Why Cisco’s John Chambers is so gung-ho on partnerships
At least that’s the view of Cisco’s executive chairman and former CEO, John Chambers, a sort of tech industry soothsayer.
“Most of them won’t work, but those that do will change the industry in a big way,” Chambers said about partnerships during an interview Wednesday in San Francisco at a conference hosted by cloud storage company Box (BOX).
Chambers discussed the recent partnership between networking giant Cisco (CSCO) and Apple (AAPL). For Chambers, the move is especially significant because the two companies will form joint engineering teams and create new products together.
The companies have not detailed exactly what they’ll make. Rather, they have made a vague statement about improving Internet performance for customers that use Apple devices in conjunction with Cisco’s networking gear.
The basic idea is that no one technology vendor can handle all of its customers’ needs, explained Chambers. In the Apple and Cisco partnership, Apple lacks the credibility to sell iPads and iPhones to businesses. Therefore, it needs Cisco’s expertise and reputation to get meetings with corporate IT departments. Cisco, on the other hand, is trying to grow its work collaboration business, which includes video conferencing technology and workplace chat software. A deal with Apple could help boost sales of those products.
Chambers said that these types of partnerships are harder for companies to pull off than acquisitions, although he didn’t elaborate about why. For the record, Chambers has signed off on a number of failed acquisitions including paying $590 million in 2009 for video camera maker Flip, which it shuttered two years later.
“[Partnerships] will influence the winners and losers in a way you haven’t seen before,” Chambers said.
Of course, Chambers failed to mention some of the partnerships made by rivals like Hewlett-Packard and Dell with fast-rising networking startups like Cumulus Networks. As part of the agreements, HP and Dell will sell low-cost, bare bone networking devices known as commodity hardware that comes bundled with networking software from startups like Cumulus. The idea is that customers can buy lower cost hardware from companies like HP and Dell and add customized software from other companies to the machine.
Earlier this week, HP (HPQ) announced a similar deal with software networking startup Pica8 in which HP will resell the company’s software on its no-frills networking hardware as well as provide support.
Cisco is still the market leader when it comes to selling networking gear, although some technology analysts say that rival and more flexible networking technologies could eventually eat into the company’s sales.
It will be interesting to see if rivals like HP and Dell get a lift in sales by partnering with networking startups focusing on software. After all, partnerships are the way of the future, at least according to Chambers.
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