Software gave Cisco edge over rivals--and partners
By Lisa DiCarlo, PC Week Online
February 22, 1999 9:00 AM ET
Paul Severino remembers all too well what it's like to compete with Cisco Systems Inc.
Severino co-founded Wellfleet Communications Inc., which battled Cisco for router supremacy in the late 1980s and early 1990s. The main difference between Cisco and Wellfleet, he recalls, was the software Cisco added to the routing equation.
"[Cisco] came up fast [and] used IGRP [Interior Gateway Routing Protocol] as a lever to keep people attached to them," said Severino, currently CEO of NetCentric Corp., in Bedford, Mass.
Cisco beat out Wellfleet for contracts with all seven Regional Bell Operating Companies in the late 1980s because, he said, "Wellfleet wasn't capable of competing there--we didn't have the software."
Cisco also gained an early edge by partnering with hub vendors. In the late 1980s, when the San Jose, Calif., company had trouble getting into large corporate accounts, it hitched its wagon to major hub vendors, which were riding the crest of a booming market.
Those vendors, including SynOptics Communications Inc., Cabletron Systems Inc. and Chipcom Corp., needed routers to meet the overwhelming demand for better corporate networks, a need driven by the client/server phenomenon. So they brought Cisco along to help them close deals. In return, Cisco licensed its Internetwork Operating System to the hub vendors, which ensured compatibility.
The router/hub combination succeeded in boosting performance by segmenting the LAN. But what hub vendors failed to realize was that routers would become more strategic than hubs and that Cisco had begun locking in customers through its software, which by then was managing routers and hubs.
Because hubs were all based on the standard Ethernet interface, it was difficult to distinguish a Cabletron box from a Chipcom box. Cisco's software, on the other hand, provided unique services, a fact that Cisco salespeople eagerly pointed out. Soon, customers were replacing their hubs with Cisco routers.
The bottom fell out of the hub market shortly thereafter, and the struggling hub vendors were sent scrambling into the arms of Cisco's competitors.
In 1995, 3Com Corp. acquired Chipcom. The following year, SynOptics merged with Wellfleet, which had fallen to a distant No. 2 to Cisco in the router market. The two formed Bay Networks Inc., which Nortel Networks acquired last year. Cabletron, although still independent, is struggling financially and is rumored to be for sale.
Cisco didn't always have the Midas touch when it came to strategic vision. Severino laughed when recalling one major deal that never bore fruit.
"Cisco and SynOptics wanted to build this thing called a 'rub'--a router card that plugged into a hub," Severino said.
"They never really pulled it off." |
