Little did we know that our interview with John Chambers at Cisco’s "Texas Data Center Day" in April might be our last with him as the company’s CEO. As we learned this week, he’ll hand the reins to Chuck Robbins in July, though will remain the company’s chairman and become its executive chairman as well. He’ll also hand Robbins the challenge of making Cisco the No.1 IT company by forging ahead with its data center, cloud and Internet of Everything initiatives. Chambers discussed those topics and more with IDG Enterprise VP and Chief Content Officer John Gallant.
A while back you talked about your goal of becoming, I think the term you used was the most important IT company at that time. (See “Chambers: Cisco will become the Number One IT company”.)
No.1 is the way I defined it in terms of the importance to the customers. The No.1 IT company isn’t by volume, it’s in relation to business customers because those are my customers, not the consumer. Who do they view as their most important partner? That’s my definition of the No.1 IT company.
That was a big goal. Where do you stand?
It was very similar if I were to draw a parallel to 1993, when we said we’re going to change the way the world works, lives, plays and learns, and the Internet is going to be at the core of that. Everybody said that’s really catchy marketing, John, but you know you’re a router company. And yet, I think you would probably say we did that more than any other company. When we originally said we were going to become the No.1 IT company people said “Yeah, that’s cool but unlikely.”
And if you watch, every transition now is off the network. Almost every move in the market is either a move to align with where Cisco is going or to align to compete against us or to utilize that technology. So to say we were in the right spot at the right time would be an understatement and our strategy around architectures and how you tie this together to get business outcomes is working. I can’t mention the companies, but you’re seeing $100 million complete network upgrades. Not just to upgrade the network, but to position for the Internet of Everything, business transformation, security, etc.
The Internet of Everything took a little bit longer to take off than I thought because we started on this eight years ago and I had to buy people drinks then or even three years ago to get them to talk to me about it. Yet between CES of last year to this year, it went from being a surprise, to being everything this year.
At the World Economic Forum it was one topic a year ago on a panel and this time there were 21 panels on it. You don’t need to explain to [French Prime Minister Manuel] Valls or [German Chancellor Angela] Merkel or [UK Prime Minister David] Cameron or [Indian Prime Minister Narendra] Modi what this means to the future of their country. Very often, if they think of one player that can help them achieve this goal, it’s going to be Cisco. If you watch, just as an example, when companies are thinking about what can you do to align with Cisco and you saw us put our best foot forward in terms of why we think they should do that, it’s really working and the size of our deals are the biggest they’ve ever been. But when countries do that, that’s never occurred before and it gives you an idea how much of the tipping point we are. We’ve got a very good opportunity to achieve the goal. It’s now about execution. Most people would give us pretty good marks in vision and strategy.
You’ve mentioned a 30% leadership change within Cisco over two years. What drove that and what were the outcomes you were trying to get to?
This is why you always listen to your customers and your peers. What I’ve realized is most leaders cannot reinvent themselves at the CEO level or at the operational level. So as you make transformations at the speed that we’re now doing, you have to probably change between 20% and 40% of your leaders and that’s hard for me to say because, as you know, I’m very close to my leaders. For example, in engineering, as painful as it was, we changed 24 out of 92 of our top leaders [over the span of] two months. What I’m now telling my head of HR is I want to get ahead of this and figure out how to develop leaders because it’s expensive to change a leader.
How do you institutionalize that? How are you making those decisions about who can and can’t change?
We have a huge HR development program. We talk about how do we develop them, how do we develop the next-generation leaders, including the next CEO. How do you develop the next-generation operating committee leaders? We literally review it with the committee. We’ve been doing this for 10 years and especially for the last three in detail. It isn’t just about succession planning, it’s how many people are we getting in which areas. It’s how you address some of the issues on diversity. It’s hard work. You’ve got to be willing to put people into roles sometimes before they’re ready and see how they do. In fairness, I’d say probably people did that with me about half a dozen times during my career. I thought I was ready. In hindsight, I didn’t know what I didn’t know, which wasn’t bad. You’ve got to institutionalize that deep in the DNA and as a company, we’ve lost very few of our leaders except when it was time for them to be changed. We also do it in a way that you don’t see an article by you all or on the front page of The Wall Street Journal about leadership changes. We just do it very smoothly and we treat people with respect on it. I lost very few of my top leaders that I wanted to keep.
You say you’re spending a lot of time watching startups. Where do you see Cisco’s next-generation competition coming from?
We called it four and a half years ago. My PR team kicked me when I said it at the Wells Fargo Conference, but I said it’s going to be white label and it’s going to be free software. I said it won’t be IBM or HP servers or Dell. We’ll beat them. I said it’s going to be an architectural play for us to beat them but then it will be an architectural play that allows us to lead against white box or bare metal or free software. That’s starting to occur now, too.
Cisco SVP Soni Jiandani will show you how our total cost of ownership with ACI [Application Centric Infrastructure] is 40% less than a white box solution with free software. That’s before you talk about architectures coming together and that’s before you begin to combine architectures for business outcomes, but you can imagine somebody who does a white box solution who saves 10% on a switch and doesn’t get the business outcome or worse, introduces a security violation that causes them $100 million to a billion dollars of damage. CIOs are not going to do that, especially if they understand it and the CEO understands it.
So that white box is really more of an initiative up at the very largest cloud providers?
No, I think it’s a fair challenge across the board.
This is even enterprise applicable?
Yes, but the difference was if we’d waited and we’d stayed on boxes it would be a tough one. We’ve moved over the last five years -- and I wouldn’t have said this if I didn’t already have the plan in place -- to architectures. So our ability to beat the white box is actually pretty good.