The Architect: Q&A with John Chambers

You mention HP, and with Leo Apotheker now running the show, we’ve heard a lot of emphasis from HP on becoming a software company and upping its stake as a software company. Does Cisco need to be seen as a software company? What’s the plan to invest in software?

So three separate questions, if I can. First, Leo is a good person and a good friend, and I wish he weren’t at HP. Same thing with Ray Lane, their chairman. And I will feel very guilty beating them. [laughter]

You heard it here first.

[laughter] You did. But it’s hard to change the culture and direction of a company. We spend 13 percent of our revenues on R&D. We acquire a huge number of companies every year. In the last year alone, we spent over $6 billion on acquisitions. That’s hard to do. Our success rate on acquisitions has been off the chart. The Tandberg success, the Starent success, amazingly good.

We in many ways caught the market transition on data centre virtualisation, and our large peers, by surprise. Much like we did when Nortel, Lucent, Alcatel, Siemens, Ericsson said, ‘Cisco, you really don’t understand telephony, you really don’t understand this market.’ We didn’t do bad. We became the No.1 player, probably five times the market cap.

The data centre in this market has similar characteristics. Make no mistake about it, they see us coming – this time we’re not going to sneak up on anybody – but this really is the breadth and depth we offer to our partners that no one else does. We are a partner-driven organisation. Our other peers, you don’t hear that from any of them.

So at the heart, are we perfect? No. Do we occasionally make mistakes? Absolutely. And I want to apologise for the lead times last year and communications with the partners. We clearly hurt them and hurt ourselves and hurt our customers, and it look us too long to fix it. But if you look now, all the lead times, with very few exceptions, are within the range where we want it, and we’ve got a different process that, while there’ll occasionally be bumps during the year or surprises from a supplier, I think you’ll watch us handle it differently.

How often are you meeting with partners?

Pretty often. When I’m on the road, it’s probably a partner a day, minimum, and sometimes large groups of partners.

One of the changes occurring not only at Cisco, but business organisations and governments worldwide. We’re moving from command-and-control, which, candidly, we’re really good at and which I love. But we’re moving to collaboration, teamwork, social networking capabilities.

What’s three to five years down the line now?

 Organisational transformations and the effectiveness that goes with it. That will drive a decade of productivity, that’s really big. It’ll save some of these systems close to bankruptcy in health care and it will transform education, internally,to companies as well as education in K-12 [kindergarten to Year 12] systems and higher education – it’s transformational.

You will also see the organisation structure [change]. Suddenly, and I would argue it’s going to be the network, IT will be so deeply embedded in the business process you won’t talk about business process and IT enabling it. They will be one and the same.