Cisco's vision of the future

EDITOR'S NOTE: This is the first part of a two-part story on Cisco CEO John Chambers' views on the future of technology.

A historic new prosperity, driven by developing countries and new technology, is coming, but whether it happens here or instead finds its home in China, India or perhaps Brazil remains a question, the CEO of Cisco Systems Inc. told those attending Affirm’s IT Visionary Series forum Oct. 19.

“I think we’re on the front edge of a 3...to 5 percent productivity gain over the next 10 years,” Cisco CEO and chairman of the board John Chambers said. “That’s only been done once before — between 1997 and 2004. Cisco called it then, in 1997, and you’re about to see it again.”

Chambers made similar remarks Oct. 19 at the Northern Virginia Technology Council’s fall banquet.

The Internet and Web technologies drove that economic spurt. The upcoming rosy economic era will be driven primarily by technologies for collaboration and video, but it will be underpinned by clouds and the virtualization of data centers, he said.

Cisco has invested heavily in video with its Telepresence enterprise videoconferencing solution and umi, its consumer version launched in June. He likened the effect of such tools to that of the Industrial Revolution. Its basic concept — of bringing work to workers — completely transformed the concept of work and drove the standard of living and productivity in this country and around the world for half a century, he said. “You’re about to see Generation 2 of the Industrial Revolution. It’s the same concept: You bring the work to the employees. But if you bring it virtually to them, they can be anywhere in the world working on the project.”

The concept is working at Cisco, he said. Fourteen months ago, after posting a 46 percent drop in quarterly profit, such a plan seemed unlikely. In 2007, Chambers began remaking the governing structure of the company as an amorphous cluster of committees. In the next two years, 20 percent of the company’s senior executives left, the Wall Street Journal reported. The controversial move was widely condemned and called “nutbag,” “insane” and “awful.”

However, said Scott Anthony, managing director of Innosight Ventures and author of “The Silver Lining: An Innovation Playbook for Uncertain Times,” writing for the Harvard Review, if Cisco learns from the mistakes inevitably made in crafting such an about-face “and adjusts accordingly, it could turn the committee approach into a game-changing management innovation.”

A year later, 70 percent of Cisco’s decisions are made collaboratively; its top 12 product lines are all new in the past 18 months; and the company posted quarterly net income of $1.9 billion, up 79 percent over the fourth quarter of 2009.

Imported from China, India, Russia

After the May 2008 earthquake in Sichuan left 75,000 people dead, nearly 5 million homeless and 400,000 seriously injured, Cisco sent $1 million in aid, then committed $45 million to a partnership with the Chinese government to build Connecting Sichuan, “replicable, scalable and sustainable models of 21st century health care and education,” based on fast broadband and video, Chambers said.

The company has brought those new models home and replicated them in California with a telemedicine pilot with Molina Healthcare, two San Diego health centers and state government to bring health care to underserved and underinsured areas in the state.

Home means closer than the San Jose, Calif.-based company’s home state, however. “You know how we do health care at Cisco?” Chambers asked. “Exactly how they do it in China.”

In India, he said, leaders asked him if Cisco could deliver $1 per doctor visit health care to every person in the country. “At first I hesitated, because it’s an unbelievable concept,” he said. “India has 1.4 billion people. But once you look past the scale, once you put in a national fast broadband, you can do that.”

Cisco is bringing its technology to other nations, but what is “happening in emerging countries is that not as much of the high tech is coming from the United States, but from Western Europe and other areas,” he said. “They’re skipping a generation” and using IT to leapfrog U.S. efforts.

“In Russia specifically, President [Dmitry] Medvedev realizes that his country can’t [remain dependent on] one industry: energy,” Chambers said. Medvedev is looking at how IT can help diversify, create jobs and develop other industries, “and Cisco is taking the lead in helping them create a Silicon Valley outside of Moscow.”

Over the next few years, the company has committed to investing billions of dollars in such efforts globally, including $1 billion in Russia, $16 billion in China, $17 billion in India and further investments in Mexico and Brazil.

The threat of U.S. failure to take the lead in the coming high-tech revolution is real and avoidable, Chambers said, with changes to how we provide education and tax corporations. But the devil is in the details.

NEXT: Tax reform will spur innovation