3Com Corporation: Forget Cisco, Think Open Source

If you're focused on Bain Capital Partners' buyout of 3Com (COMS), I have only two pieces of advice: First, stop hoping that this means 3Com will compete more effectively against Cisco Systems (CSCO). In case anyone missed the news, Cisco buried 3Com in the enterprise market a decade ago and there's no changing that. Second, start realizing 3Com's best opportunity for success is in small and midsize business, thanks to an open source networking strategy that's finally coming together.

The key to 3Com's success is Asterisk -- an open source telephony platform. Much like Linux's ability to undercut Microsoft Windows pricing, Asterisk can support voice-over-IP applications at a lower price than traditional VoIP solutions from Cisco, Nortel, Avaya and other big equipment providers.

3Com's decision to support Asterisk is a move I predicted back in February. Now, 3Com is finally moving into the Asterisk telephony market. In fact, 3Com plans to offer Digium's Asterisk appliance to small businesses, the two companies announced October 1.

The Asterisk strategy could be a winner for 3Com in small and midsize businesses, and some enterprise departments. Other key targets should include K-12 and university CIOs.

3Com's partnership with Digium should not be underestimated. Digium pioneered the Asterisk market, and recently acquired a key rival called SwitchVox. 3Com is now far better positioned to serve small businesses that want low-cost VoIP systems.

But competing with Cisco at the high end? Let's not get ahead of ourselves here, folks. 3Com has made some progress in the past year, but the company remains a shell of its 1990s self.

Asterisk and the buyout by Bain may go a long way to changing that -- at least in the small and midsize business markets.

Comments

[Adam:]

Joe,

While I agree that the way to challenge the established incumbents is using Open Source (I am the founder of an Open Source Software Company) I question how this can work for 3Com. The business model for Open Source depends upon ongoing service/support fees. While 3Com can probably make some margin by bundling Open Source Software with hardware, these margins will be very small. 3Com delivers their product to market via distributor and resellers. The resellers are the recipients of the support fee's not 3Com. In fact, in the Open Source example you propose, 3Com is only providing a convenience by pre-loading Open Source onto a hardware platform, something that one of their partners can also do.

In fact, last reported quarter 3Com's service business was $9M on revenue of $319M

Open Source, Im not sure how 3Com can get there from here?

Adam

2007 Oct 02 10:34 AM

[User 140474:]

Joe, Adam, I think you may just only look at US market by saying 3Com ability to challenge Cisco. I think 3Com have its ability - never underestimate 3Com with its pioneer status and one of the inventor of Ethernet. I think buyer should think deeper when come to networking vendor selection in their large enterprise network deployment. Does the vendor committed to healthy and safety environmental when manufacture their high tech product ? What have been done ? Does the vendor only think money money & money to wall street ? What they give back to users and social ? Do they think of social responsibility and environmental responsibility? Are they think of customer cost saving ? Most of the high tech vendor still not doing or saying going to do.. But 3Com did it. go to 3com.com/green to disover how 3Com helps to protect the green environment. In large enterprise space, >1000 nodes. 3Com is winning many large enterprise deal in APR market and continue success in this market. To at today highest growth market in Asia. Especially China, India and SEA.I think as a users, I don't want to see a dominant vendor in this market. We want to have closer second player that can balance Cisco. They are too powerful & command premier price because perception of mostly large enterprise user in US think going with Cisco, they job safe. This is cheeting ourself. If you love our planet, if you love our children, if you care about our future. You will think what best for us. Now and Future. Green Solution, Open Standard, Cost Effective, Reliability.

Hope you all open your mind. Think.

Green

2008 Jan 15 06:14 PM