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Sun 27 Nov 2005 04:00 AM

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3Com gets back on track

Networking giant 3Com has battled to shake off the stigma of expensive strategic blunders. Now, CEO Bruce Claflin believes it is a leaner, more focused operation than at any time in its history

|~|Clafinbody.jpg|~|3Com has re-emerged as a player in the enterprise space thanks to a deal with Huawei Technologies and the purchase of Tipping Point. |~|As an outsider to the networking industry, when he took up the role of president and chief operating officer at 3Com in 1998, Bruce Claflin said his first priori- ty was “to listen and learn”.

Seven years down the line, he’s had plenty of opportunities to do both: he’s since taken on the role of chief executive officer at the networking firm and has led it through one of the toughest periods in its history to something approaching the pre-eminence it enjoyed in its heyday.

It hasn’t all been plain sailing by any means; the company has undergone a number of switches in strategy in the past few years, such as its decision to exit — and then re-enter — the high-end corporate networking market, which it used to share with arch-rival Cisco.

Its initial exit from the enterprise market had seen it push hard into the consumer space, and champion its Palm handheld device as central to its strategy, only to subsequently spin off the Palm Computing unit altogether.

These changes in strategy have come at a cost. Staff numbers, which had been swollen by its acquisition of US Robotics in 1997, have been cut savagely, from over 12,000 five years ago to around 1800 now.

What has emerged is, as Claflin is quick to point out, a very focused company that has a clear strategic vision, one it has been bullish about pursuing. Central to that strategy is its return to the enterprise networking market.

Many observers have been critical of this strategy, arguing that customers in that market will be reluctant to trust 3Com, but Claflin has no truck with this argument.

“It’s been six years [since 3Com exited enterprise], which is five lifetimes in our industry,” he says. “I think, as they say, time heals all wounds but more importantly when I talk to customers I tell them don’t look at what I’m saying, look at what I’m doing,” he adds.

As proof of 3Com’s commitment to the enterprise market, Claflin can point to a couple of major moves the company has made in the past few years.

Firstly, having decided to get back into the enterprise networking market, Claflin was instrumental in 3Com’s signing of a deal with Chinese networking equipment maker Huawei Technologies, which gave it access to switching and router technology products that are significantly cheaper than Cisco’s.

The two companies formed a joint venture in 2003; it’s proved so successful for 3Com that the firm is now looking to
take the controlling interest.

“That venture is going fabulously well,” Claflin asserts. He points out the joint venture originally employed 850 staff and pulled in around US$20 million in revenue in its first quarter of operating: “Now they’re approaching US$100 million in quarterly revenue, a five-fold increase. They have close to 3000 people and this is just in two years,” he states.

For more proof to prospective customers, Claflin highlights 3Com’s capture last year of security firm TippingPoint Technologies for US$430 million.

TippingPoint specialises in intrusion prevention technology, providing an appliance that sits on the network and inspects incoming packets to determine if they are malicious.

It is a technology that Claflin says proved to be a “must-have” for 3Com. “Within the enterprise the major trend we saw was the ability to handle convergence — voice, video, data, graphics, fax — all over a single network,” he explains.

“As we explored convergence, we realised that if you couldn’t make the network secure customers were never going to commit to putting all of their traffic, all of their applications into an unsecure environment."

"So secure, converged networking became the focus of the company. We had several security technologies internally but frankly I felt they were insufficient to meet what I call the growing threat environment,” he states.

“So we believed that we needed to have technologies that would automate the security environment and would preemptively take security risk out of your network before they could ever touch the application, wh-ich meant intrusion prevention, and the best intrusion prevention company in the world is Tipping Point,” he claims.

As far as Claflin is concerned these two ventures represent compelling evidence that 3Com is back as a serious player in the enterprise networking space once again.

“I’d love to be able to tell them [customers] they should believe me because I tell them, but they probably look at where our money is going,” he says.

The issues around customer confidence in 3Com in the ente- rprise space were “in another decade and a different century and they are past us,” he says.

If the issues truly are behind 3Com, it is down to Claflin’s work. While he only took the reins as chief executive officer in 2000, his predecessor, Eric Benhamou, made it plain back then that Claflin had already played a key role in the development of the company’s strategy.

“He co-architected the transformation we went through last year. His fingerprints are all over the company,” Benhamou told a US newswire service at the time.

Not a bad achievement for a man who Benhamou also ack- nowledged: “was not a networking industry specialist coming in, but he’s learned a great deal about our business, our technology and our competitors.”

Claflin has certainly learned about one competitor: he is extremely vocal on the subject of rival Cisco, the company that surpassed 3Com in the 1990s to capture the leadership of the networking market.

Since its deal with Huawei, 3Com has been frequently referred to as the firm that offers a cheap alternative to Cisco. Is this a tag that bothers him?

“I think that’s true at one part of the network, which is infrastructure and the reason we are perceived that way is because we actually say it,” he states confidently.

“In infrastructure, our belief is it should be fast, reliable, always available, and cheap. When I say cheap I don’t just mean cost to buy, I mean equally cost of ownership, and there are enormous costs that go into managing that proprietary environment,” he claims.

By that proprietary environment, he means the Cisco
environment, and that is a subject he returns to later, but he is also keen to qualify his own remarks.

When talking security and the Tipping Point solution, Claflin is keen that 3Com should not be seen as just a bargain supplier.

“Security is the number one problem that CIOs face today,” he points out.

“When we talk to a customer there it is never about cheap,
it is always about being better at doing things you could never do before to keep your network running and highly available. And there, frankly, we command a premium because we are unquestionably the best company in the world to solve one of the world’s toughest problems,” he adds.

||**|||~|Clafin4body.jpg|~|3Com has undertaken an aggressive and singular approach since it decided to re-enter the enterprise networking market currently dominated by Cisco Systems. |~|While Cisco is also keen on making inroads in to the security market, the two companies have a fundamentally different approach, Claflin claims.

“Where the difference lies is that we are completely committed to openness and interoperability and Cisco, of course, is proprietary,” he states.

“All of our applications work on anybody else’s infrastructure
I would guess that 60-70%, maybe more, of Tipping Point products protect a Cisco network. We’re agnostic, we don’t care what the underlying infrastructure is. Tipping Point can secure it,” he claims.

By promoting a commitment to open standards, Claflin believes it can gain ground against its rival.

“We are a classic attacker,” he states. “There is this guy that sits at the top of the hill called Cisco. Because he controls the hill he’s set up ways to protect his installed base by having proprietary links between the various pieces. The whole idea is to leverage the installed base to get the next order.”

“We’re completely the opposite. We say you should get technology whenever you need it, wherever you need it, wherever you want it in the network, without regard to what came before or what came after. It is a fundamentally different approach from Cisco,” Claflin says.

“To give a different example, our switches work with
anybody’s routers and vice versa. In fact, our switches will work in a Cisco environment as if they were a Cisco-like product with similar command line interfaces and so on,” he says.

“So not only have we broken down any proprietary links between services, applications and infrastructure, we’ve broken them down within,” he adds.

“In that regard, we’re hugely different from Cisco, where everything is under IOS and they’ve made certain to put proprietary interfaces at each boundary in an attempt to lock the customer in. That’s the big difference between our two companies,” he emphasises.

Convincing customers of that fundamental difference is going to be key to 3Com’s success in the future.

Ask Claflin what keeps him awake at night and his response is succinct: “There is this enormous power of incumbency, which Cisco, as our principal competitor, has because of their installed base,” he admits.

“So you to have to overcome the inertia that exists because of that. I would say that most of the things that keep me awake at night are execution related; we certainly have the financial strength to pursue our strategy,” he goes on to say.

“We have all the technology to pursue our strategy; I think it’s more of the execution side of it,” Claflin admits.

The man who once said he was ready to listen and learn now has to be the chief executive who delivers the message: Claflin can claim to have taken 3Com a long way in his tenure, but he is well aware that there is a still longer way to go.

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