For a time back in 2002 Cisco, was the world's most valuable company, worth $555 billion thanks to providing the switches and routers that made up the underlying infrastructure of the internet during its first rapid period of growth.
But much has changed in the intervening 13 years: Cisco's market cap is now nearer to $140bn and it's a different tech company -- Apple -- that's now ranked number one in the world.
Amid new competition at home and abroad, with the emergence of new business models and the rise of cloud computing, Cisco is trying to plot a new path.
But none of this seems to holds any fear for John Chambers, who until July this year was the networking company's CEO and is now its executive chairman.
Chambers -- in charge of Cisco for two decades -- has plenty of experience of seeing other tech companies fail to adapt when the competitive landscape changes. The most important mistake they make, he argues, is to miss those big market transitions -- be they technology driven or down to changes in customer demand.
"We're probably reinvented ourselves five or six times literally in the last two decades alone," he says, insisting: "We get the market transitions right."
The second way companies can fail, says Chambers, "is they make the classic mistake of doing the same thing too long". And while Cisco is best known for selling the networking boxes that underpin the internet, and its customers' networks and datacenters, it no longer wants to be seen as just a hardware company.
More software and services
Although sales of switching and routing still account for more than half of its revenue, Cisco wants to sell more software and services.
Part of the reason for this is that Cisco is facing increasing competition from the so-called 'white box' manufacturers -- companies that offer lower-cost hardware, upon which customers can then install their own networking software.
This appeals to some of the very largest companies on the internet -- the Facebooks and Amazons who have enormous amounts of data to move around and the expertise to build their own software to do it.
Although this is a relatively niche market at the moment, if that trend were to spread into the wider enterprise world it could put pressure on companies like Cisco.
Cisco's annual report (PDF), published last month, spells out the risk: "For example, if we do not introduce products related to network programmability, such as software-defined-networking products, in a timely fashion, or if product offerings in this market that ultimately succeed are based on technology, or an approach to technology, that differs from ours, such as, for example, networking products based on 'white box' hardware, our business could be harmed."
However, Biri Singh, Cisco's CTO, rejects the idea that the white box phenomena has much momentum outside of the biggest 'web-scale' companies. While some enterprise customers might have "web-scale envy" and want to emulate the biggest players, most customers do not want additional complexity in their network -- "they want it managed," he says.
Longer term, the rise of web giants like Amazon also threatens another element of Cisco's core business in a different way: as companies put more of their data and applications into cloud environments like Amazon Web Services they have less need for datacentres of their own. That means they might not need to buy as much networking gear.
"The enterprise data center is undergoing a fundamental transformation arising from the convergence of technologies, including computing, networking, storage, and software, that previously were segregated within the data center," warns Cisco's annual report.
To counter this threat of networking being turned into an open-source commodity, Cisco wants to push more intelligence into the network, creating a vision of more programmable, flexible, and virtual networks. Software-defined networking and network function virtualization will help Cisco become more like the software companies that have stolen its limelight in recent years.
"The transformative opportunity for us is to really grow into software and scale that side. Things are going to stay connected: the basic concept of routing and switching is not going away -- you need a network and you need to be able to connect. I think the intelligence of that routing and switching is what's going to change dramatically," says Singh.
That means opening up and documenting the APIs in its products so that developers can create new applications, something that the company is hoping will happen around the internet of things (IoT). That's quite a change for a company that has often had a reputation for closed technologies: Cisco says it has increased its efforts to attract developers, and now counts 315,000 members in its developer programme.
Betting big on IoT
Cisco's new CEO Chuck Robbins is betting big on the IoT as a growth area for the company. "I do believe this is bigger than the first wave of the internet. It has to be," he said at the company's Global Editors' Conference in San Jose, where the company's executives made their case for the reinvention of the networking company.
The company predicts that the 15 billion devices connected to the internet now could rise to 50 billion within five years and that internet traffic will triple. Nearly half of mobile internet traffic will be machine-to-machine communication, as the billions of sensors embedded in everyday objects report their status.
For example, a 'connected car' will generate a petabyte of data, said Cisco; the company has also signed a deal with a Japanese robot maker to help monitor robots on factory floors.
As well as (Cisco hopes) selling more routers and switches, by selling the analytics and security that companies will also need it can shift towards a more software-based business model with recurring revenue streams.
Cisco sees the networking market as comprising three elements: the smartest guys in the room who want to build it themselves, and who might be lured by the white box vendors; the standard enterprise with complex needs (which makes up 80 percent of the market); and the business that wants a shrink-wrapped service. Security, particularly around the IoT, is one area where Cisco sees potential, as is selling managed networking (see the company's Meraki acquisition).
Acquisition and investment
One piece of Cisco's strategy that remains unchanged is its thirst for acquisition: 182 so far, even if the markets haven't liked every one.
"In 1993 we acquired Crescendo; the market yawns, the stock went down [they thought] we'd paid an unreasonable amount of $92m for $10m in revenue stream: $13bn product lines today," jokes Chambers.
Hilton Romanski, Cisco's chief strategy officer, said that acquisitions remain key to the company, adding one or two points of growth, on average, to revenues over time.
"Sometimes it's been a little bit more sometimes a little bit less, but its an important part of how we both differentiate from a strategic perspective and financially continue to drive growth."
Cisco also has a $2bn investment portfolio around the world invested in 100 startups, plus access to more though its venture capital investment activities and funds. "We have the ability to look over the hill, around the horizon, to be able to understand transitions and changes that are happening in the marketplace long before they happen at mass scale within in our customers. This is really important to us," says Romanski.
Cisco is also building a number of 'innovation centres' around the world aimed at different industries (automotive in Germany, for example), which will also allow it to work more closely with small businesses.
One new element is an increased emphasis on partnerships and co-development, says Romanski: "We believe it is going to be as important if not more over time than our acquisition strategy and our internal development strategy has been." For example, Cisco recently signed a deal with Apple to help ensure that iOS apps perform better on its Cisco networks. The company has also recently signed a deal with Chinese company Inspur to boost its presence in a potentially huge market where it has struggled to make inroads against the local networking giant Huawei.
All of this, argues Chambers, gives CEO Robbins the chance to reinvent the company one more time. And right now Cisco still generates the revenue and the profits to make the change. However, it may prove difficult to hit Chambers' target of becoming the number-one tech company again. Much may depend on whether Cisco can develop new revenue streams before some of the older ones decline.
Steve Ranger travelled to San Jose courtesy of Cisco.
More on Cisco
- Cisco stakes a claim for Internet of Things security and analytics
- Cisco fleshes out its Internet of things system, portfolio
- Cisco to set up joint venture with Inspur in China
- The cloud IT arms race is going to the no-name infrastructure providers