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Cisco Technology to Boost Software Performance

December 6, 2005

NEW YORK — Cisco Systems Inc. on Tuesday said it is introducing technology to speed the performance of software programs running over long-distance corporate networks, as the communications equipment leader seeks out a stake in how the next generation of software is managed.

The announcement marks Cisco’s entry into what it expects to be a key future market, one the company hopes will spur billions of dollars in sales and raise its revenue growth rate.

The latest technology, known as “application networking services,” is designed to allow business applications to flow faster and be directed more intelligently over networks, said Abner Germanow, an analyst at market research company IDC Corp.

It is one of nine, high-growth markets Cisco refers to as “advanced technologies.”

The technology will form part of Cisco’s foray into a new generation of Internet applications that are built to share data easily with each other. If they work, businesses could benefit from lower bandwidth costs and fewer headaches while trying to get various programs to cooperate, said Cisco Senior Vice President Charlie Giancarlo.

Potential rivals for the latest technology include Computer Associates International Inc., Hewlett-Packard Co., International Business Machines Corp., and Microsoft Corp., but it remains to be seen whether Cisco will compete with them, cooperate or do both, CIBC analyst Stephen Kamman said.

“When you actually get down to the brass tacks of who’s going to get paid, then it becomes competitive,” Kamman said.

Germanow said that this new generation of applications could reduce the response time that some employees run into when trying to use large software applications.

“If you want to see how many bikes shipped in North Dakota last week, when you click on some option in that application, (the question is) how long will it take to respond?” Germanow said.

Cisco, which posted $24.8 billion in fiscal 2005 sales, and the software industry also think that businesses would be able to cut costs by integrating software programs.

“If you want a rule of thumb, 40 percent of the cost of putting in a new application is integrating it with the other applications,” Kamman said.

Cisco’s most recent advanced technology initiative is digital video, which it took on when it agreed to acquire cable set-top box maker Scientific-Atlanta Inc. in November for $6.9 billion. Other advanced technology businesses include optical networking, data storage and home networking through its Linksys product.




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