Cisco Systems is withdrawing from Smart City Push

City planners and local authorities have been preparing for years for a future where technology is reshaping the urban landscape, with features such as self-driving cars, smart lighting and connected alarms to protect residents. Communication using 5G technology covering the city would allow widespread adoption of smart devices.

For Cisco, best known for providing routers and other network equipment to corporate customers, that vision promised a burgeoning new market. And the effort, based largely on the company’s Cisco Kinetic for Cities software services, became a high-profile initiative for Chief Executive Chuck Robbins as he sought to transform Cisco from a hardware supplier to a company more closely involved in the lucrative business of selling. of software. Services.

Now Cisco continues. “We recently decided to stop selling and eventually support [for] the Cisco Kinetic for City product line to align our product investment with changing market and customer requirements, ”a company spokesperson told The Wall Street Journal.

It can be difficult to send an old tech company into promising new areas. International business machines Corp.

For years, the Watson artificial intelligence system tried to introduce into industries such as healthcare, but many customers dropped the product when they found that it had limited impact on patients. Software giant Microsoft Corp.

tried his bid to break into the hot smartphone market. And chipmaker Intel Corp.

said it recently closed its Intel Studios effort aimed at playing a bigger role in augmented and virtual reality.

Cisco bought Jasper Technologies Inc. in 2016 for $ 1.4 billion to strengthen its expertise in the so-called Internet of Things, the connected devices that would also support a smart city. The following year, it launched Cisco Kinetic for Cities.

“There are many great opportunities” in smart cities, Mr. Robbins told the Journal in 2017, noting the potential benefits of technologies such as connected lighting. Soon after, the company said it launched a $ 1 billion program to help cities use technologies to transform their neighborhoods.

For Cisco, the shutdown comes as the company embarks on a broader restructuring after disappointing Wall Street with its fourth-quarter fiscal results in the summer. Mr. Robbins said Cisco would cut $ 1 billion in spending and staff to reflect changes in customer spending priorities during the coronavirus pandemic. The company, he said, would pay more attention to security services that are now appreciated by customers adapting to a distributed workforce.

The pandemic has hit the local government budgets needed for smart urban investment hard. A June survey by the National League of Cities, an advocacy group for a large number of cities, found that 65% of cities in the US postpone or cancel infrastructure projects.

Cisco isn’t the only company struggling to make smart cities a business success. This year Alphabet Inc.

Sidewalk Labs Inc. has pulled out of a billion dollar smart city project on Toronto’s waterfront. The Google parent had poured hundreds of millions of dollars into Sidewalk, most of which was for the Toronto project, and had little to show for it.

Cisco’s approach to the smart city was different from Google’s, which focused largely on showcasing its technology on a single site to serve as a model that others could embrace. Cisco has established a wider network of partnerships with locations in different countries to support their smart city projects.

“Smart cities are a hard sell,” said Christopher Reberger, a former Cisco executive who has analyzed the economy of smart cities. Return on investment can be difficult to quantify, he said, and merging disparate smart city technologies can seem daunting. “Even basic things like public WiFi were difficult.”

Cisco said it did not abandon business with local authorities and was committed to working with cities in areas such as network connectivity and security. It would also support companies offering smart city technologies, the company said.

But the decision to cut back is a setback for Cisco, which has tried to boost sales of software services over hardware.

“Cisco’s transition to software and subscriptions has been mediocre at best,” said Jim Fish, senior research analyst at Piper Sandler & Co. Mr. Robbins said the company was meeting its goals.

Write to Aaron Tilley at [email protected]