Insight Community

First, let's acknowledge the two important points:

1) Social networking within the enterprise is nascent

2) Cisco throws off $400-$600mm in free cash flow PER MONTH

If one combines the "social software" plays Cisco made recently, they are in the truest sense a drop in the proverbial bucket. A far more interesting question is what Cisco has planned for Webex; which is arguably one of the most successful SaaS vendors in the world. The Webex deal is the 2nd largest acquisition Cisco has made this decade [2nd to Scientific Atlanta].

Getting back to the specific question at hand; Cisco has aggressively moved itself closer to the end user for years. Whether it was branching further out of the core of the network to buying Linksys so they could get a place within the home and small offices, to the purchase of Scientific Atlanta which puts Cisco in tens of millions of living rooms. John Chambers and his team are SMART people. Their track record is without equal and clearly they realize the POTENTIAL power of social networking.

Let's not confuse these purchases as being some grand plan for Cisco. It's standard fare for Cisco to make small bets on areas of potential interest. These moves are no more, or less significant than Cisco's decision to open up a venture capital group in Russia this week. They are call options on future opportunities.

 

I think Cisco is looking at the next generation of corporate networking, and has come to the conclusion that at least part of that future is going to involve social-networking tools. The first generation of corporate networking involved routers and switches and other hardware, but the ubiquity of network access means that part of Cisco's business is likely to slow its growth, and profit margins are likely to decline. In much the same way that IBM moved out of selling hardware and into software and services, I think Cisco sees itself adding value to corporate networks through social tools, and either maintaining or enhancing its existing business and profit margins by doing so.

It's a converging world so it makes sense for Cisco to venture into the common ground, and let's face it social neworks are really anybodys right now. They haven't needed a niche technology background or marketing skills  that are unique to one domain of business to make them work. I think Cisco also sense that social networks are going to take over other areas of the communications business. Already young viewers are professing themselves happy to see bebo type content on their TV screens so who knows where Cisco's long term business lies? Social networks are a metaphor that allow them to move into the content world and to cross its blurring boundaries. As content becomes more and more about connectivity that too is a signal for Cisco to get close.

Cisco’s Media Solutions Group (CMSG) was put together with one objective – to provide an infrastructure platform designed to help media-content owners enhance the content and entertainment experience for consumers. Key in this objective are two terms: “infrastructure platform” and “content and entertainment experience.” Gluing them together is the fact that, in this increasingly networked world, “content and entertainment experience” is almost always delivered over a network pipe and Cisco has always been state-of-the-art in providing networking infrastructure.

 

What Cisco was missing in the above puzzle was the software infrastructure to deliver that “content and entertainment experience.” That too has now been solved with the acquisition of Five Across and the platform behind Tribe.net. It obviously makes sense to purchase a proven (and state-of-the-art) software asset rather than to build it from scratch in house (think about the time saved in getting the solution out in the hyper-competitive market).

 

Ning’s Marc Andreessen is quoted as saying "The idea that Cisco is going to be a force in social networking is about as plausible as Ning being a force in optical switches." One couldn’t be more wrong. Cisco’s strategy is definitely not to be a force in social networking. If that was the case, it would have thrown its cash at MySpace. Cisco purchased select assets – read, proprietary software infrastructure – of privately-held Utah Street Networks, Inc., the operator of the social networking site Tribe.net.  The deal does NOT include the Tribe.net site, which will remain completely independent of Cisco.

 

It’s the same with Five Across. Five Across’ Connect Community Builder platform is the leading social networking and online community solution for consumer product and services companies looking to add functionality to an existing online presence. It is a rapid-deploy web publishing platform that enables organizations to promote and monetize user-generated content, including video, photos and audio without compromising overall site performance. What’s more the platform is designed for scalability.

 

Cisco now has both the plug and the socket.

 

Cisco’s Media Solutions Group can now offer businesses a one-stop package (through state-of-the-art hardware and software that seamlessly scale with business requirements) to visibly enhance their web presence through site-specific user communities. Potential customers include media companies, sports leagues, affinity groups, and any organization wishing to increase its interaction with its online constituency.

 

Cisco’s Media Solutions Group is doing exactly what its name says – offering media solutions.

 

Reference:

 

Cisco Media Solutions Group (CMSG)

http://www.cisco.com/web/strategy/media/index.html

 

Five Across

http://www.fiveacross.com/product/index.html

 

Cisco Completes Purchase of Selected Assets of Utah Street Networks, Inc.

http://newsroom.cisco.com/dlls/2007/corp_030507.html?sid=BAC-JsSynd

 

Cisco Announces Agreement to Acquire Five Across

http://newsroom.cisco.com/dlls/2007/corp_020807.html?sid=BAC-JsSynd

Like all maturing industries, Cisco is facing commoditization of traditional network equipment and services. Scrappy startups are providing cheaper and functionally similar solutions on increasingly powerful commodity hardware, chipset and/or open-source OS like Linux. Open-source pure software solutions like Vyatta are maturing quickly, enabling customers to deploy networking services on their own commodity hardware. Cisco is also facing a major competitor Huawei in China, a big growth market for Cisco (and most any company, for that matter).

Cisco recognizes these trends and have probably started projecting very far ahead to see what areas they can extend into to protect their business. Cisco is familiar with commoditization of the network stack, starting from the lower levels (eg. pure routing power) and gradually moving up to higher level services (eg. traffic shaping, xml routing, sophisticated network security). Customers expect more and more services built into a single box at lower and lower prices. Cisco is now pushing do-it-all power/space-efficient chasis-based equipment that comes built with a whole slew of features and future-proofed via firmware upgrades and expansion cards.

Cisco has been able to keep up by aggressive acquiring startups. This strategy has worked well for them not only to quickly add competitive features, but to add to their talent pool. However, Cisco has normally acquired startups with products that are not too much of a mind-stretch with regards to integrating them into existing product lines or into an appliance box you can plug into a network.

FiveAcross and (especially) Tribe.net seem to be as far away from Cisco's space as one can get in terms of synergy and customer needs. Here are some postulations as to why Cisco acquired these two companies:

• Cisco currently sells equipment that connects IT resources (PCs, printers, storage etc.) in a way that is fast, secure and reliable. Social software can be interpreted as connecting people, the source of information and corporate knowledge. If Cisco is good at solving network problems and making things efficient at the IT level, perhaps there are similar characteristics in the social network that Cisco can lend their 'traditional' network expertise. One can certainly imagine some areas that are comparable, like access control, security and 'routing'. Routing of X where X can be internal resource requests, documents, knowledge, customer support requests, customer leads etc. based on attributes of a social network.
  
• Let's assume that Cisco truly believes that 'Social Network' is something they can get into and be good at based on their experience with physical IT networks, then (maybe) the acquisitions look less ludicrous.
• FiveAcross has been focused on selling social software into the enterprise. They started with a simple blogging service aimed at internal enterprise bloggers, and then they built an enterprise IM/messaging system, and now they have a product that can be best described as a CMS system that can be used by everyone in the company (as opposed to traditional CMS systems only used by content editors). So, you can see FiveAcross as enabling and encouraging organizational knowledge sharing and publishing.
• Tribe.net is a consumer internet service that's basically Craigslist with social networking. I don't foresee Cisco trying to get into the consumer internet space anytime soon, or even try to sell software to companies trying to launch a consumer service. However, if Cisco is trying to implement a social network into an organization or enterprise, the Tribe.net platform can be a good candidate. Tribe.net links people based on similar attributes and clusters people into 'tribes' and provides a simple interface to navigate that network. The Tribe.net platform can be the basis on which other services can be built on top of. The publishing functions of Tribe.net is simple and simplistic, as they should be for a consumer site. Maybe that's where FiveAcross fits in, by providing enterprise-level publishing features (backups, access control, moderation etc.).
• Another possibility is that Cisco might be getting these two companies and associated talent at a good fire-sale price and incentivize/lock them in for the next few years to help them figure out the social networking space, if there's anything there. Adding diversity of thinking and experiences into the Cisco thinking can help the company learn and spawn new things, as nebulous as that sounds.
• In any case, making an organization work better by connecting knowledge and resources better can be a value proposition that Cisco can be known for. Their slogan 'Welcome to the human network' hints at that direction. It might be hard for most people to imagine Cisco beyond a hardware networking company, but we have seen companies reinvent and extend themselves in surprising and successful ways.