Cisco, Linksys One, and Scientific Atlanta: Gorilla At Work
In Dealing with Darwin, the discussion of platform innovation focuses on how it is a natural strategy for any gorilla company that has achieved ubiquity with a proprietary technology—with particular attention to Intel, Microsoft, Oracle, IBM, EMC, and SAP. Cisco’s recent announcements are a great illustration of how such strategies play out.
Cisco is pretty much the undisputed leader in enterprise networking (although Huawei hopes to have something to say about that in the future), but it has been more than a little challenged in both the telecommunications service provider market and the small business marketplace. The former requires a highly specialized in-house services-led workforce, something that is not really compatible with Cisco’s business model, and the latter just the opposite, a services-free offer for the person who has no in-house IT help. Cisco, by contrast, grew up in a general-purpose networking world selling into an IT-rich enterprise environment. Not a good fit.
But now we can see where its next moves are heading. Linksys One is an appliance-like offer that will be resold through telecommunication service providers (SPs), both traditional and non-traditional, as a hosted service. This does not require Cisco to develop deep SP expertise, and it gives it a leveraged entrée into the small business market through a channel that is already a trusted source of services. Moreover it brings to market a next-generation platform from which one can readily envision launching a broad array of services.
Meanwhile, its acquisition of Scientific Atlantic gives it’s a second SP play—by resurrecting the CLEC vs. ILEC play. Only this time the C in CLEC stands for Cable-enabled. The ILECs are still deeply engaged with the traditional telecom switch providers—Lucent, Nortel, Alcatel, Seimens, Ericsson—and while the company will no doubt continue to knock on those doors, the exercise is a bit like pushing a rope uphill. The cable folks, on the other hand, are absolutely delighted to get help with their own version of the voice/data/video triple play. What Scientific Atlantic brings to the table is the possibility of an end-to-end platform play with Cisco controlling both ends.
In the Enterprise Microsoft has always controlled the edge end of things, as it hopes to in the home via XBox or the media PC. Sony has the same idea with its Playstation. Linksys, on the other hand, is the leader in home routers, and Scientific Atlanta has north of 40% market share in set-top boxes. So pull up your armchair and let the games begin. This is going to be reality TV at its finest.