Nile founders, John Chambers, left, and Pankaj Patel, have worked together for nearly 25 years.
Nile River
In two decades running Cisco, John Chambers transformed an emerging computer networking company into one of the most dominant technology companies in the world, with nearly $50 billion in annual revenue and huge global customers.
Now, seven years on from selling switches and routers, Chambers is challenging its former employer with a startup that is about to exit stealth mode on Wednesday. Chambers, 73, teamed up with former Cisco chief development officer Pankaj Patel to form a company called Nile, which promised to expand the company’s Wi-Fi world.
It’s a market that over the years has seen Cisco fight it Juniper Networks and Aruba Wireless, now a unit of Hewlett Packard Enterprise. Chambers and Patel say that neither Cisco nor its current competitors have developed the wireless technology needed to meet the demands of the modern office, with its wide range of devices, combined workflow trends, and Advanced security threats.
“We’re building something that our previous company didn’t build,” Chambers said in an interview with CNBC. “It’s a whole new field. It’s not like we’ve done something, and we’re trying to make it better.”
Nile has raised $125 million in the four years since he and CEO Patel teamed up to start the company, though its funding rounds have remained private to date. Through his investment company, JC2 VenturesChambers said he owns 10% of Nile. Other investors include March Capital, 8VC and Iconiq Capital.
Nile’s technology has only been available to customers since May, so the company has a long way to go before negotiations over market share make sense. The spokesman said Nile has 20 production deployment units, including at SpringThoughtSpot and the University of Missouri-Kansas City.
Nile is delivering a simple user experience that doesn’t require customers to upgrade their hardware. Instead of selling big and expensive boxes – the Cisco model – Nile will charge organizations based on how many people use its network infrastructure each month.
That’s especially relevant at a time when employers are figuring out their hybrid and remote working plans. Patel says offering only Nile service will save customers between 30% and 50% at each location where it is deployed.
“We are very different,” he said. “We actually match the number of users on a network. In a building, if there are 250 or 300 users on a given day, we only charge them for the number of people who are using it.”
Nile is not the first company to attack Cisco and other hardware vendors with a software-based alternative.
‘Already an industry buzzword’
While Chambers and Patel still work at Cisco, many Silicon Valley startups have raised large rounds of ventures as they tout an approach known as software-defined networking that involves developing develop advanced software and put it inside merchandise boxes. But the hype never materialized for the big newcomers as incumbents, including Cisco, found their way in. market.
More recently, Cisco began allowing customers to pay for network as a service (NaaS), with 2021 Introduce what it calls Cisco+. And earlier this year, HPE announced GreenLake for Aruba. However, very few large companies have signed up to these agreements, said Brandon Butler, an analyst with technology industry researcher IDC.
“The incumbents have been trying to do NaaS for a long time,” says Patel. “It has been an industry buzzword forever.”
Chambers says that Nile’s approach is to connect what Amazon for storage and computing, allowing people to rent resources and pay for what they use monthly instead of requiring them to buy, set up, and manage their own hardware. Butler of IDC says that, in the data center, the network is lagging behind computing and storage in its move towards consumption-based usage.
Nile’s original product line included Wi-Fi distributed access points within a facility, access switches that connect to access points, and distribution switches that can connect access switches to Internet. The software allows administrators to see if the network is working properly, learn about problems, and monitor the performance of applications.
While taking on Cisco is a noble task for any startup, few are better positioned to know the company’s weaknesses than Chambers and Patel, who have worked together. for about 25 years. Chambers joined Cisco in 1991, a year after the company’s IPO, and in 1995, took on the position of CEO, a position he would hold for the next 20 years. Patel spent nearly 14 years at Cisco and before that was an engineer at a company that Cisco acquired. At the time of his departure, he was among the top four Cisco executives.
“Whether it is a public company or a private company, a small or medium or large company, any company can capture what we are involved with,” says Patel. “Why? Because anyone in any business, small or large, needs connectivity to do their job.”
Meanwhile, Cisco has been mired in low growth mode for more than a decade, including the last part of Chambers’ career there. The company hasn’t generated double-digit revenue growth since 2010, following the financial crisis, and has topped 5% only once since 2013.
For Chambers, the Cisco takeover carries some irony. As CEO, Chambers was known for making life difficult for lieutenant colonels who had left his rival company. The most notable example is at Aristaan enterprise networking company co-founded by Andy Bechtolsheim and David Cheriton, who sold a former company to Cisco.
In 2008, the duo hired Jayshree Ullal, who was once a top Cisco executive, as CEO of Arista. It was a move Chambers made. In 2011, according to The Wall Street Journal, Chambers “told executives to keep Arista from winning any new business from Cisco customers.” His salesmen then formed a “Tiger Team” to thwart “marketing efforts and thwart Arista’s planned initial public offering,” the Journal reported.
In 2014, Cisco sues Arista for patent and copyright infringement, causing a lengthy legal battle, which ended four years later with Arista agreeing to paid Cisco more than 400 million dollars to end the litigation.
Chambers told CNBC at the time of the lawsuit, “We need to send a message to the market that we will protect our innovation and also protect our customers.” Ullal responded, telling CNBC that Arista was “definitely blind and frustrated.”
“John should at least pick up the phone and call me,” Ullal said at that time. “Instead, it was in the press, and we only received it five days later.”
When asked about a comparison between what the former Cisco executive did in the past and what he is doing now, Chambers called it a “fair question.” He said that he and Patel had been away from Cisco “for many years” and had run about eight startups together since then. He said Nile is pursuing a transforming market that all incumbents cannot change, “and he added, “I’ve always believed that your competition always comes from below. “
Chambers also brought up another former Cisco member who left the company to build a thriving competitor called Launch. Eric Yuan, founder and CEO of Zoom, joined Cisco in 2007 through the acquisition of WebEx. He left Cisco in 2011 after failing to gain internal traction in an effort to build a more modern video conferencing system.
Yuan starts Zoom, has become a household name during the pandemic because its video chat software is easy to set up and use on any device in the office, at home, or on the go. Chambers highly commends Yuan and even uses Zoom for his virtual meetings (including this one).
“He was very creative,” Chambers said of Yuan. “I wish we’d be quicker on our feet to balance that out.”
