Cisco's 3-Pronged SMB Strategy

By Colin C. Haley

June 11, 2003

The network equipment maker boosts efforts to woo small and medium businesses (SMB) customers, believing they will start spending on IT before enterprises.

Cisco is boosting efforts to woo small and medium businesses (SMB) customers, believing they will start spending on technology before enterprises, CEO John Chambers said during a briefing with reporters and analysts yesterday.

"Technology levels playing field," said Chambers, explaining why customers in the market are investing faster than their larger counterparts.

The San Jose, Calif., maker of networking equipment has a three-pronged strategy for winning SMB business, which generates 20 percent to 30 percent of its revenue. Overall, the market for SMB networking gear is about $6.6 billion, Cisco estimates. The company owns about 42 percent of the market, it said.

The first is marketing/advertising. Print ads targeting SMBs (part of a larger $150 million campaign) begin running this week in a nine publications including The Wall Street Journal, Fortune Small Business and Inc., Cisco spokesman Ray Hadulco told internetnews.com.

In addition, Cisco is trumpeting its "Growing with Technology" awards program, a competition that recognizes creative ways in which SMBs use netwokring technology and the Intenet to boost business. Winners receive Cisco networking gear or services. The second is acquisitions, the company's traditional method for making inroads in new markets. Cisco recently plunked down $500 million for Wi-Fi gear maker Linksys. The company could have matched Linksys' technology in-house but worried about falling behind.

And though it's not making nearly the number of buys as when its stock was soaring in 1999 and 2000, it still has plenty of cash and a market capitalization of $122 billion to make buys like Linksys when it feels the need.

Finally there are partnerships. Cisco is has inked a number of deals with hardware and software firms, resellers and content players like Yahoo, to broaden its offerings.

"It's a very large marketplace, one you have to move through partners," Chambers said. "(Customers are asking), 'How do I change the business process? What are other small businesses doing? How do you combine that into a total systems approach?"

Targeting SMBs isn't just for a short-term sales boost. Chambers said many SMBs were planning ahead and buying network infrastructure that will support voice, data and video traffic, even if they don't need the capability now.

When Chambers started at Cisco, it was a medium business. The point being today's SMBs are tomorrow's enterprises. And Chambers believes that introducing a company to Cisco equipment in its early stages will pay off for years to come.



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