Cisco CEO: Virtualization to fuel second Web boom

Cisco chief executive John Chambers has predicted that the IT industry will enjoy a second era of productivity which will mirror the growth spurred by the original Internet revolution in the mid 90s.

In his keynote address to VMworld in San Francisco, Chambers said the "second phase" of Internet productivity will be driven by virtualization, convergence and online collaboration.

"There is a fundamental shift in the industry and it's occurring much faster than any market transition I have seen so far," Chambers said.

"It is about a wave of collaboration, enabled to a great extent by the virtualization of access to any content. This will usher in what I believe will be a generation of productivity that will change not only how we work, where we work, but the very nature of work itself."

Chambers said that the more effective sharing of compute power, combined with huge bandwidth capabilities, will "get us to rethink how we work".

"Web 2.0 has been around," he said, "but at Cisco we're doing it with a vengeance."

The networking vendor has ramped up the number of projects it undertakes, acquisitions it makes and products it launches on an annual basis by virtualizing not only access to servers and applications, but also human resources.

For any given project, Cisco now assigns any stakeholder or staff member from any department--be it sales, IT, engineering or finance--to work together using Web 2.0 collaboration tools and online voice and video, according to the Cisco chief executive.

Cisco has also set up wikis for customers and staff to contribute ideas to the company, as well as a "Ciscopedia" which enables staff to learn from experts on any given topic within the company using a Facebook-like presence technology.

"We have thousands of ideas coming through on our wikis from customers and employees," Chambers said.

Cisco's latest acquisition, WebEx, took just eight days to integrate into the wider company. An acquisition of this size once took 45 days, Chambers said--testament to the power of using virtualization (disaggregating applications from hardware) and collaboration tools.

Chambers also showed images from a "virtual" meeting he and his team at Cisco had with their 200 top financial analysts on the preceding day--conducted via videoconference, and powered by collaboration tools and instant messaging.

The combination of virtualization and collaboration, Chambers said, has already saved the organization US$200m last year.

"This is where IT becomes sexy again," Chambers says. "This is where the sizzle comes back into IT."

Budgets to increase
Chambers said successful companies need to make a habit of catching these transitions--and riding them hard.

"In the early 90s, the Internet had already been around for three decades," he said. "But already 90 percent of Cisco product orders were online. And 90 percent of our customer service was done without human intervention. We sold three times the product of our competitors--which drove us to a position in the industry that was a huge advantage for us."

Chambers said economic growth slowed in the last two to three years as economies exhausted the productivity gains available from the first wave of the Internet.

"We are running out of gas," he said. "This is why chief executives are seeing IT as an expense item. If this scenario continued, you would expect IT budgets to remain flat for the next decade."

But Chambers expects that the industry will grow at three to five percent, not the modest two percent being forecast by financial analysts.

"I think you will see a second phase of innovation, driven by virtualization, collaboration and convergence," he said. "I think you will see in the next five to 10 years an identical replay to what happened in the mid 90s."