G00250957 SWOT: Cisco, Wired and Wireless LAN Access Infrastructure, Worldwide Published: 4 December 2013 Analyst(s): Christian Canales, Tim Zimmerman This document analyzes the strengths, weaknesses, opportuniti es 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......... ..............................................................13 Implication for Cisco....................................................................................................................... 14 Company Overvi ew........................................................................................................................ 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 Analysis This 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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Recommendations for Partners and/or Competitors.......................................................................13Implication for Cisco....................................................................................................................... 14
Company Overview........................................................................................................................ 14
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,
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
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
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
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,
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
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/
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
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"