Switch and Router Giant Cisco Struggles to Reinvent itself, Explores New Markets

For many years, Cisco Systems dominated the market in the networking arena. Its routers and switches, were, simply put, unbeatable. Now, however, the competition has heated up exponentially, and many investors doubt that Cisco can continue its empire-like hold on its primary offering. According to a Wall Street Journal article, competitors are entering the networking market rapidly and are offering customers cheaper alternatives.

Hewlett-Packard, for example, has begun wooing big Cisco customers by offering a 20% discount on comparable switches when they trade in Cisco gear. The relatively younger IT company Juniper Network is also giving Cisco a scare when it expanded its network-switching market from virtually zero three years ago to 2.3%. Only this week, Juniper announced a new networking gear suite. Meanwhile, Cisco’s share of global switch and router sales two of its biggest business areas both fell during the fourth quarter of 2010, while some competitors’ shares rose, according to the WSJ article.

So where does that leave Cisco? For one, unlike Nokia, a company that has shot itself in the foot for essentially not innovating its products and services rapidly enough to keep up with astronomic innovation,  Cisco has made it a point to re-invent itself in other areas, or so says a recent Economist article.

In an effort to explore other unconquered arenas, Cisco has invested in 30 different “market adjacencies” after a successful run with its video teleconferencing technology, Telepresence. In addition to announcing important new upgrades to its Telepresence technologies, like a 12-inch touchscreen device for controlling endpoints and two new 5-inch display IP desk phones with integrated cameras, Cisco has committed itself to launching new products and services in arenas as scattered as mobility, collaboration, and data center servers.

But, as many critics have pointed out, Cisco may be “spreading itself too thin” by entering such a diversity of IT products and services markets. While many of its new products have certainly shown promise, Cisco cancelled its e-mail service, Cisco Mail, offered alongside its successful WebEx Conferencing service, only 13 months after it was introduced. After investing $250 million, Cisco gave up on the cloud e-mail service because of unresponsive customers and competition against Google Apps, which offers more storage and more services at a much cheaper rate.

Although only time will tell how Cisco will ultimately fare with its wide-angled approach, its Q2 report card was unimpressive. Now that switch and routers are no longer Cisco’s mainstay, the networking giant will have to pull its weight in markets in which it has little experience.

This is a guest post by Mariana Ashley . She is a freelance writer who particularly enjoys writing about online colleges. She loves receiving reader feedback, which can be directed to mariana.ashley031@gmail.com.