Cisco’s new structure key to success, Chambers says

Cisco Systems' whirlwind of activity over the past few months wouldn't have been possible without the company's spread-out management structure, in which about 650 people are involved in cross-functional 'councils' and 'boards' that search out potentially profitable new markets, Chairman and CEO John Chambers told a financial analyst conference.

“We are the most aggressive this last year that we have ever been,” Chambers said. He ticked off several big moves the company made just between Oct. 1 and mid-November, including four acquisitions around the world and a partnership with EMC and VMware. The deals included the major acquisitions of wireless IP infrastructure vendor Starent Networks and video powerhouse Tandberg. Cisco couldn't have done all that without a new management structure introduced in the past few years, which he said ended the classic “command and control” organization in which one or a few top executives drive all new initiatives.

The management system has raised some skepticism since it started to take shape at a large scale in 2007. Chambers has defended it as necessary to enter 30 new markets adjacent to Cisco's core networking business, a task the company is carrying out now and that Chambers wants to expand. Cisco can now get a new initiative off the ground in less than 60 days thanks to these cross-functional teams taking the initiative, he said.

Chambers struck an optimistic note as he kicked off the annual conference at Cisco's San Jose headquarters, calling the company's fiscal first quarter ended Oct. 24 “phase one” of an economic recovery. That recovery is “still very fragile,” he added, but said he is more comfortable than ever with his standing forecast of year-over-year revenue growth between 12% and 17% over the long term.

Chambers identified video, collaboration and virtualization as the most significant areas. “Video and collaboration are the two major moves we're going to make this year,” Chambers said.

Looking farther forward, Chambers pointed to the electrical transmission industry as an area that might benefit from Cisco's brand of experience. That industry has 360 protocols and virtually no security — much like the early Internet, where Cisco first made its fortune as the pioneer of routing, he said.

Chambers downplayed the growing field of competitors Cisco is facing as it expands, especially with its UCS (Unified Computing System) architecture that includes its first servers, introduced earlier this year.

“I know you want me to talk about HP, or you want me to talk about Huawei,” Chambers said. “We don't react to what a competitor does. We react to market transitions.”

Reacting to them quickly will have a big payoff for Cisco, he said.