Little Brother Cisco in China

Cisco’s Chinese strategy is so much more sophisticated than most people realize that the giant networking company—the “gorilla” of networking—is executing a stealth program under the very noses of Wall Street and the mainstream media (MSM) that will have long term implications for almost every company in the networking space.  In Cisco’s case, elephants can dance, The future implications of wiring the entire country for surveillance are Orwellian. and the proof is in this week’s announcement of Cisco’s acquisition of SyPixx, an obscure small company that has built a way to get old cheap analog surveillance cameras images (as well as digital ones) up onto IP networks so they can be monitored centrally. The $51 million investment is small potatoes, and while Om seems a bit bewildered, and some analysts are positive, no one gets it.

Except for John Chambers.  Given the amount of ink that Cisco gets over everything it does, it is surprising that the press ignores one crucial part of John Chambers’ background: Before joining Cisco he was the general manager of IBM’s operations in China.  Chambers understands the needs and desires of China’s rulers better than most American executives.  The ruling elite wants to build a Big Brother society, and Cisco is all too willing to help them do it. SyPixx is a crucial component.  The reason is rooted in the single most important project in China for the next two years: The 2008 Olympics.  As befits a totalitarian, controlling culture, China has decreed that it will have surveillance cameras on every intersection, and at every location in every venue for the forthcoming Olympics.  (Can every bedroom be far off?)  This kind of coverage started in Sydney in 1996, where a number of intersections were monitored, and then it took a giant step backwards at Athens, where the Israeli sub contractor mounted plenty of boxes that looked like they had cameras…but it turned out they were empty.  Of course, that didn’t matter because the high speed IP network that was supposed to carry the traffic was never fully operational. Now comes China, and the powers that be aren’t about to accept failure.  The solution?  Turn over the entire thing to Cisco and let the networking gorilla handle it all.  Hence SyPixx. Of course, the future implications of wiring the entire country for surveillance are Orwellian.  Maybe 1984 is going to be 2008. While the US enterprise market remains Cisco’s biggest single sector—and posted strong results again in the latest quarterly financial report—the future for the company is in China.  Over the past few weeks the company has announced a series of major commercial supplier contracts, and educational high speed wins in China’s next generation IP build outs—crippling Juniper Networks’ ambitions and blunting the supposed competition from China’s homegrown networking upstarts ZTE and Huawei.  Juniper’s stock has recently cratered after Wall Street caught on to what this all meant for its prospects.(Remember how a year ago there was a lot of speculation in the next generation networking world about how Chinese upstart router and switch makers Huawei and ZTE were going to mount a credible attack on Cisco’s worldwide IP hegemony.  This was about the time that Cisco introduced its new CSR-1 mega-routers, and challenged Juniper Network, which had been the darling of big iron routers for a while.  Hmmm…the latest supposed challenger to Cisco is open source routing.  Don’t bet your retirement plan on it.)

In the past few weeks the company has revealed that it made a $220 million investment (9.7% of outstanding shares) in Shanda last year, China’s leading online gaming company.  Now there’s the kind of quid pro quo that China’s oligarchy appreciates.  All of this demonstrates just how strong Cisco’s presence is in the world’s biggest new market for IP gear and networking, and more importantly, how deeply the company understands the needs of China’s rulers.

While Cisco has taken some heat for its kowtowing to the Chinese government over ‘Net surveillance, its behaviour is nowhere near the egregious capitulation of both Google and Yahoo! which both changed their products to better enable Chinese government regulation of public access to the Internet.  Of course, now that the networking gorilla will be supplying the tools to let the Chinese government watch every one of its citizens, all the time, maybe it deserves a new nickname.  Little Brother?