Share This Article:

About 4,400 Cisco workers and executives got pink slips last week and are now beginning to wind down their employment at the networking giant. The layoffs are part of a sweeping reorganization designed to cut operating costs by at least $1 billion and refocus the company on core products.

While the restructuring is painful, the Cisco community is ringing with endorsements for the measures. Partners, customers and even affected employees believe Cisco will emerge from the reorganization stronger and better than its current state.

“Speaking as one of the affected in this change, Cisco is making a tough, but right choice. I have seen Cisco go through this before … it will emerge stronger,” wrote former Cisco employee Rusty Worden in the Cisco LinkedIn community forum.

Cisco has been telegraphing the layoffs for months following CEO John Chamber’s admission last April that the company had “lost its way.” The statement was a reflection of the company’s bloat after years of acquisitions that brought it consumer video (Flip), set-top cable boxes (Scientific Atlanta), virtualized servers and a raft of other consumer and business-grade products and businesses.

While Cisco planned for the future based on video-jammed networks, Wall Street investors hammered Cisco management for sluggish stock performance and inflated operating costs. Competitors like Juniper Networks, Hewlett-Packard and Brocade started stealing customers and market share by offering competitively priced products and laser-focused services.

Chambers and his team capitulated to critics and undertook the reorganization to get Cisco more focused on its core products – switching and routing, as well as divesting of underperforming and distracting offerings, such as Flip. There have been rumors Cisco would even shed its Linksys SMB networking division and WebEx collaboration services (neither have come to fruition).

The reorganization also brings a restructuring of the channel program, which includes the collapsing of the global structure into three regions and the elevation of Andrew Sage to head the SMB channel sales and the appointment of Amanda Jobbins to head the newly reconstituted channel marketing division.

>> CHECK OUT: Cisco Reorganizes Worldwide Channel

The changes have caused much angst in the channel community, but partners are exceedingly supportive of Cisco – if you believe the posts on LinkedIn’s Cisco bulletin board: “This is the time for Cisco and partners to focus in the technology which related to core of Cisco technologies like switching, [unified communications] and others. We should be ready to work hard and smart. I think we will be in better situation,” wrote Mohammed Kuhail.

Not all partners are endorsing the change. Some are worried Cisco will continue to lose focus. Between the lack of focus and reduced resources, some partners are concerned that customer satisfaction will wane and competitors will continue to steal market share.

“I fear Cisco gear users may begin to look for alternatives, though it depends on how Cisco manages this change,” wrote Nnamdi Onyebuchi.

The optimistic outlook for Cisco’s reorganization isn’t reserved to partners and customers. Competitors are also looking warily at the Cisco changes. Executives at several Cisco competitors say they’ve enjoyed success because of Cisco’s lack of focus. Cisco’s distractions created opportunities in switching and routing that they effectively exploited.

With Cisco now refocused on its core products and launching the partner-led sales initiatives that will put more sales resources in the field, competitors tell Channelnomics that they will have a harder time winning deals against the market leader.

Cisco is announcing its fourth quarter and end of fiscal year 2011 earnings report today. It’s expected that Chamber and team will forecast sluggish growth amid economic uncertainty and anticipated cuts in government IT spending. However, they will likely express optimism for improved performance and operational efficiency resulting from the reorganization. While Cisco isn’t out of the woods yet, partners and competitors would agree with that sentiment.

* * *

Lawrence M. Walsh is CEO and president of The 2112 Group, a technology business advisory service that specializes in optimizing indirect channels and partner relationships. He’s also the executive director of the Channel Vanguard Council. He is the former publisher of Channel Insider and editor of VARBusiness Magazine. You can reach him at lmwalsh@the2112group.com.

On Twitter:
Larry Walsh:@lmwalsh2112| Channelnomics: @channelnomics

One Response to “Consensus: Cisco Reorg Will Make It Stronger”