Ovum Study Confirms Growing Demand for Managed IP Services

Service provider managed service revenues projected to top $41 billion by 2009.

SAN JOSE, Calif., February 13, 2006 - Cisco Systems® today announced the results of a study it commissioned from Ovum, the analyst and consulting company, that confirms businesses are increasingly looking to service providers for managed connectivity, voice, security and other Internet Protocol (IP) services.

According to Ovum, the managed-services market is expected to reach $41.5 billion per year by 2009. The study features data collected from more than 2,500 end users from companies using managed services in 20 countries across the Americas, Europe, Middle East, Africa and Asia and representing the finance, manufacturing, retail, government, healthcare and education markets.

“More and more business customers want service providers to deploy and manage their network solutions to reduce costs and improve reliability,” said Peter Hall, Research Director, Ovum. “Significant opportunities exist for service providers developing and delivering managed services, especially in the areas of multiservice IP VPN, IP communications, security and Metro Ethernet.”

Other key findings from the Ovum study include the following:

* Customers who have adopted managed services from service providers are largely pleased with that decision, based on cost reduction and higher levels of support and availability.
* Network security is the most commonly adopted IP service.
* By 2009, managed IP VPN will remain the largest portion of the market (53 percent) but managed voice over IP (VoIP) will grow the fastest (65 percent compound annual growth rate (CAGR)).
* The region including Europe, Middle East and Africa (EMEA) currently leads in adoption of managed services, followed by North America. Latin America is currently the smallest market for managed services, but offers rapid growth potential for IP VPN and VoIP.
* The manufacturing industry is the broadest adopter of managed services, followed by government and finance.
* End users strongly prefer to purchase IP managed services from service providers who offer their services over Cisco technologies.
* “Cisco Powered Network” is the most well-recognized and well-respected brand in the managed services market and was rated as end users’ brand of choice across all geographies.

Cisco’s four-part strategy to drive service provider success includes the following:

* Build Networks: Cisco works with its service provider partners to build carrier-class, Internet Protocol Next Generation Network infrastructures that provide a lower total cost of ownership and support application, service and network convergence to increase profits and sustain growth.
* Deploy Services: Cisco helps providers develop new services tailored to address existing and anticipated market demands. With traditional services and even new service offerings under intense price pressures, Cisco works with providers to more efficiently support legacy services and offer value-added personalized services to attract and retain customers.
* Accelerate Demand: Providers seek to generate awareness and engage customers around new services as quickly as possible to increase return on investment, improve cash flow and generate top-line revenue growth. Cisco has the marketing resources and existing relationships with business customers to facilitate this demand generation.
* Optimize Business: Providers also seek assistance in improving margins and reducing operating costs as a means of boosting their bottom line revenues and increasing efficiency of customer care and back-office operations. Cisco Customer Advocacy support, business consulting and worldwide channel programs and more, are intended to give providers greater resources and the ability to make such improvements.

“The strong opportunities for growth of managed services demonstrated by this study, coupled with the opportunities afforded providers by the Cisco Powered Network program, are a recipe for revenue growth and customer satisfaction,” said Kirt Jorgenson, director of service provider marketing for Cisco. “The Cisco Powered Network program gives providers Cisco resources to help them grow their businesses. We look forward to continuing to work with the growing ranks of Cisco Powered Network members to help them capitalize on this multi-billion dollar managed services opportunity.”

For additional information about managed services and the Cisco Powered Network program, please visit the Cisco web site at: http://www.cisco.com/go/managedservices.

About Cisco Systems

Cisco Systems, Inc. (NASDAQ: CSCO) is the worldwide leader in networking for the Internet. Information about Cisco can be found at http://www.cisco.com. For ongoing news, please go to http://newsroom.cisco.com.

# # #

Cisco, Cisco Systems and the Cisco Systems logo are registered trademarks of Cisco Systems, Inc. in the U.S. and certain other countries. All other trademarks mentioned in this document are the property of their respective owners.

Contact Information

Wilson Craig

Press Contact

Cisco Systems, Inc.

Contact via E-mail