May 12, 2004 8:50 PM PDT

Cisco's Chambers cites customer confidence

LAS VEGAS--When Cisco Systems' CEO John Chambers talks, people listen.

Chambers anchored the second day of the NetWorld+Interop trade show here on Wednesday with the day's final keynote speech. Cisco's top executive, whose comments about the economy are followed almost as closely as those made by Federal Reserve Chairman Alan Greenspan, entered the hall like a rock star.

Scores of attendees lined up a half-hour in advance just to get inside the auditorium where Chambers would be giving his keynote address. As he's done in previous speeches, Chambers gave the packed house of engineers, competitors and resellers a glimpse into the mood of his customers. And as he did Tuesday on the company's third-quarter conference call, he noted a drastic improvement in the mood of many of his customers.

"Over the past year, I've seen CIOs getting more confident," he said. "There's still some hesitancy, but things have dramatically changed in the past three months. For the first time, CIOs are being more optimistic, not only about the economy in general, but about their own industries."

Chambers noted that this growing enthusiasm has already turned into more business for the company, citing great improvements in revenue for enterprise spending, particularly in the United States during the last quarter. Now that executives are more confident, he said, they will be willing to spend more money to make their businesses more productive.

While he made no bones about promoting his company's own products to help customers achieve these goals, he pointed out that, without fundamental changes in business processes, productivity benefits can't be realized.

He used his own company as an example, noting Cisco's early use of e-learning tools. Even though Cisco had spent millions of dollars to upgrade and improve its network to provide e-learning to its employees, it initially showed few productivity gains. But as salespeople learned that they could break the lessons down into smaller increments instead of spending three to four hours at a time in front of the computer, and they learned to filter out material they didn't need right away, productivity improved.

"If all you're doing is automating a function, you won't improve productivity," Chambers said. "You really need to improve the underlying fundamental business processes."

The message resonated with customers and resellers of Cisco equipment.

"I really respect the underlying message," said Charles Taylor, a vice president of a small value-added reseller in Southern California. "He made a really good point. Customers can spend a lot of money on new IT infrastructure, but it's really about changing the business model."

Chambers also highlighted some technology areas where Cisco is concentrating, and he emphasized the company's mission for delivering a network architecture rather than simple point products.

In a staged technology demonstration, which is typically part of every Chamber keynote address, he drove home his point by showing how security must be woven into every technology solution. Against the backdrop of a fake company, he highlighted several technologies, including wireless network access and Internet telephony, to demonstrate how Cisco can keep companies more secure and productive.

Wrapping up his talk, Chambers tried not to sound too much like a cheerleader for an industry in recovery.

"I can't say that the networking industry is back," he said, "because it's always been here. We just get excited about it at different times."

 

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