Cisco and Microsoft try to smooth competition debate

The competition between Cisco Systems Inc. and Microsoft Corp. for network market dominance seems to be heating up, but the companies also co-operate more than ever, according to their chief executives.In a move designed to explain away Cisco's and Microsoft's evermore at-odds relationship, Cisco CEO John Chambers and Microsoft CEO Steve Ballmer discussed the situation in New York this morning, appearing by webcast for people who couldn't attend the presentation in person.It was the first time the two executives had met in a roundtable discussion, even though the firms seem to be on a kind of collision course: both want to dominate the unified communications (UC) arena, which includes technologies such as instant messaging, email and mobile applications.Cisco's UC push comes from its roots as a network equipment vendor. Microsoft's interest derives from its Exchange and Office Communications servers, as well as its UC app Office Communicator - and the fact that its popular Office computer programs are becoming the user-interface of choice for people accessing all sorts of UC functions. According to Ballmer and Chambers, Microsoft and Cisco certainly do compete in the UC sector. However, the firms also collaborate. Specifically, Microsoft and Cisco have been working together to ensure interoperability between products in the IT security, architecture and management realms, as well as wireless, home entertainment and SMB arenas."Our customers love the fact that we compete," Ballmer said, noting that end-user organizations witness lower prices and quick product innovation thanks to competition. But if a customer wants to use a mix of Cisco and Microsoft to build a UC infrastructure, the products must work together. "We have to get that level of sophistication of interoperability, otherwise our customers aren't going to be very happy," Ballmer said.Management challengesThe relationship is difficult to manage. According to Ballmer, it's hard enough for a company Microsoft's size (80,000 employees) to break down the barriers between individual departments. Imagine how difficult it is to work with an equally large partner.To address that, the firms instituted executive overseers ensuring the collaboration runs smoothly. Charlie Giancarlo, Cisco's chief development officer, and Bob Muglia, Microsoft's senior VP, server and tools, are the relationship's governors.Yes, there are cultural differences between the businesses. "But we're not trying to merge," Ballmer noted. "We're not trying to have a cultural fit. We're trying to serve our customers."Many mainstream communications technology vendors, including Avaya Inc., Mitel Networks Corp. and Nortel Networks, have been touting their relationships with Microsoft. The companies are starting to sell their communications equipment as software that can interoperate with Microsoft's desktop applications.Cisco has also trumpeted its Microsoft ties; nonetheless, the two firms seemed destined to compete fiercely in the emerging UC space (see "Vendors Vie for Unified Communications Dominance," Telemanagement, December 1, 2006).As ever - if perhaps more clearly - Ballmer and Chambers said their companies would balance competition and co-operation."The market is very big," Chambers said. "We're both going to make a lot of money here."Ballmer said there's a difference between the Microsoft-Cisco relationship and the Microsoft-Nortel deal under which those companies jointly develop UC products. With Nortel, Microsoft is partnering to build specific offerings. With Cisco, Microsoft is partnering to make sure different products interoperate.According to Chambers, Cisco and Microsoft work together to answer a particular customer concern: technology ease-of-use. It's good that clients are focused on that, he said. A few years ago, corporate executives viewed IT as a necessary cost; now they see technology as a productivity enhancement. Ease-of-use is an important aspect of productivity.Asked about the rise of Google Inc. - the search-engine provider has developed applications to compete with Microsoft and seems poised to become a communications service provider - Ballmer said his company is "not choosing to be a telecommunications company."Chambers said Google is neither friend nor foe. "I love anybody that loads networks."Asked about new technology-delivery concepts such as Web 2.0 and Software as a Service (SaaS), Ballmer said Microsoft aims to use the service approach to target SMBs, which purchase applications sporadically. "It changes our business model; it changes our technology model - and it's fantastic for us, if we do it right."

Cisco and Microsoft try to smooth competition debate

News | 08/20/2007 5:37 pm EDT

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