Networker: Becoming very rich
Speculation is mounting in financial circles: which company will be the first to reach a market capitalisation of US$1 trillion?
This will be an historic event. Market capitalisation (that is, the total stock market value of all of a company's shares) of US$1 trillion would mean that the company is worth US$1000 for every one of the world's billion poorest people.
This is probably enough to solve the housing, food and water problems for the whole world. That's not to suggest for a moment that such a company would do anything of the sort, but it puts the figure into perspective.
Many had taken for granted that this honour would go to Bill Gates' Microsoft. Valued at something around US$500-600 billion, the software company is well on the way.
However, another information technology company is now making a run for it: Cisco Systems.
In the second week of February, Cisco passed General Electric to become the second highest valued company in the world, at US$440 billion. General Electric, a company with a century of tradition, is well known. Cisco, formed less than 15 years ago, is virtually unknown.
Cisco's most important products are the boxes that make the internet work, called routers. In the early years of computer networking, there were various approaches. One was ethernet, a system which worked only within a small area. It is used in local area networks.
However, a network which can only cross a building or school is limited, and there were many contenders for a larger network, a wide area network.
IBM worked out a networking protocol (a set of rules) called SNA. Like IBM's management structure, it was based on a rigid hierarchy. The UN-related International Standards Organisation developed some proposals, including X.25 that worked with limits. A range of commercial organisations promoted two technologies called frame relay and cell relay (or asynchronous transfer mode).
To just about everybody's surprise, all these technologies (with the exception of ethernet) were superseded in the early 1990s by one of the oldest: the TCP/IP protocol used by the internet.
Based on some smart innovative work in its early days, Cisco was one of the first players in the router market, and has since held the bulk of the world market. These innovators were to lose out to business investors in the short term.
Cisco's senior management today appears devoid of technical ideas. Since becoming a public company, Cisco has maintained its position through a strategy of buying out one new technology company after another. To date, it has bought about 50 and it plans to purchase another 25 or so in the coming year.
Cisco's market position has allowed it to hold on to two archaic technology approaches.
The first is the programming language called IOS, which is used within its routers. This steadfastly remained awkward and clumsy throughout the '90s, while simpler and better systems were starved of support. Like the early word processing programs, this helped to lock customers into Cisco-only purchasing policies.
The second is Cisco's emphasis on proprietary protocols for information travelling between its routers. This is in stark contrast to the overwhelming support for open, published, free technical standards used by the internet as a whole.
Expect to hear a lot about Cisco as commentators start to talk about the wonders of the new giant. We will no doubt be told that hard work, innovation and foresight have been properly rewarded.
That sounds better than saying that a sharp investor got the better on some original thinkers, then used an early market lead to beat out opponents and hold back technology while buying everything else that came along.
But then that's the market.
By Greg Harris