Life in the grey zone
27 August 2007 | 0
These are interesting times for Linksys. The smaller firm was bought by networking giant Cisco in 2003 for $500 million on the back of its strong presence in the US home and small business networking market. But, as Cisco has started to make aggressive moves of its own beyond its enterprise stronghold into the small and medium business sector, the likelihood of an overlap between the two companies has grown stronger.
At the end of July, Cisco CEO John Chambers told a European press roundtable that the use of the Linksys brand for consumer routers and networking kit was reaching “end of life”. The impression created at the meeting was that the Linksys brand would disappear in months, presumably once the outstanding inventory had been sold off.
According to various news agencies, Chambers said Cisco had kept the Linksys brand only because it was better known to US consumers than Cisco was, but he added: “As you go globally, there’s very little advantage in that.”
Almost as soon as this news had broken, Charles Giancarlo, president of Cisco-Linksys, issued a statement to eWeek magazine claiming that Linksys consumer and SMB products would “continue to be marketed under the Linksys brand and co-exist in the market with Cisco-branded connected home products over the near term”. But he said Cisco would continue to examine its branding strategy “and make changes if and when these changes add value to our customers’ decision-making processes and our channel partners”.
So, although the message appears to be “business as usual”, at least in the near term, longer term it looks more cloudy. As Cisco launched an integrated voice, data and wireless technology package for small and medium sized businesses (SMBs) in May and announced that it was also planning to set up a sales channel to sell and support the sale of these products to small business customers, there is, as Cisco Ireland country manager Michael Galvin concedes: “a grey area between where the (Cisco and Linksys) products fit”.
At the launch of those products, Chambers claimed Cisco was “the network leader in the SMB market” and was “uniquely positioned to deliver the total communications experience” the SMBs require. While Galvin says there is an “aspiration” to promote both Linksys and Cisco brands in Ireland, the clear gap that previously existed between the two names is definitely closing. According to Galvin, Linksys is primarily aimed at the home, home office and the ‘S’ in SMB, while Cisco covers the rest. But as Cisco promotes its brand more intensely in the SMB market, the danger is the “grey area” will inevitably broaden.
Cisco’s decision to invest $2 billion in the SMB market three years ago signalled its ambition to break out of the enterprise space and widen its customer reach. Products such as the Cisco Smart Business Communications System (initially aimed at companies with fewer than 16 employees) and the Cisco Unified Communications 500 device are results of that investment.
Cisco’s SMB business in Ireland is worth just under $17 million, according to Galvin, and the bulk of its sales come from the Cisco product range rather than Linksys. He believes one of the potential strengths of the Cisco brand in the SMB market is its association with the wider business environment. “SMBs don’t think of themselves as SMBs; they think of themselves as a business,” Galvin argues. “They think of themselves as a business in a particular sector; they don’t classify themselves in a market called SMB. All businesses want the same thing – secure access to information at any time.”
Cisco’s approach is “to try to develop a value proposition” but it is also keen to ensure its products are cost-effective, simple, relevant to the industry the customer is operating in, and secure. Customers need to start with a business issue and then decide on the technology, Galvin stresses. Cisco provides a discovery guide based on the industry the customer is focused on and an assessment of where they are.
The next step is to assess how the technology is applied to business issues – the “value assessment”, as Cisco describes it. The company also provides ‘solution guides’ for helping in technology deployment. According to Galvin, the whole package, along with bundled service offerings and a direct finance option from Cisco, makes it easier to buy as well. With the Smart Business Communications System, for example, Cisco offers a finance solution at zero per cent.
Because SMBs don’t think of themselves as a group, they are more interested in products that have the same basic level of functionality as those sold to enterprises. They’re looking at convergence and security – issues which, Galvin says, are “ticking the boxes with people because they meet the business criteria. Most SMBs don’t know what VoIP is and probably don’t really care”.
There is one part of the Linksys product range that Galvin singles out. He claims that Linksys One will “change the opportunity for SMBs” because it is designed to be a hosted service as opposed to a product a customer will buy. He cites 3PlusPlay, an Irish company which has used Linksys One’s hosting capabilities to produce “a very cost-effective way of delivering converged systems to SMBs”. Because it is provided as a hosted service, small businesses can “avoid some of the cost and compleixty of having to integrate technology”.
On its Web site, 3PlusPlay claims it can deliver a telephone system, multimedia contact centre, multipoint video conferencing bridge and a multipoint video surveillance system or video streaming system on a hosted basis down a broadband connection. Only the end points of the system, such as phones or video cameras, are in the customer’s premises.
“We deliver all of the functionality via a hosted and managed model where no additional hardware is necessary on the customer end,” it states. The company says it can also network multi-site offices and offsite staff into a transparent and converged network. Galvin believes there is real potential in Linksys One. “We see software as a service and product as a service as a real differentiator in the telecoms space,” he argues.
It will be interesting to see whether this offering will still be called Linksys One in a year’s time or whether it will be a service offered by a Cisco small business division.
– Billy MacInnes