The virtuous cycle

by billso on Friday, 20 October 2006

This arti­cle appeared in my old blog at

Peter Bur­rows of Busi­ness Week reports on Cisco’s recent per­for­mance. Cisco is the dom­i­nant ven­dor of net­work­ing equip­ment world­wide. I think of Cisco as the Internet’s plumber. Your pack­ets moved through a Cisco switch or router at some point in their journey.

If you use a Linksys router or net­work appli­ance at home, you’re using a Cisco prod­uct. Cisco pur­chased Linksys in 2003, and has been inte­grat­ing oper­a­tions and mar­ket­ing ever since. Linksys is posi­tioned as an entry point for SOHO (small office and home office) users who need net­work­ing equip­ment, and who may need higher-powered Cisco equip­ment when their busi­ness expands. At the same time, Cisco engi­neers have been remak­ing the Linksys line, using best prac­tices from Cisco’s enteprise net­work­ing equipment.

A vir­tu­ous cycle occurs when a com­pany moves from one “favor­able cir­cum­stance” to another over time. Ama­zon, eBay, Microsoft, Intel, Google and Apple have all ben­e­fited from the cre­ation and main­te­nance of their own v-cycles.

One might argue that Nin­tendo and Sony are risk­ing their v-cycles, at least in the video game mar­ket. Wii and PlaySta­tion 3 each have their own issues.

Cisco has appar­ently built its own v-cycle around advanced net­work­ing tech­nolo­gies, includ­ing VoIP (voice over Inter­net Pro­to­col). VoIP tele­phones are con­nected to an RJ-45 jack, not a tele­phone RJ-11 jack. Remem­ber that RJ-11 also pro­vides elec­tri­cal power for tele­phones.

So how does a VoIP tele­phone get enough power to oper­ate? Users could plug the tele­phone into an AC out­let, but there’s a neater way. Through a handy pro­to­col called Power over Eth­er­net (PoE), spe­cial switches can con­nect these phones to the net­work and deliver 13 watts of power, which is enough to keep a tele­phone and a small dis­play screen running.

PoE can’t deliver enough power to keep a lap­top com­puter run­ning, which is one rea­son why lap­top com­put­ers need their own power source — either AC cur­rent or batteries.

PoE fea­tures aren’t built into most older net­work equip­ment, so any com­pany that wants to deploy VoIP in its offices has to buy PoE switches from Cisco, Foundry or another hard­ware vendor.

PoE and VoIP adop­tion are pow­er­ing Cisco’s vir­tu­ous cycle — at least for now.


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