Good-By UMI, Hello Strategy?

Cisco is discontinuing its personal/consumer telepresence product, Umi (or however you like to spell it; I’m not going to imitate their accent-U!), a move that’s no big surprise to most industry-watchers, including me.  The big question isn’t why (because it didn’t sell) but whether the move might represent a gradual shift by Cisco toward a more sustainable vision of the future.

First, no significant audience is going to pay the Umi price for good consumer telepresence; there are too many things with webcams out there.  I think Cisco knew that, and perhaps was hoping to spawn some sort of populist drive for premium telepresence service.  The problem with that, of course, is the neutrality issue.  But the real problem with Cisco’s telepresence approach has been that it’s traffic-push and not revenue-pull.

For a year and a half now, Cisco has been champion of what could be called the “bits-suck” theory of network infrastructure.  If something comes along that consumes bits, that just sucks the old dollars right out of operator pockets and into the pockets of network equipment vendors (mostly, of course, Cisco).  It’s not volitional, it’s Natural Law.  Hence telepresence in any form is good for Cisco, and consumer telepresence is great.  Hence, Umi.

The challenge for this approach is that driving up consumption of bandwidth in an all-you-can-eat world only drives down operator profits.  It’s kind of ironic that Cisco would promote its own profit growth through a strategy that proposes its customers abandon their own hopes for more profitable services.  Not only is it ironic, it’s ineffective, which means that at some point Cisco has to move on to something more realistic.

The Street is liking the “new Cisco”, a company that seems to be more humble, hard-nosed, and hard-competing.  It’s going to like “hard-thinking” even better, if Cisco starts to demonstrate that.  I think Acme Packet’s shortfall announcement yesterday demonstrates that oldthink in networking is going to end up taking you to some ugly investor meetings.  So Cisco needs newthink, which has to be a position more aligned with what operators can sell than what they are going to be forced to buy, or give away.

The other problem with consumer telepresence as a driver is that it’s aimed at wireline; you can hardly cart Umi around with you.  Right now, ROI on wireline infrastructure is falling too fast for operators to be even modestly interested in supporting new wireline models of any sort, and particularly those that make the operator a passive traffic conduit.  Which is of course the core of the issue here.  Network equipment vendors have stubbornly clung to the notion that traffic is valuable despite continued proof to the contrary.  It’s not.  It never will be.  Services are valuable, if the “service” itself either creates productivity improvements for business or differentiable experiences for consumers.  Simple transport and connection will always be the foundation of the network, but never again will they be the foundation of network profit, and thus they can never be the foundation for network equipment vendor profit either.  Cisco, more than any other network player, has the assets to swing for the stands here with a service story that really links the transport of yesterday to the profit of tomorrow.  They’re coming to bat this year, and we’ll watch closely to see how they do.  One thing is clear already; the space is Cisco’s to win or lose because nobody else has the leverageable assets they can push into service in time to influence the market.  This is the transitional year in service provider networking.


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