now offers a broad range of deployment and payment options. It can, for example, Build, Operate and Transfer (BOT) the system to the customer or deliver its collaboration software either as a managed service, or as software-as-a-service. It also now offers a broad range of payment options, including utility-based pricing.

Since Cisco initially expected these alternate delivery models to be attractive primarily to mid-sized companies, it designed them to be offered through third-party partners (see my upcoming June 13 blog). Much to its surprise, however, a rapidly growing percentage of large enterprise customers are also looking for these delivery options and some are insisting that Cisco deliver such services itself.

Cisco’s large, enterprise collaboration customers are also demanding that Cisco provide more than a new level of solutions and architectural consulting services and new, more flexible delivery and pricing options. They also increasingly require that Cisco tailor these solutions to the needs of their specific industry.

The company has been developing industry-specific sales skills over the last several years and has been rapidly expanding its industry-based services capabilities. It, for example, now has collaboration service specialists with deep focuses in industries including healthcare, financial services and education and now counts on highly specialized implementations in industries including pharmaceuticals, airlines, education and state governments for some of its highest-profile reference accounts. And, with Cisco services receiving customer satisfaction ratings of 4.6 out of 5.0, it appears that most are appreciative of the company’s increasingly sophisticated and specialized value-added services capabilities.

Posted in 21st Century Careers, Cisco, IT Company Strategies, IT Industry and Companies, IT Industry Trends, IT/Business Consulting/Outsourcing, Skills Requirements, Workforce Trends | No Responses »
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The Payoffs of Cisco’s Globalization Odyssey

Sunday, January 31st, 2010

In my last blog, I outlined Cisco’s ambitious globalization plans, its plans for establishing Cisco Globalization Center East in Bangalore as a corporate co-headquarters and its longer-term plans for building a network of globalization centers that will not only globally distribute the company’s workforce, but also its management team. This blog looks at some of the challenges Cisco faces in its globalization efforts and how it is addressing them, the opportunities its expanded global presences is creating and some of the lessons that its experiences may provide to other companies.

Challenges and Solutions

Cisco certainly faced many of the same challenges that all companies face when building a major presence in India. It had to navigate the government‘s infamous bureaucracy, compensate for and adjust to the country’s deficient infrastructure and inconsistent education system, and find a way of managing the 12½ hour time zone difference between India and the company’s California headquarters. It also had to adapt to cultural differences between Indian and Western employees. These include the difficulties that many Indian workers have delivering disappointing news and providing candid feedback, their deference to corporate executives and the disappointment and even shame they experience in adapting to the Cisco tradition of lateral organizational moves (versus promotions to higher level jobs and titles).

Cisco, like many other companies establishing an Indian presence, has addressed these traditional challenges. It faced greater challenges, however, from the tricky governance challenges that arose from the combination of two Cisco-specific issues:

  • Its highly matrixed organizational structure and its extensive use of councils and boards (see, for example, the July 2009 McKinsey & Co interview with John Chambers) which is highly dependent on frequent, often spontaneous communication and collaboration among managers and executives from all across the organization; and
  • Its decision to globally distribute its executive and management team, as well as specific functions to India and other countries.

Its first governance challenge was to ensure that all of its employees would accept and adapt to the increasingly central role that the Indian center would play in the organization. This required an immediate, high-profile validation of the role of the Indian organization and the need to incorporating it and its managers and executives into all appropriate decision processes. Cisco built the credibility of the Indian organization in three steps:

  1. Its high-profile promotion and launch of the facility as the greenest and most technologically advanced of all Cisco sites, its role as one of the company’s most important customer/partner demonstration and education centers and its being the home of what will soon be the company’s second largest R&D facility and by the actions of two particularly critical executive sponsors;
  2. The move of EVP Wim Elfrink and 20 other senior executives to Bangalore; and
  3. John Chambers’ ongoing elaboration of the importance of Globalization Center East and his hosting of Cisco’s 2008 company meeting in the complex.

The next challenge was to identify how to maintain, or adapt, the company’s traditional freewheeling, real-time communication and collaboration process when critical members of each team are located halfway around the world, with no shared work hours. Would communications patterns change or would more and more meetings be conducted (and decisions reached) without participation by remote group members?

Cisco’s own technologies, including its Unified Communications solutions, WebEx conferencing and TelePresence videoconferencing systems, certainly helped. But technologies alone are not sufficient to change established processes or corporate cultures.

Cicso began its global communications began in the normal way, trying to schedule meetings at times that were only minimally inconvenient for each party, such as 6:00, 7:00 or 8:00 AM/PM. There were, however, far too many conference calls for far too few time slots. And since there were typically far more participants in the U.S. and Europe than in India and China, calls were increasingly scheduled throughout the night (Indian time) and early Saturday mornings (Friday afternoon in California). India-based executives were getting worn out and were losing sleep and family time. Although Wim Elfrink had a Telepresence system installed in his home, this only moderately reduced the burden. Nor was Cisco prepared to provide this same, very expensive luxury/incursion for all its India-based managers and execs.

The solution? John Chambers ordered that no calls would be held after 11:00 PM in any time zone and that the burden of calls outside of work hours must be spread across geographies, so that everybody would end up making similar compromises.

The Opportunities of Globalization

While the launch of the Bangalore center presented some obstacles that had to be overcome, it also provided Cisco with some important new opportunities. As I discussed in my last blog, the first and the single most important reason for Cisco’s dramatically expanded Indian presence was to accelerate the company’s growth in Asian and other emerging markets. Cisco claims that this investment is already paying off, such as by providing a presence and allowing it to incubate Asian ecosystems that were instrumental in capturing big, strategic accounts. These include Smart Building wins in China, Smart City wins in Saudi Arabia and Smart Education wins in Qatar. (I’ll cover such projects in more depth in a future blog). It is also working on a number of other projects, such as Korea’s Songdo Smart City and Malasian WiMax (with YTL) implementations, that have the potential of creating other huge new global growth opportunities.

Cisco’s commitment to Asia has also allowed the company to extend relationships with current Indian SI partners and to create new joint market initiatives, as with Tata around security and Wipro in addressing Middle Eastern markets.

Establishing the Indian co-headquarters also gave Cisco a powerful new tool in developing a new generation of globally-aware managers and executives. The initial expansion has already contributed to globalizing the traditionally Western-centric corporate culture. Meanwhile, moving Wim Elfrink and other executives to India helped increase Cisco’s visibility into other countries and emphasize the importance the company places on doing business in emerging countries. Of course, it also provided a new high-profile opportunity to gain experience in other geographies. And, as a somewhat unexpected bonus, Cisco is already finding that many employees who transfer to India are more willing to remain in India or transfer to another Cisco emerging country site, than they are to return to San Jose.

The growing role of expats is also a critical tool in spreading the company’s culture to new offices and employees. This was initially done by sending U.S.-based employees to India. India, however, is now emerging as a training ground for Cisco employees in—and the transfer of new technologies and solutions to—other emerging countries, such as the transfer of Smart Grid and Smart Community experts and concepts from India to South Korea.

Leveraging Its Learnings

As I mentioned in my last blog, this is only the first step in Cisco’s plan to transform the company into a fully geographically distributed, global enterprise. Although it entered this expansion without a big, formal central design, Cisco has learned many lessons that will be increasingly institutionalized in future globalization efforts. It is also studying experiences of other global companies, such as Coca-Cola and, especially GE, to help facilitate its learning process.

This will not only help Cisco help itself, it will also help it to help its customers—companies that, like Cisco, recognize the need to decentralize their management structure and globalize their operations. Most companies, however, don’t have the technology, the architectural capabilities or the experience to engineer these transformations themselves. Cisco, in the spirit of its self-defined transformation from “Internet plumber” into “trusted business advisor”, is preparing to help these other companies as well as itself.

Posted in 21st Century Careers, Business Trends, Cisco, Creating the 21st Century Workforce, Globalization, Immigration and Offshoring, IT Company Strategies, IT Industry and Companies, IT Industry Trends, STEM Careers, Technology's Impact on Job Skills, Workforce Trends | No Responses »
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The Globalization of Cisco: Emergence of a Corporate Co-Headquarters

Sunday, January 24th, 2010

Globalization, as I have discussed in a number of recent blogs and reports, is rapidly becoming one of the defining attributes of knowledge work. It is also rapidly becoming one of the defining attributes of dynamic, growing companies.

But what is globalization? What are the attributes of a global company and what does the process of going global mean for a company’s employees?

Before describing what globalization is, let’s first examine what it isn’t. It is not labor arbitrage—the shifting of manufacturing facilities and process-based business functions (such as payables processing and accounting) to less expensive locations. Globalization is much more. It is a deep, sustained corporate commitment to decentralizing the company’s operations, diversifying its markets, distributing its business and management processes, and globalizing the corporate culture.

Consider the example of Cisco, a company that is effectively transforming itself from a U.S.-centric multinational corporation (MNC) into globally integrated enterprise (GIE). True, Cisco is not the first company to go global, nor does it have a huge global footprint, especially when compared with IT services giants such as Accenture or especially IBM. But like most of the company’s ambitions, its globalization ambitions are bold and unconventional.

Going Global

For years, Cisco has sold globally and operated overseas facilities. Yet, it based its corporate management team in the U.S., and made virtually all major corporate decisions there. The company’s plan to transform itself into a truly global company, with a global culture, globally-integrated management process and global growth strategy emerged in late 2006, with the board’s authorization of a plan to open a “second corporate headquarters” in Bangalore India.

This new globalization center is not about labor arbitrage. Cisco neither migrated existing operations, business processes nor functions from the U.S. to India. Although reduced costs are certainly a bonus of its globalization efforts, it created the Bangalore center to support net new corporate capabilities and to address three fundamental corporate goals, to:

  1. Accelerate growth in emerging markets (especially Asian) during a period in which emerging countries promise to grow much more rapidly than traditional developed country markets and to incubate some of the company’s most promising new growth businesses;
  2. Drive new levels of innovation by designing products in/for emerging markets and by exposing the company to new business opportunities and business models; and
  3. Capture increasingly scarce talent in a world where employable labor forces in general, and technically educated workers in particular, are growing much more rapidly in emerging countries than in developed countries.

Why Bangalore? First, Cisco, and a number of the companies it acquired, already had operations in the city. Second, and more importantly, India is a huge market and within 5 hours, one can fly from Bangalore to 70% of the world’s population and most of the world’s most dynamic and rapidly growing economies. Moreover, India has a large and rapidly growing base of well educated, English-speaking talent, some of the world’s best technical universities, and a judicial system that respects intellectual property.

The Roles of Globalization Center East

The center, which opened in 2007, is also one of Cisco’s showcase corporate facilities. It is the greenest building in the company and the first to be totally IP-enabled. It delivers a broad range of video service—including video healthcare—directly to employee desktops and serves as one of the company’s premier customer centers and a showcase for all of its new offerings.

More importantly, the facility, which currently houses 5,000 people, provides a full complement of corporate functions and a rapidly growing percentage of the company’s top executives. This includes large numbers of managers and directors, 14 Vice Presidents and Wim Elfrink, Executive Vice President of Cisco Services and the company’s Chief Globalization Officer.

While this executive contingent certainly includes people responsible for the company’s Indian operations, its overall emerging country growth and the company’s overarching globalization strategy, it also includes executives with broader corporate responsibility. Elfrink, for example, is responsible for the company’s entire services business, which accounts for 20% of Cisco’s total revenues. Other Bangalore-based executives manage global initiatives including Smart Connected Communities, Connected Real Estate and Advanced Services.

Bangalore-based executives are intimately involved in all types of corporate decisions. They sit on virtually all of the company’s councils and boards and sometimes drive initiatives that have only ancillary links to India or emerging countries, including the acquisition of at least one U.S.-based company. Bangalore is also taking the global lead in some of the company’s most promising growth opportunities, such as those around smart buildings, smart cities and smart grid.

Cisco’s 4,500 person Bangalore R&D center also plays an increasingly global role. Roughly 40-45% of its activities focus on designing new or adapting current products and services for emerging country markets, 40-45% on developing leading-edge offerings (including a central role in developing the company’s line of Nexus data center switches) for global markets and only about 10% focus on India-specific offerings.

The Future of a Global Cisco

Although the opening its Globalization Center East center was certainly a critical step in transforming Cisco from an MNC into a GIE, it is only a step. The company plans to grow the center from 5,000 to 10,000 people and to dramatically expand its role in developing new markets and products and in training a new generation of truly global managers and executives. John Chambers, for example, has committed to locating at least 20% of Cisco’s to talent in India by the end of 2010 and to ensuring that center will play a co-equal role in shaping the future of the entire company.

But regardless of how big and important the Indian operation is likely to become, it is only a first step to transform Cisco into a truly global company. It is likely to establish additional global centers in the future. China, meanwhile, will also play an increasingly central role. It is likely to become the company’s primary manufacturing hub and home to market initiatives such as Smart Cities.

Although each center will focus on technologies and growth opportunities of particular concern to regional customers and on global functions and processes to which the region’s talent is best suited, each center is also expected to play a central role in the management of the entire company. Each will house large and growing numbers of corporate (in addition to regional) executives and participate in the geographically distributed business model to which Chambers is committed, and to which he is now piloting in India.

Plans are great. But nothing, especially something as radical and unprecedented as Cisco’s globalization strategy, goes quite according to plan. As I will discuss in my next blog, the company has already learned a number of lessons from its initial efforts—lessons that will be critical not only to Cisco’s next globalization steps, but also in those of other companies.

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