The Friday Interview: Barry O’Sullivan, Cisco

5 Aug 2005

Do you know the way to San Jose? If you don’t, Barry O’Sullivan (pictured) certainly does. The Irishman who used to run Nortel in Galway has fetched up in the heart of Silicon Valley with archrival Cisco Systems, where he is head of global internet protocol (IP) communications.

A few years ago, this job might have been seen as interesting but peripheral in a firm committed to the real business of selling switches and routers but nowadays IP telephony or voice over IP (VoIP) is where it’s at, and O’Sullivan is in the happy if no doubt pressured position of steering one of the fastest-growing units within Cisco.

The division is growing at a 40pc annual clip and its revenues are running at over a billion dollars a year, which means it must now be firmly under CEO John Chambers’ gaze (even in a US$22bn company, US$1bn is still a significant lump of money). In 18 months, Cisco has gone from sixth to second place in the IP telephony and overall business voice market and is ‘only’ a million dollars shy of market leader Nortel. “My boss said to me: ‘You couldn’t find another million dollars?'” says O’Sullivan laughing.

Since O’Sullivan took up his current role two years ago, IP telephony has gone way past the early adopter phase. “It took us three years to ship the first million IP phones but just five months to ship the most recent million. You can see the shape of the curve,” he says.

Cisco now has 25,000 customers using IP telephony. And it’s no longer just the smaller companies; it’s also larger enterprises, such as British Airways and Airbus, that are switching to the platform. More than 60 of its customers have more than 5,000 IP phones installed and one, Bank of America, has an incredible 180,000 handsets in place. Irish customers, naturally on a more modest scale, include insurance firm Hibernian, which is planning to install upwards of 1,200 IP phones.

According to O’Sullivan, it is clear that many organisations have reached the stage where they are having a serious internal debate about whether to retain and upgrade their legacy telecoms infrastructure ie, a separate telephone system, or switch to an IP network on which to run both their voice and data traffic. “What we say to customers, if they are thinking of slowly upgrading their old PBX, is: do you want to invest in the part of the network that you’re going to keep or invest in the part of the network that you know is going away? That’s pretty compelling for people.”

So, for O’Sullivan the days of the PBX, the venerable company telephone switch, are definitely numbered and its epitaph is already being written — and sooner than many people might think. “For new system shipments, in two years it will be all IP,” he asserts.

What is driving the growth of IP, particularly in large multi-branch organisations such as banks, are cost savings, O’Sullivan observes. The savings mainly come from the lower call charges that result from routing calls over a corporate IP network rather than the public phone network — so-called ‘toll bypass’ — and the reduced maintenance fees that result from having a centralised IP-based network rather than having to have technicians on hand to manage local phone systems. The return on investment argument is irresistible, believes O’Sullivan, who cites the example of a new customer in the US, South Trust Bank, which has recently installed Cisco CallManager software within its corporate data centre, allowing it to distribute phones anywhere on the network.

“If someone new joins a particular branch at the bank they simply FedEx out the phone, the person plugs it in and it self configures. They save so much money on maintenance, changes and move-outs and typical VoIP cost savings through toll bypass that the system will pay for itself within a year,” he says.

Another big driver is the impact of personal experience – the fact that growing numbers of people are using VoIP services such as Vonage and Skype in the home. “If the chief information officer is using Skype or IP telephony at home he or she is going to go into the office and think, why aren’t I using it here?” says O’Sullivan.

In fact, the line between consumer technology and business technology is getting increasingly blurred, he feels. “Things such as text messaging and instant messaging that people are used to using on the mobile phones and PCs have now become business tools. It’s a type of generational thing too. The younger people are used to communicating in this way. My kids talk to their cousins in Ireland using instant messaging and web cams — we’re going to see more of that coming in.”

In the same way, the line between mobile and fixed-line telephony are also becoming blurred, with both Motorola and Nokia announcing agreements with Cisco that will allow the handset manufacturers to produce dual-mode smart phones that combine Wi-Fi and mobile technologies. The handsets will operate using IP-based 802.11 technology inside the enterprise and mobile telephony outside, with a seamless hand-off between networks.

Here again, cost is the main driver, notes O’Sullivan, as the new handsets will also allow companies to cut their mobile bills as more mobile calls are carried over their internal Wi-Fi network than the cellular network. “Some of the cellular providers in the US are a little worried about it because they see more of their minutes going on to the IP network,” he notes, “but the more progressive of them see it as a way to attract business customers because they will see it as an offering that can reduce subscriber churn.”

Another convergence trend O’Sullivan identifies is 3G video and the enterprise, whereby workers who are on the road call back into their office using their 3G video phones, which in turn is driving demand for video telephony at work.

Married to an Irishwoman, O’Sullivan admits to feeling family occasional pressure to return to the auld sod at some stage but acknowledges that finding a role at a similar level here, or even on the East Coast of the US, is just not on the cards.

In the world of telecoms equipment at least, Silicon Valley is definitely the place to be and O’Sullivan is clearly enjoying being at the centre of things. He has no plans to leave San Jose any time soon.

By Brian Skelly

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