Cisco CEO: Internet Revolution arrives
By Jeffry Bartash, CBS MarketWatch
Last Update: 3:18 PM ET Jan 27, 1999
WASHINGTON (CBS.MW) -- The chief of the biggest U.S. data networker outlined a broad vision Wednesday under which exploding Internet use will reshape the lives of individuals, companies and countries much like the Industrial Revolution did 200 years ago.
Likening the vast change underway to the "inside of a tornado," John Chambers, chief executive of Cisco Systems (CSCO), predicted that the Internet Revolution will encompass every facet of life.
For businesses, the key to surviving and thriving, he said, is speed.
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"This is an era in which the fast will beat the slow," Chambers told an overflow audience during the Comnet trade show in Washington, DC. "You miss a key move in six months, you may never catch your competitor who took advantage of that."
At Cisco, for example, a majority of orders for its equipment are now placed over the Internet, Chambers said. That gives buyers and sellers greater control over costs and inventory. Cisco has such fast access to information that the company could close its books the day after a quarter ends, he said.
To the swift, glory
Chambers pointed to the successes of Amazon.com, the web-based bookseller, and E-Trade, the online stock trading service, as examples of companies that took early advantage of the Internet and caught much larger competitors napping.
Take Amazon.com (AMZN). In just three years, the first-of-its-kind bookseller went from zero market capitalization to nearly $21 billion, vastly outpacing the $2.5 billion market cap of leading traditional book store operator Barnes & Noble (BKS), whose sales still dwarf those of Amazon. Investors are betting that Amazon, which owns no stores and thus has far lower costs, will be the bookseller of the future.
Similarly, e-trade's (EGRP) overnight success has forced traditional brokers to move to provide their own online trading.
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Indeed, Chambers asserted, the cheapness and ubiquity of the Internet has swept away many obstacles hampering potential competitors from entering mature industries dominated by large firms.
"Size and financial strength isn't nearly the barrier it was during the Industrial Revolution," he said.
Wave of future
The one big hurdle to an Internet-dominated world, the Cisco chief said, is the low speeds of the bulk existing telecom networks, but that's rapidly changing. All the major phone carriers, and many of the largest cable operators, are switching to Internet-based networks and away from the century-old circuit-based systems, Chambers said.
"Circuits are dead," he said. Any company that continues installing the older technology is putting itself at a "major price disadvantage in the future."
Indeed, AT&T (T) CEO C. Michael Armstrong, a day before Chambers, told an audience at Comnet that the world's oldest phone company was moving swiftly to convert to packet-based Internet Protocol and that it will compose a plurality of its network by 2004. "We are moving from a circuit-switched world to a packet world," he said.
With high-speed access to the home and office well on its way, the home and office themselves are likely to be hooked up internally to Internet networks. Every electronic device will have a smart chip and communicate with other devices, Chamber predicted.
Global reach
More broadly, the Internet will turn commerce into a truly global activity and level the playing field for all countries, Chambers said. The Internet will give everyone access to the same prices and the same ideas, eroding the power of established businesses to maintain artificially high prices or authoritarian governments to maintain control over their populations.
As a result, it's important that governments move to promote technology and improve education. Singapore, Chambers said, has created the best education system in the world and is wiring homes and businesses to the networks of the future. Other countries better get moving.
"This is going to occur everywhere in the world," he said. "You've got to move at an Internet's pace."
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