Armed with an increasingly comprehensive product portfolio, Cisco Systems is hoping to forge much closer relationships with service providers, becoming not just their supplier but their partner in network architecture.

During the company's last earnings call in November, CEO John Chambers — boasting of a surge in service provider revenue — augured a new era for its role in the carrier world. Cisco's service provider business is starting to mimic its enterprise business in the 1990s, he said, when businesses urged Cisco to become a closer partner, allowing the vendor greater influence over their networks — essentially standardizing around a Cisco architecture — in exchange for a lower cost of ownership. At the time, Chambers thought 10% of his customers would want such turnkey solutions while the rest would prefer to handpick their gear. But today, more than half of Cisco's enterprise customers call the vendor a strategic partner, Chambers said, “And a huge number standardize on us architecturally. I think the same opportunity exists in service providers.”

Accelerating that trend are service providers entering unfamiliar territory — telcos into video, cable operators into voice, etc. — and seeking Cisco's expertise to guide them. The surge in video traffic is also pushing carriers to more quickly move from Sonet/SDH networks to Ethernet over WDM, a technology trend for which Cisco is well-positioned.

“For some accounts, we're basically doing everything,” said Carlos Dominguez, Cisco's senior vice president of service provider operations. “Some cable companies are saying, ‘I don't understand voice; can you help me?’ Those who want to get to market earlier are saying, ‘You can probably do this better than I can. Why don't you roll it out and turn it on, and, over time, give it over to me?’”

The approach is consistent with AT&T's 2004 decision to deputize Alcatel as a de facto partner in its fiber-to-the-node deployment. But unlike that deal, which included subcontracts and outsourcing (and in stark contrast to Lucent Technologies' strategy of offering to use the best products, even if they came from competitors), Cisco wants its end-to-end offerings to be all Cisco gear.

The company will integrate its own products much more closely over time, Chambers said, particularly in the home entertainment space, where it has acquired a set-top vendor, a video-on-demand software vendor and home router vendor. For example, Cisco starts trials this quarter of a new video caching appliance for fast channel-changing IPTV that works with its 7600 edge routers and will eventually be integrated within the 7600s. “They're putting integration hooks between routers and set-top boxes,” said Joe Chiasson, Susquehanna Financial Group analyst.

Cisco is even considering having its own IPTV middleware. “If that ends up being the long pole on the tent that holds us up from being successful, of course we'll entertain doing something there,” Dominguez said.

Plus, Cisco, which didn't fare well in long-haul optical, has the products to aid service providers as they upgrade their metro networks to handle video traffic, said Michael Howard, Infonetics analyst. “What Cisco has is the Ethernet, the WDM, the ROADM — they have a transition platform that will allow carriers to move from Sonet to Ethernet over WDM,” he said.

Turnkey solutions won't appeal to everyone. Some carriers simply don't want to feel locked in to a single vendor. In particular, Tier 1 carriers are likely to have mixed opinions on the subject, Chiasson said, while Tier 2 carriers (with less internal resources to build their own networks) will be more open to it.

“Among Tier 1s, the all-inclusive package will probably still be in the minority,” he said.

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