A few years ago Cisco Systems CEO John Chambers realized that he needed to prepare a counterattack to the growing threat of software-defined networking, a new kind of technology that allowed companies to control networks using software, rather than the high-end routers and switches that Cisco built its name on.
With billions of dollars in company coffers, Chambers could have acquired a startup to get in the game. He also could have asked some of the thousands of engineers employed by his company to tackle the project. Instead, he elected to persuade several semiretired Cisco executives to leave their lives of leisure and take on, as the archetypal plot of so many action films suggests, one last job.
“I wasn’t planning to do anything,” says Mario Mazzola, a 67-year-old entrepreneur who helped found four companies that were acquired by Cisco. Setting aside dreams of lounging by the water on Italy’s Amalfi Coast, Mazzola rejoined longtime engineering colleagues Prem Jain, Luca Cafiero, and Soni Jiandani, and set up shop in an old, nondescript building on Cisco’s San Jose campus.
Step one? Staff up by hiring engineers from rivals Arista Networks and Juniper Networks. Step two? Introduce to the world Insieme Networks, the latest in a string of successful “spin-in” companies the team has created and sold to Cisco. “The idea was that we could do software-defined networking in a way that is much better than what the competition can provide,” Mazzola says.
The stakes couldn’t be higher. Cisco’s trajectory during the past few years has been bumpy at best. Though the company has long been a leader in innovation, it missed the rise of SDN, as it is called, which threatens Cisco’s hardware dominance by moving network control to the software layer, allowing companies to use cheaper equipment. In short, Mazzola and his team weren’t tasked just with creating a new market for Cisco, but doing so without cannibalizing its moneymaker. (No pressure.)
Chambers’ dream team believes its technology trumps the alternatives because it allows for control of both physical and virtual networking equipment, thus offering more visibility across a company’s network. But the competition isn’t lying down. Arista Networks is headed by Cisco veteran and Mazzola protégé Jayshree Ullal. Longtime partner VMware has rolled out its own network virtualization platform. And relative upstart Facebook is leading efforts to open-source networking equipment.
It’s a critical moment for Cisco. The Insieme experiment puts a spotlight on its ability to build new products at the expense of its legacy business. If it fails, Cisco may not get its Hollywood ending after all.
This story is from the December 23, 2013 issue of Fortune.