• 01/25/2005
    10:18 PM
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Cisco Acquires Airespace: Shaking Up Enterprise Wi-Fi

Cisco's announced acquisition of Airespace last week for $450 million in stock was the latest of a number of recent moves toward industry consolidation. But it should also be one
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It will be interesting to see what kind of pricing model Cisco decides on for this new "smart-everywhere" architecture. The company has historically charged a significant premium for its well-engineered APs. Vendors like Airespace, Aruba, Trapeze and Symbol have priced their APs as giveaways, making most of their profits on high-priced network controllers and software. The combination of premium-priced APs and high-cost controllers could force IT managers to modify their financial models for rolling wireless out enterprisewide. They won't want to do this, so Cisco will feel some pressure to lower prices.

Market forces will also play a key role in future system pricing. Before this acquisition, Cisco was already the dominant force in enterprise Wi-Fi, and many pundits have long proclaimed it "their market to lose." While Cisco's near-50-percent enterprise wireless market share makes it the clear leader, much of that market was soft--so soft that a number of high-profile, loyal Cisco Ethernet customers (Microsoft is rumored to be amongst them) were jumping ship for wireless solutions from Airespace, Aruba, Trapeze and others. One senior IT architect from a major financial services company and a large Cisco customer told me that he felt Airespace had acquired the position of thought leadership in the enterprise Wi-Fi market. Ouch.

Now those "on-the-fence" customers are much more likely to remain loyal to Cisco for wireless. Aruba is now elevated to the mantle of "most credible alternative to Cisco" in the enterprise, because of both its technical innovations and its market success. When I recently asked Aruba co-founder and VP of marketing Kerrti Melkote what percentage of the 200-plus enterprise customers they touted were Cisco shops, his response was "almost all of them." Now, when Aruba competes in Cisco shops, it will compete against Cisco's name and Airespace's marketing and technology. That will be tough.

There is reason to wish success upon Aruba, Trapeze, Symbol, Meru, Proxim, Colubris, Nortel, 3Com, Extreme and any other competitive alternatives to Cisco. Cisco, which has a record of working outside the IEEE to define its own proprietary standards (LEAP for security, CCX for more advanced capabilities), needs competition, not only to keep it honestly engaged in industry standards efforts but also to encourage continued innovation. A fat, happy Cisco could be bad news for everyone.

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