Today’s world is filled with gadgets. If you just look around you will realize that you are surrounded by all kinds of devices. When people talk about technology most of the time they are talking about software. But what is often not discussed is the hardware part of the technology. You have telephones, bulbs, and many other things that do not have any kind of software in them. These are products that are more important for people. Because they make life so much easier but no one actually realizes this. A simple thing such as an LED bulb is a very important part of our life. Just imagine if you did not have a light bulb then how difficult your life would have been. When people talk about technology companies all they talk about are companies like Microsoft, Apple, Google, and some other companies. But they never talk about the companies that manufacture typical hardware products.
This is because there is not much innovation in them and most of them are basic products. However, the products manufactured by these companies are used by a large number of people around the world. Some of these companies also provide telecommunications and software products but people do not know much about them. They might know the name of the company and they might even be using the company’s product. One such company is Cisco. This is a company that most people might have heard about but do not know anything about. Well, after reading this article you don’t have to feel that way again because this article is completely about that. In this article, you are going to learn about the business model of Cisco and how it makes money. But before knowing about those things first let’s know a little bit more about the company.
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What is Cisco?
Cisco or Cisco systems incorporated is a multinational technology company. This is an American company that was founded in the year 1984. The founders of this company are a couple, they are Sandy Lerner and Leonard Bosack. Before founding the company both of them used to work at Stanford University. While Leonard Bosack was the manager of the computer science department Sandy Lerner was the director of computer facilities at the business school. They wanted to come up with something that helped them to communicate with each other from their offices that were very close. So Bosack designed a technology that could connect the LANs of both their offices. The specialists of this device are that it could choose the best part for the flow of data among the networks. They tried to sell this product to many companies but they did not have any success.
This is when they decided to launch their own company. Apart from there are other co-founders like Kirk Lougheed, Bill Westfield, and Greg Setz. Things were not easy in the beginning. Both the founders had to mortgage their homes to invest in their companies. Not only that but they used their credit cards and even postponed the salaries of their early employees. It was in 1986 the company sold its first product that is a router. It became the first company to sell a multi-protocol router as the router was of TCP/IP protocol suite. Cisco was one of the first companies that successfully sold the routers commercially.
By the end of 1987, the company was generating more than one million in revenue. After this, the company started producing different kinds of routers for various communication protocols. The company had its IPO in the year 1990. It generated $224 when it went public. In the same year, Sandy Lerner was fired because of this Leonard Bosack resigned from his position. In 2000 it was the most valuable company as it was worth more than $500 billion. As of today, the company is worth $173 billion which is less compared to 2000 but it is still one of the most valuable companies.
Business model of Cisco
Cisco has been in the industry for more than three decades and it has been one of the most valuable companies in the world for many years. There are a few things that helped the company to be as successful as it is today. Let’s take a look at the things that helped it become so successful.
Offering services to different customer segments
This is a great advantage and opportunity for Cisco to do a lot of business. The company has products for customers that belong to different customer segments. So it can sell products to all these customers to run their business. Cisco manufacturers different types of products for different customers. Let’s look at the customer segments it offers its services to.
Public sector
Educational institutions, Federal governments, state and local governments come under this segment.
Enterprises
These are usually firms that have more employees and many offices in different geographical locations.
Service providers
These are the companies that provide telecommunications services, wireless services, cable services, internet services. Not only that it also provides audio and video communication services to businesses and consumers.
Brand
As mentioned earlier the company has been in the market for more than three decades. It is a very popular company. People all around the world recognize Cisco. Cisco has a good reputation for providing high-quality products for all kinds of customers. Having Cisco products or partnering with them will help the companies a lot. The brand is one of the reasons that attract customers.
Variety of products
If you just look at the number of products that Cisco offers your mind will be blown. It literally manufactures every technology product that an IT company needs except for computers. It offers everything from servers to routers to telecommunication products. Not only that it also offers software services. You can avail of software networking and cloud services.
How does Cisco make money?
Many companies of this size have multiple revenue streams but Cisco has only a few. There are two ways in which it makes most of the money. Let’s look at them.
Selling high-quality hardware products
This is something that you already know. When people think of Cisco the first thing that comes into their minds is the hardware products that they sell. As mentioned earlier it manufactures almost all kinds of products that a company needs to run its operations. Not only that but it also keeps innovating their products so that they are compatible with new technology. The majority of its revenue comes from selling telecommunication products, network hardware, and other similar products.
Subscription fees
It also generates revenue from the software and infrastructure services it provides. Cisco provides the infrastructure for companies to run their operations both offline and online. It also has a video and audio conferencing application in the form of WebEx. Cisco WebEx is one of the leading video conferencing services that are used by businesses for online meetings and other things. It charges a monthly fee for using its services.
Conclusion
This is the business model of Cisco. It is one of the most popular hardware manufacturers in the world. Cisco provides its services to thousands of businesses around the world. You can learn about other interesting business models on Zeen. Click here to know about the business model of American Express.
