Cisco has two main customer constituencies: network service providers and business IT departments. One of WebEx’s crown jewels is its MediaTone network. This is a global private network, with dedicated fiberoptic links and multiple peering points to the Internet. If Cisco doesn’t sell this off, they will be competing with their customers in one of their primary markets. Unlikely to fly, though Cisco sometimes doesn’t seem to mind treading on toes.
This leaves the remainder of WebEx, the application (SaaS) side. It’s a natural complement to two of Cisco’s current business lines, filling a gap between their Unified Communications Manager (VoIP PBX) products and their high-end telepresence offerings.
As Cisco gets into more and more of the software services that run over IP networks, they end up competing more and more with Microsoft among others, and in an odd way for an Internet company.
Cisco rode the Internet Protocol to the stars. An article of faith amongst the IP cognoscenti is that the network must be stupid. This means that we conceive of the Internet as an amorphous connectivity cloud with computers on its periphery. Some of them are clients and some of them are servers. The Internet doesn’t care which is which. This is very powerful, because anybody with an IP address can set up a web site (a.k.a network service). This is anathema to the traditional network service providers who want to provide value (get revenue) in the network beyond mere connectivity. The Internet world (like Google) and the PC world (like Microsoft and Intel) love the stupid network model because it lets them innovate. The owners of the wires hate it because it forces them into the role of mere connectivity providers, since they are incapable of innovation at the service level.
But Cisco’s bread and butter is network equipment. Cisco doesn’t sell servers. So every service that migrates from the stupid network model to the intelligent network model increases Cisco’s potential market. Cisco hasn’t yet apostatized, but these actions are building gravitation in that direction. They have already ported their IP PBX to IOS, and they are allegedly even warming up to IMS!