Cisco reorganizes to streamline business

Cisco John Chambers

Networking giant Cisco is best known for building a lot of the backbone gear on which the Internet has been built, like routers, switches, hubs, and other key components of network architecture—the kinds of things that make data centers and cloud computing possible. The massive growth of the Internet would seem to put Cisco in a secure business position, but the reality is that the company faces significant competition from the likes of Hewlett-Packard, Juniper, and Arista—and now the company has announced a broad reorganization designed to streamline its operations, cut costs, and bring products and services to market more quickly.

“Cisco has driven transformational change before, and we are again transitioning to the next stage of the company’s evolution,” said Cisco chairman and CEO John Chambers, in a statement. “Today, the market is driving toward simplification and it’s why the network matters. Our role as the leading network platform provider is strong, we have great customers, talent, and expertise—and we know how to bring innovation to every aspect of the network.”

Under the new organization, Cisco will focus on five key areas: routing, switching, and services; collaboration; data center virtualization; architecture; and video. Cisco describes these five areas as the “drivers of the future of the network” and the areas where companies will look to Cisco for solutions and leadership. The company expects the bulk of the reorganization to be completed in the next 120 days, with a new sales organization up and running by July 31, 2011, in time for the start of Cisco’s next fiscal year.

Cisco has not announced whether the changes will result in layoffs or executive-level departures; however, the shakeup seems oriented on enabling Cisco to compete more effectively in many markets—and that will mean trimming expenses like employee salaries. Many of the changes focus on streamlining Cisco’s management structure and will eliminate many of the company’s internal “councils,” which have historically been criticized for adding layers of bureaucracy to Cisco’s decision-making. CEO Chambers has warned the company will face “tough decisions” about where to make spending cuts.

The moves come in the wake of Cisco abruptly killing off its Flip consumer camcorder business—although it’s tempting to say Flip died because consumers are increasingly shooting video with smartphones and other devices, it’s probably closer to the truth to say that Cisco just doesn’t know how to operate in the consumer space: the bulk of Cisco’s clients are enterprises, governments, campuses, and service providers.

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