Feature Story

June 6, 2007

The desire of businesses to leverage the newest networking technology for competitive advantage is no longer confined only to larger businesses. Millions of small businesses are now adopting networking capabilities to reach global markets in India or China or to use mobility to be more responsive to customers.

David Tucker, director, Connected Office Business Organization at Linksys, recently spoke with News@Cisco about Linksys' evolution into the small business market, the new version 2.0 of Linksys One, and the growing synergies with Cisco in serving the SMB market. (The following is a modified excerpt from a News@Cisco podcast interview with Tucker.)

How would you define the small business market that Linksys serves?

David Tucker: Our target market is small businesses with less than 100 employees, and this include all types of businesses from hair salons to restaurants to law offices, with many different motivations for how to use technology. This customer base is not only growing, it's also evolving and expanding all over the world. What's more, their desire to use technology to help them with their business is also changing the way they do business. It's putting pressure on them to figure out how to incorporate that technology into their business model.

Would you say that these businesses no longer see technology only as a way to maintain a competitive edge, but that it has become essential for day-to-day operations?

David Tucker: Absolutely. Technology is becoming an integral part of the day to day business in small companies just as it is within enterprises. The largest impact on small businesses today is, somewhat surprisingly, the influence from consumer product lines. Social networking, for example, such as instant messaging or the use of web tools for communicating with customers is all of a sudden appearing in small businesses. And they're really interested now in how they can offer a lot of services to their customers: whether by being mobile, or working from home, things like that, yet still maintain their small presence and financial model as they go forward.

Can you describe the small business marketplace and who exactly you are trying to reach?

David Tucker: It's a large marketplace of over sixty million small businesses that both Cisco and Linksys are trying to reach. To serve this marketplace effectively, we really need a very diverse portfolio of products as there are all types of customers, from restaurants to doctors to accountants and bicycle shops. The combination of the Linksys connected office solution and the Cisco commercial solution gives us a broad portfolio of products to meet this diverse need. So there's an entire range of customers with more sophisticated needs that are looking for a different set of technologies and features that Cisco technology can deliver. There are others who are going to be looking for a plug and play solution that is very low cost and they'll be drawn to Linksys. So, really what we're trying to do is really deliver this broad set of solutions that covers this large market.

Could you please define 'the connected office'?

David Tucker: A few years ago a small business typically had a phone system and a fax machine and usually a printer. Now their business has evolved. They are interested in leveraging the network and the Internet as way both internally and externally to reach out to their customers, to their suppliers and to their vendors in a new way. To do so they need to incorporate technology and applications and tools that connect them to the world and makes them seem as if they are a larger company. So these small businesses now have the ability to leverage IP telephony for voice, for example, and to easily communicate with suppliers and do business deals all around the world, whether in China or in India or wherever.

They also have the ability to enable their employees to work at home, which was totally unheard of for small businesses up until the last few years. The technology was too expensive to be able to do that. Now, it's at a point where they can easily have employees at home, or employees in their vehicles using mobile technology. The ability to reach out across the world and actually have a diverse global company, but yet they are really a very small company is now achievable.

The technology sounds great, but how can you bring a comfort level to the small business owner that they can handle this technology? David Tucker: This is one of the keys to the small business marketplace and where selling to this market differs greatly from an enterprise orientation. Small businesses don't have a large IT department to help them implement this technology. So the key is: it must be simple. Simple to understand, simple to implement, and easy to use. We have worked intensively to take the complexity out of configuring and provisioning, making it plug and play and self installable and self provisionable.

Is this part of the attraction of Linksys One?

David Tucker: Yes, one of the most powerful things about Linksys One is that it is a comprehensive solution that is feature-rich and will be provided by a hosted provider. The small business customer doesn't have to piece it together themselves, the provider does that, and all the pieces are going to work together. And they'll all be manageable. The business owner can focus on his business and not worry about whether this technology will work with that technology or product, since it's all built to work together. So, it provides the small business owner with a great deal of peace of mind.

Linksys is announcing Linksys One - 2.0. What does this represent in terms of evolution of this product?

David Tucker: Version 2.0 is the release that we've been working on for the last two years and is designed to help meet the increasingly sophisticated needs of our small business customers. It not only provides key system and PBX voice functionality, it also now incorporates technology such as storage, wireless, video surveillance for network security and for physical security. It's comprehensive, easy to use, and targets the small business customer who wants a solution that does it all at the right price point.

One of the unique things about the Linksys Connected Office business unit that developed Linksys One version 2.0 is that it is the only organization within Cisco that actually owns all the hardware and software pieces within a single organization; that gives up some very large advantages. It gives us the advantage that we can make it all operate together, make it plug and play and have synergies among the components. So, it's very probable that a customer may start with one piece of Linksys One technology. Maybe they'll bring in a broadband connection from a service provider into a services router and then they upgrade it to a switched network and then maybe one or two years down the road they add IP telephony. And then they add an application on top of it such as video surveillance or CRM. So, it's a solution that allows a customer to add elements as they are able to, and it grows with them as we continue to bring out new applications that they can download and add to their solution.

One other important element of Linksys One that makes it very powerful for small businesses is it removes the burden of maintaining equipment--customers don't have to worry about the latest hardware firmware release, or if their system is backed up, or if they have to upgrade their hardware to run the newest version of critical software; Linksys One does all that for them. Our technology upgrades itself on a regular basis so we keep the customer current. And that's really unique in the market. Competitors don't provide this full-service capability.

Can you make a pretty compelling return on investment pitch to these folks with Linksys One?

David Tucker: The small business marketplace is very much focused on price and cost and they want to know their cost on a month-by-month basis. The value of Linksys One is that the customer works with a single hosting provider who can provide a whole range of services together, all from a single vendor--their voice services, voicemail, call center services, customer relationship management (CRM) services and of course Internet access. And at a great price point! We're finding that, in many cases, customers pay from 30 to 40 percent less than they are paying today. They get a single bill and when you consolidate all these services together, you not only provide them with a predictable monthly fee but now the total fees of all these together is less than what they're paying today. So, it offers them a complete solution at a much reduced price than what they have today.

How does Linksys differentiate itself in the market from competitors such as Netgear or D-Link? What role does the Cisco relationship play in creating a particular value to the customer?

David Tucker: The Cisco relationship and the Cisco name and technology is very powerful. It is not only a comfort to our customers but also to our channel partners who know that we're here to stay. They know that we've made these investments and we are going to make our products successful. Even more than that, what really makes us different from Netgear and others is the fact that we're investing in our own development. This is very unique for the small business space. We have a very large development organization that is creating our own intellectual property in our applications, and that is unique. We're not simply leveraging third parties like our competition is doing. We're actually adding value in the applications themselves.

Let me give you an example. A key application that we're delivering as part of Linksys One is video surveillance that provides the small business with physical security, which is something many small businesses are concerned about. If somebody's snooping around at your back door, you'd like to be alerted to that at home, so you can record that video and put it onto a storage device so the next morning when you come in you can view it and see who was there. Another example is a real estate firm that may have female agents working at night. If somebody knocks at the front door, you'd like it if your agent could push a button on your phone and physically see on the phone the video of the person at the front door and be able to decide whether to let them in.

It's fairly involved, however, to make an application like this work as you have to link in the telephone system, the cameras, you need a link to network storage, a link into the network infrastructure--and you need software that ties it all together.

Because Linksys One is a complete solution, we are able to integrate the telephone system (which is now part of the network), other elements of the network, the cameras, and network storage devices in a single application to deliver physical security.

If I'm a small business and I grow and find that the Linksys solution is not longer sufficient for my needs, can I trade up to a Cisco solution?

David Tucker: We offer customers a financial trade up program from Linksys to Cisco so that they can protect their investments in the equipment as their business evolves. We're also working with Cisco on the technology synergies where a lot of the technologies that the customer has already in their network can move forward with them, with the addition of some new components from Cisco. This migration path means that we can now take a small business and evolve them all the way up to an enterprise business as they grow.

From an information-sharing standpoint, is there information that Linksys is able to give to Cisco because of its experience with consumers and small business?

David Tucker: Absolutely. When you look at the SMB select program inside Cisco, it is very similar to our program and a lot of what we've learned about the product technologies and synergies Cisco is going to leverage from us as well. One of the things that we are going to be doing from a organizational standpoint is we're going to continue to work very closely with Cisco. We're not working in silos, Linksys and Cisco. I sit with Cisco management on a weekly and monthly basis. We talk about product synergy. We want to be sure that when the customer looks out at Cisco and Linksys they see a combined strategy and a combined synergistic approach. We want the customer to be comfortable that they can not only start with Linksys technologies and move up to Cisco technologies, they're also comfortable with the support that's behind it and the commitment across the board from John Chambers and Cisco, all the way down to the very smallest customer.

Can you explain the linkage of the new Linksys channel partner program with Cisco as a unified program for registered partners and distributors?

David Tucker: This program will be formally announced on June 6th and will become operational on August 1. The program's goal is to bring the two channel programs of Linksys and Cisco together. Today, both Cisco and Linksys each have a registered partner program with a base of registered partners. They are fairly large so we're going to put these two bases together and we're going to allow partners from each to access features and capabilities of both programs. So partners in the Linksys program, for example, will have the opportunity to take various levels of training and specialization in the Cisco program and then as they move up the value chain there's various levels of access to technology and various discount levels. So, we look for a lot of cross-fertilization as we move along between the two programs.

Is there still a perception among small businesses that a company the size of Cisco won't be responsive to their needs?

David Tucker: Early on that was probably true as Cisco was viewed primarily as an enterprise-focused company. But with the recent product announcements from Linksys and the large commitment Cisco has made to the SMB market, the small marketplace is realizing that we're here to stay and we're focusing on small businesses. But what's very clear is that these small businesses don't want to see us simply taking enterprise solutions and pushing them down to their space. What really opens their eyes is that, in fact, we're custom building solutions from the ground up for small businesses and that's what we've been doing with Linksys One. It's also what Cisco is now doing. So, we're really targeting that commercial space with custom- built solutions for this market. The perception is changing and people are saying, hey, we know Cisco has the quality, we know you have the technology. Now, you're starting to listen to me and bringing to me solutions that I can really use, incorporate into my business and it can change the way I operate.