NetWiz,
Welcome to the "Dilbert principal"; What's that you ask? It's the gap between the marketing glossy and the engineering reality. In a world where time-to-market is the difference between winning and losing, something has to give.
This phenomenon is not unique to Cabletron. The entire sector, and all of high tech for that matter, is equally guilty. It's what causes Gate's Microsoft to be the butt of so many jokes. Although it may not be much consolation in situations as you describe, Cabletron's service and support is second to none, according to customer satisfaction surveys.
Chamber's CSCO is experiencing it as we speak. Check out the following November 21, 1997 article zdnet.com regarding "a raft of new products from Cisco". Sam Alunni, an analyst with Sterling Research was quoted then as saying, "It sounds to me like they (Cisco) are ahead of the game." It goes on to say that Sterling's Alunni believes Chambers has the right focus on the competitive landscape. "[Chambers] looks at his company as a collection of product portfolios, and he wants to compete with the best product in each category," Alunni said.
Yet Alunni then comes out recently and BLASTS Cisco for not delivering as promised. He goes on the explain in detail the marketing tactics Cisco has employed to stall their customer base until the gap is bridged and the functionality as promised is delivered. Read on:
imho,
cm!
MARKET VIEW
Sterling Research
Technology Assessment for the User Community
Cisco Systems: Tactical Marketing for Gigabit Ethernet
The Big Question
By now it should be clear that there's something wrong at Cisco. Not in the company overall, but at least in regard to their Gigabit Ethernet product line. Even the trade press has been harsh with the company on this point, characterizing their latest product announcement as disappointing.
It's not as if Gigabit Ethernet could have taken Cisco or anyone by surprise. For more than a year now, the trade press has been making a sensation of the technology. And in this case at least the press seems to have gotten it right. Gigabit Ethernet solves a real problem at a reasonable price with an upgrade path slick with least resistance.
More importantly, Gigabit Ethernet was validated by more than just trade press talk. As the saying goes, many "put their money where their mouths are". As a result, more than ten companies jumped into this business as far back as two years ago. All were small, and nearly all were started with venture capital funding. Eventually, even the top tier networking suppliers announced their Gigabit Ethernet plans.
So Gigabit Ethernet could not have been a surprise to Cisco or anyone else for that matter. All of this then raises the question: Why would Cisco given the advanced state of the Gigabit Ethernet market release a set of products that it must have known would land with a thud?
The indirect answer, of course, is that it wasn't supposed to have happened this way. In fact, the evidence suggests that Cisco's thinking was to do just the opposite in effect, to put in place a strategy that would by this time make the company a leader in Gigabit Ethernet products. But instead of moving smoothly forward, Cisco's strategy ran into some unexpected bumps. As a result, Cisco has spent the past nine months jerkin through a series of tactical marketing moves. And the end is not in sight.
Granted, only the deepest of "deep throat" insiders will ever know the full story of Gigabit Ethernet at Cisco. But outsiders can at least look over the past months and detect their pattern of tactical marketing initiatives. Sadly, the story begins with the dashed hopes of an acquisition and ends for now with the latest and poorly received product announcement.
The High Water Mark Phase
Clearly, the "high water mark" phase of Cisco's Gigabit Ethernet strategy was the acquisition of Granite Systems. Completed over eighteen months ago and consummated for $200M Cisco acquired Granite Systems for its Gigabit Ethernet ASICs. These ASICs were to serve as the foundation for Cisco's future Gigabit Ethernet product line. And this is the strategy that didn't work.
Even at the time of acquisition, many felt that Cisco had paid a prince's sum for little more than incomplete ASIC designs. Shortly thereafter, rumors began to spread that there were in fact problems with the ASICs, and that these problems were interfering with product development.
Regardless of rumors about the ASICs, however, one fact is clear. When the venture capital companies began delivering Gigabit Ethernet products in mid-1997, Cisco was nowhere to be found. In short, the investment in Granite did not get Cisco a ticket to Gigabit Ethernet's coming-out party.
The Duck and Muddle Phase
With this failure on its hands, Cisco retreated from strategy and launched the first of its tactical marketing initiatives the "duck and muddle" phase. This initiative was brief, short, and to the point. It was designed to deflect the fact that by fourth quarter of 1997 Cisco still did not have any Gigabit Ethernet products out the door.
By the fourth quarter of 1997, the Gigabit Ethernet market had reached a critical mass. There were enough vendors and enough confidence in the technology that an interoperability test was staged at a major trade show. Obviously, Cisco had to duck this public demonstration. But this alone was not sufficient. Cisco still had to insinuate its leadership in Gigabit Ethernet technology.
To this end, it pre-empted the trade show event with a bevy of high-quality, tear out, glossy advertisements that touted its Gigabit Ethernet strategy. With these advertisements, it attempted presumably to muddle the market about its actual position with regard to product availability. In effect, it tried to dangle the conclusion that it was at least as far along as its competitors, when in fact, it didn't have any product at all.
The Fine Wine Phase
Cisco, however, still needed a longer-term position on Gigabit Ethernet. It needed marketing cover for the fact that its products would not be available for some time to come. This lead to the "fine wine" phase in its tactical marketing a description taken from the wine merchant who claimed "they would sell no wine before its time."
With this second initiative, Cisco proclaimed that it would not release any Gigabit Ethernet products until the Gigabit Ethernet standard was ratified. This position conveniently ignored a simple industry fact, namely, that product can be confidently built on pre-ratified standards. And, more importantly, that the Gigabit Ethernet specification had reached this stage.
In large part, the market rejected Cisco's position. It did not accept the implication that there was danger in buying Gigabit Ethernet products from Cisco's more nimble competitors, or that there was any virtue in waiting for such products from Cisco.
The Spike The Job Phase
With market pressure building, Cisco entered its latest marketing phase the "spike the job" phase. For the unfamiliar, "spike the job" is a construction industry term. It refers to the practice of doing work on a job no matter how quick or shoddy in order to convince the client that the work is in progress. It's objective is simple,namely, to keep the client from finding another contractor to start the work. Once a job is successfully "spiked", the first contractor can come back at his leisure and complete the project on his schedule.
Cisco's recent product announcement is an example of this technique. Clearly, the products announced were simply not competitive. For example, the chassis was universally rated as being underpowered for real Gigabit Ethernet use. In addition, the price was judged to be far too high when compared to offerings from some of its competitors.
But-then again-the tactical marketing objective was not to release the best Gigabit Ethernet products on the market. The objective was to spike down an installed based that was getting increasingly anxious about Cisco's long delay in delivering Gigabit Ethernet products.
This position, of course, provides the answer to the earlier question: Why would Cisco announce products that it knew would land with a thud? The answer is quite simple. At this stage of the market, a resounding thud is better than the blaring silence that had developed around the availability of Cisco's Gigabit Ethernet products.
Cisco's Next Steps
Clearly, Cisco has to get into the Gigabit Ethernet market and fast. Some argue that Cisco will once again go back to the acquisition well and buy one of the remaining startups. The critical question in this case, however, is once again related to time. How quickly could it get the acquired product line out the door? Most likely, the acquisition route would not give the installed base any product before the fourth quarter of 1998.
Then there's Cisco's "Milan" project its effort to scale down the 12000 series router for enterprise class use. Cisco has promised that it will demonstrate Gigabit Ethernet products at the next major trade show. It remains to be seen if these products will be based on the Milan project. If they are, the industry will look very closely at the first customer ship date for these products. If this date falls into the third or fourth quarter of 1998, two conclusions will likely be drawn. First, Milan is certainly Cisco's strategic Gigabit Ethernet platform. The second is that for the time being Milan will play a role in Cisco's tactical marketing effort to spike down the installed base until some time later in the year.
In the meantime, the clock continues to tick. And as it does, opportunities ripen for those who have legitimate Gigabit Ethernet products to sell. The door is now open for the likes of Cabletron, Lucent, Bay, and 3Com to romance and win the hearts of those interested in this technology.
Samuel M. Alunni
1998 Sterling Research
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Sterling, MA 01564-2005 USA
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