Cisco and Microsoft Go Hand-in-hand Their Separate Ways

In a strange public display combining affection and disaffection, Cisco CEO John Chambers and Microsoft CEO Steve Ballmer appeared jointly before a small crowd of select journalists. Between them, there was no major new revelations to announce, though the companies are attempting to publicly demonstrate that major corporations can decide amicably to collaborate in certain areas and maintain a competitive stance in others.

It's not a bad goal: a strategic peace forged between companies that each maintain their respective interests. It's even better when you realize the companies involved have, in the past, strayed out of bounds with their respective competitive strategies (though complaints against Cisco peaked a decade ago).

But peace agreements in the IT field don't often garner big headlines. "Interoperability" may be the watch word among European regulators, and it may be the key factor IT departments and system administrators demand from corporations such as Microsoft and Cisco. It's such a technical concept at its heart that even technically skilled executives have a clearly difficult time not just defining it, but making it interesting to a general audience.

Couple this with the fact that conference moderator and veteran talk show host Charlie Rose was clearly out of his element, and today's public show of support ended up being a 90-minute fishing expedition for something important to say.

Thirty minutes into the conference, Rose asked Ballmer, "In the last year or two, what's the most important lesson you've learned about where things are going?"

To his credit, Ballmer seized the softball and tried to roll it into something. He acknowledged the larger "footprint" of his company compared to 1980. "You've got to embrace change," he then said. "You can't be afraid of it. And yet there's risks always associated with change. And we've got to seize new market opportunities. We can't just say, 'Our bread and butter is X, let's stick to X."'

Ballmer wished he'd been asked if he thought Microsoft was less agile today than in 1980. With an absence of that question on the table, he actually asked it of himself. He then responded to himself, "I can tell you, we're more agile today - I can tell you that 100% - than we were when I joined Microsoft in 1980 and we were thirty people...We've got better people, we've got more independent paths of action than we ever had before. The thing that's hard isn't to be agile. The thing that's harder today is to get alignment. John, you were talking today about alignment across company boundaries. Heck, I've got a challenge just to keep things aligned inside our company boundaries, because everybody's off being agile."

"'Alignment' means what?" asked Rose, in perhaps his most probing interrogation of the day.

"When you really want two things to work together, because you're customers are going to insist, you can say, 'Is that hard to do with John [at Cisco]?' and I can say, 'Yea, it's hard, but John and I are going to focus on it.' But we have the same challenge internally. We have plenty of cases where people say, 'We want product foo and product bar to work together, and they don't. Come on, Microsoft! Let's get to gettin' on this.' And we've got to continue to work on that and keep the agility high, and that's a challenge."

Rose noted that the "center of gravity," as he puts it, appears to be shifting toward this Internet thing. John Chambers, to the shock of no one, agreed. But then Chambers tried to resume the thread that Ballmer started. "We're all a product of where we came from in the past," he began. He reminded folks he was a former IBM employee. But IBM was too slow to respond to shifts in the center of gravity. "It took them two decades to recover from missing opportunities where they stayed in their traditional market too long," he said, reminding people of the reason why Steve Ballmer was seated on the opposite side of the stage and not John Akers.

"Watching for market transitions and very aggressively leading them, I think, as part of a team and a culture...is very important to the future," Chambers continued. "And if there's one transition that is in the first inning of a new ball game, it's collaboration on Web 2.0."

That collaboration between Cisco and Microsoft actually began ten years ago, Chambers conceded, though it had subsided for several years only to be picked up again three years ago, and then again in 2007. During all that time, the project was referred to as "Web 2.0."

Later, Rose asked Chambers what it is that customers are saying to Cisco about what they want to see from it, in those market areas where it competes directly with Microsoft. One example of such an area would be VoIP desktop communications, which is a field Microsoft is entering just this year, but where Cisco is the entrenched leader.

Customers don't really care about the details, Chambers responded. "Customers just want roadmaps of where the companies are going to go. And they want roadmaps whether you're a small or medium business, or a very large enterprise. They want to understand where other large players like Microsoft are going to go, they want to know when you're going to work together, they want to know when you haven't decided what you're going to do, and they want to know when you're going to compete. Just don't put them in a no-win. Show what interoperability is going to be, and really make it happen."

To that end, the two companies did release an updated roadmap of sorts today. It stated they will work together in four general areas: sharing ideas and technologies on voice, video, and data convergence over the Internet; joint development of collaboration tools; joint development of industry standards for interoperability; and a kind of program to jointly and intentionally create customer choice.

Some product names were selectively mentioned. For instance, Cisco, Microsoft, and storage network provider EMC will continue to work together toward the refinement of the Service Modeling Language (ServiceML), a W3C standard in which all three companies are joined by IBM and Sun in the working group. The intention of ServiceML is to create a language by which multiple vendors' brands of equipment can relate to one another their own "best practices" for interfacing and exchanging data and resources with one another.

Plus, Microsoft and Cisco will be working to extend Windows' support of Cisco Compatible Extensions (CCX) beyond just Windows Vista and into the broader Windows platform, which would apparently include Windows Mobile. And the two companies will work toward interoperability specifications for Unified Communications, even though UC is primarily Microsoft's platform. More Cisco tools should be finding their way into the next round of betas for Microsoft Office Communications Server 2007, as well as add-ons for Microsoft Exchange.

Perhaps the two companies are to be congratulated for being able to get Charlie Rose to moderate an entire session, for possible later national replay on the PBS network, whose core foundation was a partnership agreement on a W3C standard and some Exchange add-ons.

At one relatively interesting point, Rose asked Ballmer whether he believed the percentage of Microsoft's revenues from Windows and Office would be roughly the same as it is now. If Microsoft is to make good on its pledge to grow its lagging businesses, arguably, the cash cows would play less of a commanding role in the company, and those percentage numbers would have to go down.

It was a fact that Ballmer happily acknowledged. "It'll be noticeably less," he said. "Look, I've already said to our shareholders, the bulk of our actual dollar growth over the next few years will come out of...Windows and Office. But we have businesses that will grow much faster than Windows and Office, so it will be correspondingly a lower percentage of our total."

Microsoft will need to experience huge growth in advertising, servers and enterprise computing, mobile phones, Xbox and accessories, "and then still strong growth in products like Vista and Office." While the advertising end has little relationship with Cisco, collaboration with Cisco may be key to help Microsoft grow its stake in mobile communications. Noticeably absent from Ballmer's list was Zune.

And then Chambers took the first and only opportunity to slap Ballmer down a notch. "Charlie, our issue's not one of growth," he said. "This is the first time I've been able to say that in a decade. Our issue is, where do we put our time and direction?" Cisco is now freer than it's ever been, he added, to concentrate on such matters as geographies and emerging markets, rather than product divisions that have to be saved or shored up.

It was not a takedown, but it was the only time today where Cisco couldn't resist an opportunity to take the bait. Yep, they're still competitors.