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Cisco to stay out of the services business

Cisco to stay out of the services business

The company expects services under its Smart+Connected Communities program to be delivered by partners

Cisco Systems plans to collaborate rather than compete with IT services providers as it targets new market opportunities such as virtual education and health for communities, a senior company executive said on Wednesday.

"We are not greedy for services business, such as systems integration and operations, and are positioning ourselves as the suppliers of technology building blocks and platforms," Wim Elfrink, Cisco's executive vice president for emerging solutions and its chief globalization officer, told reporters in Bangalore on Wednesday.

Cisco has typically worked with partners and channels, and it is unlikely that the company will look at offering the services unless it is to help create a market, said Geoff Johnson, research vice president at Gartner. "Working through partners and channels is religion for Cisco," Johnson said.

Cisco unveiled in 2009 its blueprint for "Smart+Connected Communities," a strategy that uses the network as the platform for delivering a variety of services to communities in areas such as public safety and security, transportation, buildings, energy, health care and education.

Each of these market segments has the potential of generating more than US$1 billion in revenue, John Chambers, Cisco's chairman and chief executive officer, told reporters in Bangalore in 2009, while unveiling a blueprint for "intelligent urbanization" using the network as a utility.

About 600,000 villages in India, for example, do not have teachers, Elfrink said. There is also a teacher shortage in developed markets like the U.S. as educators retire, he said. Both situations present an opportunity for virtual education projects, he added.

Cisco gets about 80 percent of its revenue from products, with the balance from technical services and consulting around its products, Elfrink said.

About 80 percent of the company's products and services are delivered through partners, a model the company plans to continue, Elfrink added.

The company expects the market for its communities program to be addressed by "conglomerates" consisting of Cisco, which would provide the basic network infrastructure, along with systems integrators, operators of the services, and providers of other components and technologies, he said. The same conglomerates would address opportunities in other cities, he added.

Cisco said on Tuesday that it had signed a memorandum of understanding with India's Mahindra & Mahindra to collaborate on go-to-market strategies in areas that include smart cities, virtual dealerships, sports and entertainment and cloud services. Two Indian outsourcers, Tech Mahindra and Satyam Computer Services, are part of the Mahindra Group. Cisco already has services partnerships with other Indian outsourcers.

Most of the deployments that Cisco is currently working on in various cities tend to favor a cloud model for the delivery of the services, Elfrink said.

Cisco has a strong brand in enterprise and government markets, and this will help in its Smart+Connected Communities business, Johnson said. There could however be some uncertainties and delays in the growth of the business as community projects can sometimes get weighed down by issues related to social policy and political issues, he said.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com


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