Will Cisco’s Big Organizational Change Help, or Hurt?

If we have a shape of things to come, maybe now we have an organization of things to come. That’s what Cisco is promoting, at least, with the announcement it would be combining the enterprise networking and mass infrastructure groups. The challenge here is first to decide if the decision was driven, as some say, by the departure of enterprise group EVP and GM Todd Nightingale. Others say that it might be the result of the long-standing competition between Cisco business units and a company drive to stamp it out. Or, just maybe, there’s some actual market driver.

Both enterprises and network operators I chat with have been generally suspicious of the move and cynical about the motivation. Both groups believe that their interests are better served by separating the groups, and both believe that the product requirements for the groups are diverging rather than converging. They also believe that divergence will accelerate in the future, so if buyer attitude is the measure of a move, then Cisco may have read the tea leaves wrong.

Jonathan Davidson was heading the mass infrastructure group, and will be the head of the yet-unnamed new group. He was EVP and GM at rival Juniper in the past, so he understands Cisco’s main competitor, and the mass infrastructure group has played the major role in development of Cisco’s network software and interface assets. Some within Cisco say that he’s seen at Cisco as the stronger of the two executives, which is why Nightingale is believed to have taken the CEO job at Fastly, a serverless edge platform play.

The way the two were “seen at Cisco” is a credible force behind the shift because Cisco has always been viewed as encouraging rivalry among its senior executives, a climate that most think John Chambers fostered and that has continued either with Robbins’ support or at least his acquiescence. A few also point out that Cisco execs have often gone off to start a tech company, to be later bought back in by Cisco, but this has involved startups and not companies already established. And whether Fastly is a worthy acquisition is another unknown we won’t get into here.

Despite skepticism and rivalries, though, there are some solid reasons for the change, and they lay out pretty much as Cisco has described them. Networking is changing, both in terms of available technology and in terms of the balance of technology between operators and users.

Over the last four decades, enterprise networking has undergone a radical shift, from networks that were essentially smaller-scale implementations of operator networking to networks that were based on virtual-private-network services. Enterprises used to deploy their own nodal routers, linking leased lines in a grid that topologically resembled the networks of full-scale telcos. Now, they build networks using access routers and VPN services; there are no trunks and nodes at all. That’s a pretty profound shift.

And, of course, you could argue that was a reason to keep enterprise and operator networking separate. Users are now edge consumers, and operators are node consumers. But there’s another ingredient in the story, which is that enterprises want not just “network services” but managed network services. In managed services, the provider supplies the edge technology as well as the network service. Part of the enterprise shift is due to the fact that enterprises’ business scope now spans multiple operator territories, and operators have been slow to provide reasonable federated multi-provider services.

Every enterprise isn’t going to deploy managed services, but if CSPs and MSPs are highly successful (which they are) then they become dominant buyers in the edge device space, which means that operators of some sort are dominant buyers in the WAN technology space overall. Score one for consolidation.

Now to the next point, the data center and switching. Over the last decade, enterprises have shifted their application strategies toward “appmod” or application modernization, which is really GUI modernization. The goal was to accommodate the use of a browser and smartphone apps as on-ramps to legacy business applications running in the data center. This accounts for nearly all enterprise cloud spending, and it has reduced the need to change data center apps, or to supply web/app enhancements that ran in the data center and thus required more data center spending. That’s slowed the growth of the data center.

Except, of course, for cloud data centers. Cloud providers are massive buyers of servers, and that means massive buyers of data center network equipment, the switches. Their volume purchases are driving the switch market, and that means that switches are at least equally influenced by the provider side. Score two for consolidation.

Then there’s software. All network devices these days are software-based in terms of functionality. All the big network vendors have their own operating systems that run on their boxes. All have management software that facilitates network operations. Many have other software products that relate to network hosting and feature delivery. Buyer influence on software tends to follow buyer spending on network equipment, which as I’ve noted has been shifting more to providers over time. Certainly it would be foolish for a vendor to think that their network software would fork into a distinct segment for enterprise and another for operators/providers. Score three for consolidation.

Three-zero for consolidation of enterprise and operator-centric network equipment business units? Can we then conclude that Robbins, perhaps having done a pilgrimage to some mystical glade in the mountains, has returned to Cisco with a vision of the True Future? Maybe, but he’s also returned with a kernel of an old bugaboo that could turn on him and on Cisco. It’s called marketing versus engineering.

Marketing and sales is all about inducing prospects to become customers, and customers to become better customers. The classic formula for success here is to give the customers what they want. Engineering is then supposed to create the product to match customer desires. Demand-side product management in action.

But engineering is all about doing cool stuff that advances technical state of the art. Once that’s been done, it’s up to sales/marketing to make the customers want it. Clear-eyed engineers know where technology will take the industry, and build it. They, the buyers, will come. Supply-side product management, in other words.

I’ve seen more companies killed by this marketing/engineering face-off than by any other organizational factor. By creating a single product team, Cisco eliminates a strong marketing/engineering tie because engineering is now serving two different marketing and sales teams. Yes, that’s been true before, but there was an element of market-sector division when we had separate marketing, sales, and product groups. Now one giant, powerful, engineering tame faces off fragmented sales/marketing. It could be ugly.

Cisco has always been a sales-driven company, a “fast follower” rather than a tech leader. Could Robbins see the engineering consolidation as a means of creating tech leadership? Could he be failing to see the risk of a sales/marketing face-off of the kind often fatal to other firms in the past? We’ll see.