April 22, 2004 1:57 PM PDT
Cisco eyes smaller businesses for growth
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On Thursday, the company launched its SMB Class Solutions initiative, an effort to tailor its technology to the needs of businesses in the 20 to 1,000 employee range. The new initiative includes improvements in some of Cisco's products to make them easier to use, along with new financing arrangements and online education for end users.
Small and midsize companies account for roughly 5.9 million of all businesses in the United States, or 99 percent of the total business market, according to The Yankee Group. Currently, Cisco derives only about 20 percent to 30 percent of its overall revenue from this segment.
The company, which is well-known in the enterprise market and has been building its reputation among service providers, is making this untapped market a top priority. CEO John Chambers said in a statement that the company has already invested more than $2 billion into that effort.
Until recently, Cisco has not focused on specific needs of the small-business market, where customers are concerned much more with ease of use and price. The company has been facing stiff competition, based on price, from the likes of 3Com, Dell and Hewlett-Packard.
However, Cisco is starting to increase its presence in the small-and midsize-business market with new partnerships like the one with Microsoft it announced last month. Through that deal, Cisco is making its products more affordable and easier for small businesses to use.
As part of the initiative it launched Thursday, the company has enhanced the set-up and manageability of some of its products. Specifically, it has added a new feature called Smartports, which allows customers to use a mouse to point and click in order to configure ports on Catalyst Ethernet switches. Previously, configuring these products required a trained engineer to type up to 40 lines of commands. The product is initially available on the Catalyst 2940, 2950 and 3550 stackable switches.
Cisco is also integrating its management tools, including its Express Setup for Catalyst switches, its Cluster Management Suite tool for routers and its Security Device Manager for security products, so that users can launch these tools from a single interface.
"The key thing is that Cisco is making these products much simpler to use," said Helen Chan, an analyst at Yankee. "This is extremely important for this segment of the market, since they don't have dedicated IT staff to manage their networks."
Cisco is also providing discounts for products sold in bundles, and it has reduced the pricing on some of its service agreements. The company is offering a zero percent, 36-month leasing option on its Internet Communications Software systems priced over $5,000.
A large part of Cisco's success in large corporations can be attributed to its educational programs. Through these programs, network operators can be certified on different products. The company sponsors classes at universities and high schools through its Cisco Academy Training Centers to indoctrinate up-and-coming network professionals in the Cisco way. With this goal in mind, the company has developed an online training program targeted at network operators in small and midsize businesses.
"It's a great way to build a customer following," said Joel Conover, an analyst at Current Analysis. "It's worked in the enterprise. But people working for small companies can't take time to go to a special session for three or four days."