Cisco's 3-Pronged SMB Strategy

Thursday Jun 12th 2003 by Colin C. Haley
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The network equipment maker is following a three-pronged strategy — advertising and marketing, acquisitions and partnerships — to woo small- and medium-sized business customers, which it believes will start spending on IT equipment before enterprises.

Sales of equipment to small- and medium-sized business already accountsfor 20 percent to 30 percent of Cisco's total revenues and are expected to increase as the recently acquired Wi-Fi giant Linksys is absorbed.

In addition to short-term gains, Cisco CEO John Chambers said a focus on SMBs is also a smart way to establish relationships with tomorrow's enterprises.

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

Overall, the market for networking gear is about $6.6 billion, Cisco estimates. The company owns about 42 percent of the market, it said. The network equipment maker is following a three-pronged strategy — advertising and marketing, acquisitions and partnerships — to reach small- and medium-sized businesses.

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 said.

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 equipment maker Linksys. Cisco could have matched Linksys' technology in-house but worried about falling behind in the market.

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-sized business — about $71 million in sales and and fewer than 100 employees in 1984. The point being that today's SMBs are tomorrow's enterprises. And Chambers believes that introducing a small business to Cisco equipment in its early stages will pay off for years to come.

Adapted from internetnews.com.

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