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8/10/2019 Swot Cisco Wired and Wireles
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G00250957
SWOT: Cisco, Wired and Wireless LAN Access
Infrastructure, WorldwidePublished: 4 December 2013
Analyst(s): Christian Canales, Tim Zimmerman
This document analyzes the strengths, weaknesses, opportunities and
threats that Gartner expects will have the greatest impact on Cisco's
position in the wired and wireless LAN access infrastructure market.
Table of Contents
Analysis..................................................................................................................................................1
SWOT Analysis.................................................................................................................................2
Strengths....................................................................................................................................3
Weaknesses...............................................................................................................................7
Opportunities..............................................................................................................................9
Threats.....................................................................................................................................11
Recommendations for Partners and/or Competitors.......................................................................13Implication for Cisco....................................................................................................................... 14
Company Overview........................................................................................................................ 14
Methodology.................................................................................................................................. 15
Gartner Recommended Reading..........................................................................................................15
List of Figures
Figure 1. Graphical Representation of SWOT: Cisco, Wired and Wireless LAN Access Infrastructure,
Worldwide..............................................................................................................................................2
Figure 2. SWOT: Cisco, Wired and Wireless LAN Access Infrastructure, Worldwide............................... 3
AnalysisThis document was revised on 9 December 2013. The document you are viewing is the corrected
version. For more information, see the Corrections page on gartner.com.
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SWOT Analysis
The vendor analyzed in this strength, weakness, opportunity and threat (SWOT) report was selected
because Cisco is the largest global provider of enterprise network access infrastructure.
Figure 1 provides a graphical representation of the strengths, weaknesses, opportunities andthreats of Cisco's wired and wireless access infrastructure business, based on Gartner's SWOT
rating model. Figure 2 describes those strengths, weaknesses, opportunities and threats.
Strengths outweigh weaknesses because Cisco has made its wireless LAN (WLAN) product line
more competitive. Including the acquisition of Meraki, this has helped Cisco increase its WLAN
revenue share from 2H12 to 1H13, a positive sign given the loss in share that Cisco experienced for
a number of years (from 62% in 2006 to 50% in 2012). In the access layer Ethernet switch market
— despite continuing to face competition from vendors like D-Link, Dell, Huawei, Netgear and,
especially, HP, in different markets and geographical regions — Cisco continues to hold more than
60% revenue share of the market.
Opportunities had more weight than threats in our analysis. This is primarily because we expect
Cisco to be well-positioned to take advantage of a strong wired and wireless component and
network service application position in the enterprise market. The evolving needs of cellular and
WLAN integration and the increasing demand from the communications service provider (CSP)
WLAN market are other areas of opportunity.
Figure 1. Graphical Representation of SWOT: Cisco, Wired and Wireless LAN Access Infrastructure,
Worldwide
S
W
O T
Source: Gartner (December 2013)
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Figure 2. SWOT: Cisco, Wired and Wireless LAN Access Infrastructure, Worldwide
Strengths Weaknesses
• Strong channel and revenue market share
• Loyal customer base
• Breadth of portfolio and deployment modes
• Cloud and controllerless-based WLAN solutions
• Taking the lead in indoor locationing, throughCMX tools and locationing technology
• Strong position in 802.11/hot-spot 2.0 solution
• Playing catchup in policy enforcement, guest
access and onboarding with ISE• Interoperability and integration strategy
limitations with the recently acquired MerakiSolution
• Product functionality differences and optionsoften unclear to customers
• Channel/reseller support needs to improve tobetter deal with complex installations
• Expensive solutions
Opportunities Threats
• Increasing demand of overlay network services
• WLAN becoming a key component of seamlesscellular/WLAN communication
• Small cell with Wi-Fi in the enterprise
• Growing WLAN hot-spot market
• Increased commoditization of access layerswitches has simplified buying decisions andproduct selection.
• Market consolidation
• Huawei and HP have strengthened theirposition in Asia/Pacific, the fastest-growingregion
• Lagging behind in commercial innovation
• Increasing availability of WLAN managedservices will limit Cisco opportunities in the SMBmarket
• Passive optical LAN
Source: Gartner (December 2013)
Strengths
Strong Channel and Revenue Market Share
Cisco is the largest company in the enterprise network access infrastructure market and has the
strongest channel. This results in local presence, across all the market verticals that leverage end-
to-end business and creates a strong revenue market share. The ability to stretch across the
enterprise carpeted space, as well as deep into traditional vertical markets like retail (both in-store
and in the office) and education, as well as new markets, to identify different solution needs means
that many Cisco customers have wired and wireless Cisco products end to end. Moreover, Cisco'scontrol of distribution channels (despite narrowing channel margins) means the company has the
potential to reach out and address the global market demand on a much wider scale than its
competitors. As a result, the fight to take revenue share away from Cisco can be tough for
competing vendors, especially when it involves winning customers for which Cisco is the first-
choice supplier of wired networking equipment. In the enterprise Ethernet switch market, Cisco had
a 65.2% revenue share in 2012, far ahead of the No. 2 player HP (with 12.5%) and No. 3 Juniper
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Networks (2.7%). In the enterprise WLAN market, Cisco had 50.5% revenue share in 2012, far
ahead of the No. 2 player Aruba (with 13.0%) and No. 3 HP (5.3%).
Loyal Customer Base
Cisco's strong local presence helps build customer trust as solutions move from Tier 1 enterprise
deployments into the rest of the market. Especially among large corporations, Cisco benefits from a
huge loyal customer base. Cisco's influence over enterprise purchasing decisions is such that many
IT managers buy Cisco almost by default, regardless of price premiums or product differentiation.
The key here is that the customers like "one-stop shopping," the perceived value in the training and
certification, the safety of buying from a strong global brand and the opportunity to buy switches or
WLAN equipment bundled with other equipment at a discount. The importance of Cisco's loyal
customer base is further amplified by the fact that, according to our estimates, through 2017, more
than 60% of global revenue from sales of wired and WLAN access infrastructure will continue to
come from North America, Western Europe and Japan. Sales in these highly saturated geographies
are primarily driven by replacement cycles (for example, replacing a switch that's 6 to 8 years old),
rather than from business expansion or new networks being rolled out. Another aspect worth
pointing out is the limited market impact of WLAN vendors like Aerohive, Aruba and Ruckus
Wireless that decided to enter the commoditized access layer switching market during the last few
years.
Breadth of Portfolio and Deployment Modes
Through development and acquisition, Cisco has one of the broadest ranges of access layer
Ethernet switches and WLAN products. These allow it to compete with any networking vendor, no
matter the point of differentiation. Cisco has a vast hardware portfolio that, during the last couple of
years, has improved in flexibility and deployment-mode capabilities, which appeals to various
customer needs. Cisco's portfolio spans from lower-end small or midsize business (SMB)-targeted
switches, to fixed switches for wired connectivity; indoor and outdoor access points (APs), as well
as WLAN controller and controllerless architectures. Additionally, network service applications, such
as guest access, security, onboarding, network management and policy enforcement, continue to
be an important differentiator in client access layer decisions. Cisco has a solution that provides
access layer connectivity for the many needs of the vertical markets, such as retail or
manufacturing, in addition to the enterprise carpeted office. The combination of existing products,
strategic vertical-market relationships and best-of-breed channels enables Cisco to deliver end-to-
end solutions that customers worldwide have confidence in.
While many end users had to wait years for Cisco to provide leadership and "stickiness" between
its leading switch organization and its WLAN team, Cisco has finally stepped forward. Catalyst 3850
is Cisco's first Internetwork Operating System-based wireless controller to provide a switching
architecture that integrates wireless functionality, and when combined with the breadth of AP
offerings, allows Cisco to compete against vendors that provide controller-based or controllerless
solutions. Catalyst 3850 increases speed and resiliency, and adds significant functionality over the
3750-X platform for the same price. While neither product is currently a direct replacement for the
other, they can run in parallel, preserving investment protection and enabling customers to upgrade
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at their own pace. Cisco has also introduced the Catalyst 3650, a midrange stackable switching
platform that costs as much as 30% less than the 3850.
Cisco continues to make advancements with its network service applications. The Cisco Prime
network management product (Cisco Prime Infrastructure) manages both wired and wireless across
the entire edge of the network from a single pane of glass. This is a big step that requiredconsolidation of as many as four Cisco network management packages. Cisco needs to continue
the progress with the integration of multivendor management to use this management tool to
enhance the selling process. On the security, guest access and onboarding front, Cisco has
combined its guest access, Access Control Server (ACS) and Network Access Control (NAC)
applications into the Identity Services Engine (ISE) for a single application across the entire network.
Cisco will need to accelerate the release of the next steps in the road map to remain competitive in
an application area that today provides differentiation for other vendors.
Another significant product addition by Cisco is the Catalyst 6800ia access layer switches, to which
the best analogy is the Fabric Extender (FEX) technology, deployed at the campus. The 6800ia
switches can virtually act as remote line cards, encapsulating traffic that will enable them to getCatalyst 6500/6800 features at the access layer. The 6800ia switches, unlike FEX, support stacking
and Power Over Ethernet (PoE) and attach to a downstream compact switch offering flexible
deployment options. They align with prevailing traffic patterns, with advantages in ease of
management.
The Aironet 3600 series AP is an industry-first 4X4 multiple input/multiple output, three-spatial data
stream AP that was launched in 1Q12. The 4X4 (four transmit and four receive antennas) can
improve redundancy, connectivity reach and throughput performance, making it a good product for
handling the higher requirements of video and voice. The Aironet 3600 and 3700 series are module
APs that can provide investment protection, allowing enterprises to transition from 802.11n to Wave
1 or Wave 2 802.11ac through a module upgrade, avoiding having to replace the AP.
Cloud and Controllerless-Based WLAN Solutions
WLAN controllerless solutions have become a hot topic in the industry today. While HP (3Com) and
D-Link have had a "unified" wired/wireless switch platform for more than five years, it was primarily
the revenue growth success that Aerohive and Meraki enjoyed from 2010 through 2012 that started
to draw considerable attention. Competitors watched how these two small companies were winning
customers, and end users, in general, began to be aware that WLANs can live without a controller
and still be able to support, for example, roaming, centralized reporting and security. For a market
that largely stood dormant for a number of years, vendors became increasingly aware of the
importance of being able to have WLAN products that virtualized controller functionality. A lot ofproduct development activity has taken place since 2012. Arguably that was often largely driven by
reaction to what competitors were doing, which partly explains why today we can see a lot of
aggressive marketing of controllerless solutions, and why, to some extent, this is an overhyped
space.
Cisco's first move to a solution that virtualized WLAN controller functionality was the introduction, in
2Q11, of its Flex 7500 series controller. The private cloud hardware controller resides in the data
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center, from which it can manage as many as 6,000 APs spread across 2,000 branch-office
locations/Flex groups or up to 6,000 locations if not grouped. This is a high-capacity and costly
platform that, however, did not appeal to the needs of SMBs or large enterprises with few branch
offices. Cisco also has a VMware-based virtual form factor controller that operates on x86 servers
and can support as many as 200 APs, which, again, does not address the SMB market.
In 4Q12, Cisco completed the acquisition of Meraki, a vendor whose WLAN solution virtualizes
controller functionality in the cloud. While the Meraki portfolio, in some cases, competes with
Cisco's WLAN product line, especially in the SMB market, the clever part of this acquisition is the
two do not generally overlap. For WLANs that involve a small number of APs per location, Meraki is
ideal, as the cloud controller subscription-based payment model can simplify deployment
requirements for companies with limited IT resources. While the need to purchase a perpetual cloud
management software license for every AP made the Meraki solution too expensive for large
enterprises, it is a limitation Cisco has recently addressed. The newly announced Meraki enterprise
licensing model enables customers to pay a fixed license cost for management of an unlimited
number of APs. Meraki can boast several strengths in functionality, such as industry-leading device
profiling, as well as subscription-based cloud applications that include basic traffic shaping, WAN
optimization and content filtering. The next step is integration of what is best in both solutions, for
example, Meraki's device profiling and Cisco's breadth of APs to make both solutions stronger and
provide differentiation.
Taking the Lead in Indoor Locationing, Through CMX Tools and Locationing Technology
The Cisco Connected Mobile Experiences (CMX) leverages its ThinkSmart Technologies acquisition
and uses the Cisco Mobility Services Engine (MSE) platform, in combination with an open MSE
REST API, to integrate real-time WLAN-based location and contextual attributes into customer
applications. This solution can enable enterprises to create or customize their mobile applications,
such as loyalty applications via CMX, giving real-time context-aware capabilities to mobile
application experiences (for example, receiving specific push notifications, launching certain mobile
applications, connecting to a guest WLAN or receiving real-time location updates). The Cisco MSE
provides a SOAP-based API that allows third-party applications to query location information for
wired/wireless clients, tags and APs reported within a Cisco wireless network. While Cisco has
taken the lead in this area of the market, others, including Aruba and Ruckus Wireless, have
followed quickly with similar acquisitions. The key for this solution, however, will be the search for
more granular locationing capabilities than the 30 feet (10 meters) that is currently available without
additional beaconing input points within the environment.
Strong Position in 802.11u/Hot-Spot 2.0 Solution
While this is a strength that predominantly touches Cisco's position in the service provider wireless
space, WLAN APs are connected to the access layer wired infrastructure, and cellular to Wi-Fi
offloading is expected to gain traction in the enterprise space. Similar to competitors like Ruckus
Wireless and ZTE, Cisco has dominated this market segment by leveraging its relationship with
carriers, addressing demand for a market (carrier Wi-Fi) that, at least for the next two or three years,
is expected to grow at a faster pace than the enterprise counterpart. As a major customer win, for
instance, at the end of 2012, Cisco announced the rollout of 100,000 APs across Indonesia as part
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of a Wi-Fi offloading deployment by PT Telekomunikasi, Indonesia's largest telecommunications
service provider. Growth of the hot-spot Wi-Fi market in recent years has partly contributed to
Ruckus Wireless growing its WLAN revenue from less than $40 million in 2009 to $190.3 million in
2012, although it is a distant second in WLAN CSP market share. And it is no coincidence that
Aruba Networks — a vendor that, in recent quarters, has struggled to keep up with growth of the
overall WLAN market, partly due to its lack of presence in the carrier-class AP space — announced
in 1Q13 its HybridControl architecture, targeted at service providers to offer private Wi-Fi for
managed services and Wi-Fi hot spots for public access. Cisco is well-positioned to continue to
benefit from this vertical market in the short and long term. While ZTE should continue to serve well
the Chinese market and Ruckus Wireless is expected to nip at Cisco's heels from a product and
innovation perspective, Cisco has an advantage in the hot-spot market (due to its carrier
relationships) over other competitors that otherwise pose more threat in the enterprise space, such
as Aruba, Motorola Solutions, Alcatel-Lucent, Juniper Networks or Xirrus.
Weaknesses
Playing Catch-up in Policy Enforcement, Guest Access and Onboarding With ISE
Network service applications are the new differentiator at the edge of the network. They apply to all
users that connect to a wired or wireless network to determine if, when, where and how the user will
be allowed access to the enterprise network. Cisco introduced the ISE in 2Q11, aimed at
addressing bring your own device (BYOD) trends and user demand to work from anywhere, either
wired or wireless, on the device of the user's choice. ISE has security, device profiling and context-
aware enforcement capabilities (such as automatic network enablement based on device type and
enforcement of contextual-based business policies) that are built into a platform and replace several
stand-alone Cisco solutions, including NAC and ACS.
Today, the platform integration is incomplete, as Cisco needs to internally adopt a best-of-breed
methodology and not try to solve the business problem with two solutions. ISE struggles to
rationalize its existing capabilities, such as the differences in its own wired and wireless guest
access from its NAC and Wireless Control System (WCS) applications, while attempting to move
forward at the pace of the market addressing the needs of BYOD usage scenarios that require
deeper integration with a broader set of mobile device management partners. Cisco's strategy is
not a matter of moving in the wrong direction, it is only the timing of execution in a rapidly changing
access layer environment.
One of the next steps is also looking at the functionality that Merkai brings to the Cisco product
family. While the Cisco enterprise network team brings industry-leading APs and switches to theCisco access layer portfolio, the ISE team needs to minimally integrate Meraki's device profiling and
look at other functionality that can be leveraged across the entire Cisco access layer to provide a
consistent competitive advantage, rather than applied to enterprise-deployed or cloud-deployed
architectures. Additionally, policies that are created in ISE should be able to be deployed across the
entire Cisco access layer solution, whether it is an enterprise-network-deployed architecture or a
Meraki cloud architecture. Lastly, Cisco needs to update its deployment model. ISE entry-level
pricing and lack of modularity often leave Cisco on the sideline, especially when clients need only
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guest access service or Remote Authentication Dial-In User Service (RADIUS), but currently must
purchase the entire suite to deploy a single application.
Interoperability and Integration Strategy Limitations With the Recently Acquired Meraki
Solution
Differing capabilities of the Meraki and core Cisco product families often leave clients to consider
these solutions separately, instead of as an implementation choice. As noted with software
functionality, Cisco needs to rationalize the best-of-breed access layer components, such as a
common set of APs and switches that are independent of an enterprise network or cloud-based
architecture. Meraki's launch of new APs creates not only confusion in Cisco's integration strategy,
but also a crack in the strategy that is currently used by competitors to separate branch-office and
campus-enterprise decisions. Currently, none of Cisco's industry-leading enterprise networking
WLAN APs and only limited wired equipment can interoperate in the (Cisco) Meraki WLAN cloud
model, or vice versa. Since this is not Meraki's core competency, Meraki should focus on creating
cloud-based access layer solutions utilizing the products that have enabled Cisco to maintain its
market-share-leading position in access layer connectivity.
Cisco Prime can monitor Meraki and the small-business product portfolio today via Simple Network
Management Protocol (SNMP). This is the same as monitoring any other third-party devices via
SNMP. According to Cisco, the ability to cross-launch the Meraki Dashboard from Cisco Prime will
be added in 2014.
Product Functionality Differences and Options Often Unclear to Customers
While we have noted Cisco's breadth of portfolio as a strength, it also has weaknesses due to
overlapping product functionality. As mentioned in Gartner's "MarketScope for Wireless LAN
Intrusion Prevention Systems," Cisco has two wireless intrusion prevention system (IPS)
applications. First, Cisco has a basic WLAN IPS application that is unlicensed and exists as part of
WLAN controller (WLC) functionality. This solution is used by 70% of Cisco's installed base, and it
can be managed through the WLC interface or through Prime, Cisco's network management
application. The second solution is an adaptive WLAN IPS (aWIPS) application with advanced
capabilities and reporting that is licensed separately and sold in conjunction with or runs on an
existing MSE appliance. Many Gartner clients still do not recognize or understand how to take
advantage of the aWIPS capabilities, and they often confuse aWIPS functionality with the integrated
WLC capabilities. As a result, the opportunity to upsell to the aWIPS over basic functionality is often
lost, and buyers are not getting the full advantage of aWLAN IPS. Additionally, clients using the
WLAN functionality in the 3850 should test the needed capabilities since the application version
integrated into the 3850 lags behind the released software of the controller-based solution.
Channel/Reseller Support Needs to Improve to Better Deal With Complex Installations
Cisco has a reseller channel that is large and strong, but historically, these Gold- and Silver-certified
partners, as well as the rest of the reseller community, have focused on wired connectivity. Their
proficiency in wired connectivity does not match their WLAN knowledge, and not all resellers can —
or should — sell WLAN equipment. The complexity of WLAN solutions has grown from the days
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when APs were generally installed to support a limited number of users and basic business
application requirements. Today's wireless resellers must understand signal-to-noise ratios,
capacity planning and multiple frequency migration strategies. This is not knowledge and
experience that can be obtained from Web-based training or by sending a technician to a three-day
certification course. The issue here is that many Cisco Gold partners — that used to make most of
their revenue from wired equipment — are now trying their hand at selling and installing wireless
technology, and some Gartner inquiries indicate this can lead to situations in which Cisco partners
lack good understanding of design, configuration and support issues. Cisco needs to make sure
that resellers selling wireless technology understand the medium; otherwise, it risks losing the
wireless business — and possibly, the entire access layer business — to other vendors. Alongside
its partners, there are opportunities for Cisco to better educate and prepare the channel/resellers,
by improving the training and radio frequency knowledge base with updated certifications, as well
as making more in-depth training available for partners worldwide.
Expensive Solutions
Historically, Cisco has had strong presence in the enterprise wiring closet. While the products
continue to "check the box" in regard to functionality, Cisco's competition during network refresh at
the access layer has intensified through the years, as commoditization and price play bigger roles in
the decision process. While we have noted that Cisco's portfolio has improved its breadth, which
also results in a broader set of price points for different customers, client pricing commonly remains
higher compared with other vendors (even at heavily discounted prices when Cisco faces the
prospect of losing a customer). Especially with edge switches, these premiums are largely
unjustified, given the lack of competitive differentiation. Gartner has also often seen other vendors
offer similar, or even lower, average selling prices than Cisco for equivalent market requirements.
Additionally, competitive offerings have lower maintenance and support costs (albeit none can
match Cisco's geographical coverage).
In the WLAN market, a trend that should further question Cisco's premiums is carrier Wi-Fi rollouts,
which tend to involve deployment of thousands of APs, given out heavily discounted against list
prices. This will drive down the prices of APs, or at least put more pressure on vendors to lower
their prices. The Cisco Aironet 3600 AP is an expensive product, with a list price of around $1,495 in
a market where Gartner continues to see AP ASPs in the $400 to $450 range in the enterprise and
lower in the carrier Wi-Fi market, depending on functionality. Cisco needs to continue to refresh and
rationalize its WLAN AP product families as competitors look at replacing Cisco in access layer
connectivity solutions, not only for wired connectivity, but also for wireless.
Opportunities
Increasing Demand of Overlay Network Services
Physical technologies, such as PoE and 802.11n, have become largely commoditized at the access
layer, and this commoditization has increased the useful life of equipment. This makes selling
overlay network services (for example, context-aware and location-based services, security, and
BYOD support) across the entire network for wired and wireless connectivity more important.
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Deployment of network application services, such as network management, security authentication
and authorization, and policy enforcement, will continue to be driven by enterprises seeking
efficient, secure and predictable behavior from their network.
Gartner is already hearing clients ask for the next step in the access layer market: SLAs for wired
and wireless communications. Cisco's position in the access layer has it well-positioned to takeadvantage of this change in the market. Clients want a guarantee that client bandwidth
requirements are being met. They also want end-to-end monitoring of the network, and proactive
and dynamic changes to the network to maintain SLAs, independent of client-based input. They
want it for data, voice and video, which means monitoring tools must provide feedback on
bandwidth and latency across the end-to-end network.
There is also a need in the market for managed services; however, without monitoring tools and the
ability to proactively address issues, partners will not be able to meet the market requirements.
WLAN Becoming a Key Component of Seamless Cellular/WLAN Communication
While Cisco has taken some steps to address the needs of cellular and WLAN integration (on such
things as smartphone support and mobile core gateway functionality), this remains a market with
important evolving needs, and adoption of seamless integrated cellular and WLAN voice
communications is still rather embryonic. And while it will be prevalent outside of the building, it
may never reach critical mass inside the enterprise, except in vertical markets like retail or higher
education. Within the context of Cisco's access layer infrastructure, we have classified this as an
opportunity because broader adoption of integrated cellular/WLAN solutions will inevitably lead to
WLAN equipment gaining importance as a component of seamless communication for WLAN-
enabled handsets. While many initiatives around Wi-Fi Certified Passpoint and 802.11u support
today primarily target service providers and carriers, this will begin tilting to the enterprise space in
the future, although the two solutions, cellular offloading and fixed mobile convergence, will lookvery different.
A driver will be seamless connectivity needs and the opportunity of choice for employees. While
implementation of an in-building or campus WLAN can enable calls to be switched from the public
cellular network to a private enterprise network, bypassing cellular charges, there will be software
costs to provide the handoff, so the cost-saving opportunity will be mainly lower handset operating
costs. The 3G small-cell module that can plug into Cisco WLAN APs and the Quantum software
(both introduced in 1Q13) is a good step by Cisco to improve connectivity between WLAN and
cellular networks. Jabber for Mobile is a good addition to the Cisco product set, allowing calls to
move from a WLAN to a cellular network and back, keeping calls live without disconnecting. Jabber
is offered on a number of devices, and mobile operating systems can support organizations' needfor better mobility.
Small Cell With Wi-Fi in the Enterprise
Acquisitions of Intucell and Ubiquisys (completed in the first half of 2013) will also help Cisco
compete with established mobile network vendors, such as Ericsson, Alcatel-Lucent and NSN, in
the emerging small-cell infrastructure market. Small-cell technologies have the potential to extend
coverage for 3G, Long Term Evolution (LTE) networks for service providers into the enterprises,
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depending on the pricing model of the cellular technology. Cisco has an opportunity to lead in this
embryonic market since many competitors push for cellular for some applications, for example,
voice on smartphones for education or healthcare or Wi-Fi for other applications, including data and
video. Cisco has the ability, through products and relationships, to provide both small-cell and Wi-Fi
capabilities and seamless transition for enterprises looking to invest in both technologies. The
modular design of the Aironet 3600 and 3700 AP series — which includes a module for 3G/small-
cell connectivity — can further help Cisco leverage this opportunity.
Growing WLAN Hot-Spot Market
Gartner has forecast CSP WLAN (Wi-Fi) hot-spot market revenue to outpace growth in the
enterprise market at least through 2016. As one of the leading market suppliers, Cisco is well-
placed to take advantage of this opportunity, although its main competitor in the U.S., Ruckus
Wireless, has made more progress on integrating Passpoint support in APs. Wi-Fi hot-spot services
will continue to be strongly driven by service providers looking to relieve congestion on cellular
networks in busy indoor locations, and, increasingly, also by location owners wishing to use Wi-Fi
as a marketing tool .Together with growing interest in monetizing Wi-Fi, consumer profiling, data
analytics and location awareness technologies, this market sector has plenty of opportunity for both
equipment sales and professional services.
Threats
Increased Commoditization of Access Layer Switches Has Simplified Buying Decisions and
Product Selection
This threat will continue to put into question Cisco's ability to charge higher price premiums. And
while fear of interoperability between Cisco and other vendors' equipment often makes customersavoid looking at other vendors for replacements, multivendor networks will continue to grow as a
result of increased commoditization. Access layer switches represent a mature market that has not
seen much innovation in the past few years. Many vendors continue to fight the war primarily from a
price point perspective, mostly with gigabit product additions targeting the apparent "future-
proofing" needs of businesses. From a marketing perspective, support of the 802.3az "energy-
efficient Ethernet" standard, which "shuts down" idle ports, has seen some recent interest. Lifetime
warranties and functionality, such as the security ability to lock down Media Access Control
addresses at the port level, PoE support, port mirroring, or stackable and stacking capacity, have
become common features for access layer switches.
Market Consolidation
We have seen consolidation through the years (acquisition by HP of Colubris Networks and 3Com,
Juniper Networks of Trapeze Networks, and Adtran of Bluesocket). More recently, in November
2013, Extreme Networks completed the acquisition of Enterasys Networks; these two vendors have
been in the Ethernet switch market for more than a decade. The access layer has evolved into a
market where only established or fast-growing, innovative companies likely have a chance for
survival. We classify this as a threat because market consolidation can lead to bigger enemies with
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a broader distribution channel and potentially more resources to focus on differentiation. The
Enterasys Networks acquisition will make Extreme Networks one of the top five vendors of LAN
access infrastructure in revenue, behind Cisco and HP, but very close to Juniper Networks and Dell.
Huawei and HP Have Strengthened Their Position in Asia/Pacific, the Fastest-Growing Region
Gartner has forecast Ethernet switch market revenue in Asia/Pacific to grow by a compound annual
growth rate (CAGR) of 4.9% from 2012 through 2017, against a CAGR decline of 3.3% for North
America and 3.4% for Western Europe. The key here is that, while most of the market revenue is still
concentrated in the mature regions, Asia/Pacific will see the highest growth. We classify this as a
threat because HP and Huawei have in the past 18 months strengthened their footprint in Asia.
Currently, less than 15% of Cisco's switching revenue comes from Asia/Pacific, compared with
more than one-third for HP and more than 50% for Huawei, which experienced very good growth
from 2011 through 2012.
Lagging Behind in Commercial Innovation
We classify this as a threat because in the switch market, some vendors have started to look at
ways to offer more flexible and innovative commercial solutions, which adds differentiation as an
alternative to Cisco. Brocade's Network Subscription and HP's FlexNetwork Utility Advantage are
rental models that can add flexibility to network acquisition. There are possibilities for CSPs to use
this type of model to offer managed network solutions on a pay-per-port monthly subscription
basis. For the targeted large enterprises and government organizations, the key will be savings on
capital expenditure, as well as greater flexibility in aligning network capacity with changing business
needs (customers can, for instance, turn ports on and off). For the cost-conscious SMB market,
Alcatel-Lucent offers Fast Ethernet switches with the option to upgrade to gigabit via a licensed
software upgrade.
Increasing Availability of WLAN Managed Services Will Limit Cisco Opportunities in the SMB
Market
Increasing availability of managed WLAN services will continue to help lower the bar of adoption for
WLANs for companies that do not have the resources or technical knowledge to maintain their own
network. An emerging trend that could help managed services break into the market is delivery of
WLAN software as a service.
Although Cisco has strengthened its position with the Meraki acquisition, this has become a
crowded space in recent years. WLAN managed and professional services today are offered not
only by WLAN competitors, such as Aruba and Motorola Solutions, but also by service arms by
carriers (such as AT&T, BT Global Services, Orange Business Services, T-Systems and Verizon
Business), system integrators/outsourcers (such as Accenture, CSC, HP and IBM), channel partners
of network equipment manufacturers (such as CDW, Insight Networking and Presidio), independent
network consultants and offshore providers (such as Tech Mahindra and Wipro).
The value proposition is that the WLAN controller and accompanying network application services
no longer reside in the enterprise network, but are moved to the cloud and delivered through the
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Internet for a monthly subscription. This can add flexibility to how enterprises wish to have wireless
networks managed, and can reduce installation and maintenance costs.
Passive Optical LAN
We classify this as a threat because passive optical LAN can significantly reduce the number of
switching cabinets and Ethernet switches needed within a LAN architecture and, hence, threaten a
portion of LAN switch sales. However, while this is a growing market, it remains relatively small, and
for this reason, we give this threat a low score rating. Based on gigabit passive optical network
technology commonly deployed in carrier networks, the LAN equivalent can eliminate the limit of
90-meter horizontal cable runs to switch cabinets and provide a more passive centralized
architecture. The recently formed association for passive optical LAN includes a group of vendors
looking to promote adoption of this LAN architecture. To date, deployments have focused on the
government and hospitality verticals.
Recommendations for Partners and/or CompetitorsGartner remains cautiously optimistic that Cisco will continue to maintain its strong revenue share in
the global access layer infrastructure market for at least the next five years. Upcoming sales of
802.11ac products will be successful, despite relatively slow adoption in the next 24 months, due to
the multiphased introduction of 802.11ac capabilities (many enterprises will decide to wait for the
advanced set of Wave 2 product capabilities), the inability of 802.11ac to support the 2.4GHz
frequency band, the declining costs of 802.11n chipsets and the scalability of 802.11n. Because of
its market power and ability to influence purchasing decisions, Cisco has historically rarely missed
out on opportunities with technology transitions. In the switch market, HP will continue to pose
strong competition to Cisco, which could lead to a reduction of Cisco's higher price premiums.
Potential and current Cisco partners should, however, remain confident of Cisco's commitment to
the product and customer demand.
Competitors should learn from the loss in revenue market share that Cisco experienced until it
decided to invest more resources in improving its wired/wireless integrated management
capabilities. While there are still competitors of Cisco for integrated wired/wireless network
management capabilities (for example, Aruba, Enterasys Networks and HP), Cisco's strong
presence in the switching market continues to be a clear advantage. This advantage gives Cisco the
exposure to be more shortlisted than any other vendors in opportunities to win customers.
Competitors must understand their differentiation, because they will lose trying to stand toe-to-toe
with Cisco if they are trying to check the box. Vendors that have also identified complementary
functionality specific to vertical markets like point of sale and kiosk integration in retail, teacher tools
in education or small-cell integration with Wi-Fi for cellular offloading will be able to competeagainst Cisco and its partners that have a generalist approach. Ease of use, proactive network
management and cloud deployment options for network service applications continue to expand
with both SMBs and enterprises.
Partners should recognize Cisco's recent ability to strengthen its position in the WLAN space and
be aware that differentiation will increasingly move to network application services, solutions that
also apply to wired connectivity. Opportunities will come from many areas, such as resell, system/
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product integration, consulting collaboration and service support, but will require additional
investment by partners in both additional staff and training of existing personnel. Partners need to
recognize that the market is moving to end-to-end access layer solutions, with demand for higher
levels of service to ensure that the network is available for critical business applications. Historically,
we have seen partners that have traditionally sold part of Cisco's product line, with the associated
certifications, try to expand their footprint in the market (for example, by offering both wired and
wireless solutions), but they found difficulties because of the business and technical differences in
these access layer components. This is an issue when the market is moving to create complex
policies for access and applications, as well as SLAs to support an increasing number of end users.
Implication for Cisco
Cisco has maintained its position as the largest enterprise access layer network infrastructure
vendor through its influential market power, broad channel capabilities, acquisitions and, recently,
an improvement in execution. To maintain this lead, Cisco must continue to build on its access layer
market strategy to capitalize on the growing opportunity of organizations moving to wireless for
end-user connectivity. The carpeted WLAN enterprise market remains largely untapped, but Cisco
risks missing opportunities if it fails to quickly react to customers considering replacing wired with
wireless connectivity, as Cisco inadvertently protects its switching business line. Cisco needs to
continue to invest in aspects that still need more work to keep lowering the bar of adoption for
WLAN, including voice, security, installation requirements and network management. Cisco should
also review and consider simplifying its portfolio, which often seems too broad and complex for
buyers.
Company Overview
For an overview of Cisco's business performance in all its market and solution segments, see
"Vendor Rating: Cisco."
Cisco was founded in 1984 and is headquartered in San Jose, California. The company has more
than 75,000 employees worldwide (as of 2013). Net revenue for Cisco's fiscal year ending 27 July
2013 was $48.6 billion, up by 5.5% year over year.
In the LAN market, Cisco has the following market share.
In worldwide enterprise Ethernet switches, Cisco's port shipments declined by 2.6% year over year
during 2012, as its shipment share declined from 35.7% to 34.2%. Associated revenue increased
by only 0.1%, leading to a loss in revenue share, from 67.7% in 2011 to 65.2% in 2012. Since
Gartner does not segregate its estimates between campus and data center, these estimates are forthe overall market, not only for the LAN access switching space. Port shipment share was 36.6% in
1H13, up from 33.6% in 2H12. Associated revenue share was 66.0% in 1H13, up from 64.7% in
2H12.
In the global WLAN market, Cisco's revenue grew by 30.7% from 2011 to 2012. Revenue share
dropped from 50.6% in 2011 to 50.2% in 2012. Its revenue share grew to 52.4% in 1H13, up from
49.9% in 2H12.
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Methodology
Cisco was selected because of its overall stature and influence in the worldwide wired and WLAN
access infrastructure marketplace as the leading provider in revenue and product shipments. We
based our ratings on an evaluation of Cisco's business on its own merits in the market, but also in
the context of market dynamic shifts that might occur in the future. To formulate this SWOT, weused quantitative data, including Gartner Forecast and Market Share reports, and qualitative data,
including briefings from enterprise network providers, discussions with Cisco and reports from
customers.
The Gartner vendor SWOT analysis is designed for the use of providers, as well as individuals, in
strategic planning, marketing and competitive analysis roles as a supplement to their planning
processes. Its primary value is as an independent analysis of the provider's competitive situation.
The SWOT analysis provides a unique independent view of the strengths, weaknesses,
opportunities and threats for a specific part of a provider's business in a specific market and
geography.
Gartner Recommended ReadingSome documents may not be available as part of your current Gartner subscription.
"Vendor Rating: Cisco"
"Magic Quadrant for the Wired and Wireless LAN Access Infrastructure"
"Forecast Analysis: Enterprise WLAN Equipment, Worldwide, 3Q13 Update"
"Forecast: Enterprise Network Equipment by Market Segment, Worldwide, 2010-2017, 3Q13
Update"
"Market Share: Enterprise Network Equipment by Market Segment, Worldwide, 2Q13"
"Forecast: Small Cells Infrastructure, Worldwide, 2011-2017"
"Market Share: Enterprise Ethernet Switches, Worldwide, 2012"
"Market Share Analysis: Enterprise WLAN Equipment, Worldwide, 4Q12 and 2012"
"Market Share: Enterprise WLAN Equipment, Worldwide, 4Q12 and 2012"
"Service Provider Wi-Fi Will Drive Changes in Enterprise Wireless LANs"
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