Who's really in charge at Cisco?

Key innovators continue to report to Chambers, not new CEO Robbins

Chuck Robbins is officially the chief executive officer of Cisco, but that doesn’t mean he’s totally in charge.

Several sources inside and outside of Cisco say the company’s star engineers and key innovators – Mario Mazzola, Prem Jain and Luca Cafiero – continue to report to former CEO John Chambers, who became the executive chairman of Cisco July 26 when Robbins succeeded him. The three, along with marketer Soni Jiandani, founded three companies funded and then acquired by Cisco under its “spin-in” model to insert it into new or disruptive markets, like storage area networking, data center switching and SDNs.

+MORE ON NETWORK WORLD: Cisco unapologetic on spin-in model+

That “MPLS,” as they are informally referred to, still report to Chambers and not Robbins signals that Cisco is not willing to part with the status quo when it comes to product development vital for the company’s growth and account retention. The spin-in model of innovation has been highly successful for Cisco, reaping the company billions in sales and profits, and helping to stave off incursions into its incumbency from traditional and start-up rivals.

Indeed, MPLS and the Insieme Networks business unit they most recently founded were exempt from the sweeping engineering reorganization spearheaded by Executive Vice President and Chief Development Officer Pankaj Patel last fall.

But it also indicates that Cisco may insulate certain operations from Robbins for a defined or indefinite period until the board of directors is fully confident in his ability to lead the entire company.

“Perhaps it’s just a temporary arrangement as they prepare to retire or create another spin-in, but it certainly creates ambiguities about the (CEO) transition,” says one source familiar with the arrangement. “I wasn’t surprised that they didn’t want to get swept into the mainstream engineering and marketing organizations, but not reporting to the CEO raises questions about who really decides about innovation investments.”

Cisco said it would not comment on its organizational structure when asked about the reporting arrangement for MPLS. It chose instead to crow about the progress of its Nexus 9000 and Application Centric Infrastructure (ACI) product lines, the most recent developments from MPLS.

“The ACI portfolio is doing great,” a Cisco spokesperson stated in an e-mail. “It’s one of the fastest ramping technologies in Cisco’s history. We’re proud of what that team has already achieved, and it’s only the beginning. Last quarter, ACI revenues grew 53% quarter-over-quarter and 100% year-over-year.

“We have no comment to make about our internal organizational structures.”

Chambers is reportedly now an evangelist for security at Cisco so if MPLS are working on another spin-in under Chambers, it could have a security focus.

Meanwhile, the success of the Nexus 9000 and ACI is coming at the expense of the older Nexus 7000/7700 line. In its just completed fourth quarter, switching grew 2% with 200%-plus growth in the Nexus 9000 and ACI, CEO Chuck Robbins said.

Revenue across the Nexus 9000, 3000 and ACI product lines was $438 million. Cisco says it added 1,400 new Nexus 9000 customers, bringing its total to over 4,100 since the product was introduced in November, 2013. Nine hundred of those customers are also ACI customers with the Application Policy Infrastructure Controller (APIC) product, up from just under 600 in Q3.

Twenty-six of Cisco’s largest 28 enterprise customers are now Nexus 9000 customers, with 30% of them new in the fourth quarter, Robbins said. Many of them, undoubtedly, are transitioning from the Nexus 7000/7700.

Cisco declined to break out Nexus 7000/7700 growth figures for the quarter, but Robbins said in the Q4 earnings call that the transition from the 7000 line to the 9000 is offsetting some of the expected growth in the Nexus 3000 and 9000 lines.

“We're very happy with the transition going on in the data center switching space,” Robbins said during the earnings call. “As we look at customers that are migrating to 10G, 40G, 100G … it's just being offset by the transition from the Nexus 7000 to these new platforms. And we think in the next few quarters we'll see that inflection point.”

Sources say Cisco may be de-investing in the Nexus 7000/7700 product line, cutting monies for new hardware programs and preparing it for support and maintenance mode. Indeed, 400 associated with the Nexus 7000 program are believed to be headed for the exits.

Cisco said the product line is still an important one in its data switching portfolio.

“We will continue to invest and develop the platform, both for the installed base and new deployments,” the spokesperson stated in an e-mail. “As recently as this summer, for example, we announced innovations that make it easier to integrate the Nexus 7000 into Cisco’s overall SDN strategy.”

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