There's been some speculation that Cisco might make a major software acquisition to fill out its "network as the IT platform" vision. Can you address that?

WebEx was a pretty big chink for us. When we did the WebEx acquisition we had the same kind of questions -- is this kind of software business really consistent with your strategy? We saw that it was a really great opportunity. What's interesting to me about WebEx is that in addition to having a great product, they've got a business model that our customers are just absolutely ecstatic about. The notion of being able to subscribe to a collaboration service ... has just been a tremendous surge over the past year or so.

What do the changes to IOS -- opening up interfaces to developers, running it on Unix -- mean for customers?

If there's a general trend through all of our software businesses, what you're seeing is more and more extensibility, so that third parties, including our customers, can add value to the software. It's happening at the application layer with WebEx, it's happening at the infrastructure layer with our unified communications portfolio, and it's happening at the operating system layer with IOS. Componentization and running on Unix-based microkernels are not new programs, per se; we've had different versions of IOS with some of those attributes in the past. But the notion going forward is that to the extent that we can modularize the services that will give customers more flexibility in turning up these services, in how they upgrade, in how they add new services to the network, and really simplify the process of running what are today in some cases very large, complex enterprise networks.

It's work that we're actively engaged in now. I don't think we've talked publicly about a time frame for commercial availability yet.

How significant of a change is that for Cisco's traditional IOS strategy?

It's a significant step forward for us. What it means is that over time customers will be able to take better advantage of the intelligence we're providing in the network. The common theme here is that we're really looking for ways to help customers take better advantage of some of the advanced functionality we provide in our network solutions today. Software turns out to be a key way that we can do what John [Chambers] has been talking about for some time, which is link business architecture to technology architecture in a meaningful way. All the talk that we're doing about collaboration today just represents one very strong pillar in that strategy. Collaboration turns out to be a pretty direct route to improving a whole variety of different kinds of business processes.

How important is it that you develop an ecosystem comparable to what Microsoft has for Windows?

We have an ecosystem that we've been developing over the past six or seven years of developers who have built some very innovative applications on our platform. A lot of them are vertical applications -- unified communications systems for healthcare or for government or for retail. And we've learned that there's just an incredible amount of innovation that happens when you begin to open up your interfaces and provide good documentation, developer kits and supporting that community. What you'll see us do over the next couple of years is take that to the next level and increase . . . our focus in enabling others to build businesses on the products and solutions that we build. If you look at the WebEx Connect ecosystems, these are not the traditional kind of shrink-wrapped software developers that you would see represented today in most of the large software ecosystems. These tend to be very much Web 2.0-oriented developers. A lot of them are in developing countries where there's an incredible amount of innovation, there is great technology but they have no way to take their products to market and to monetize the business. And what we can help do for that community is complete the business model by giving them a vehicle to reach customers and a mechanism for monetizing their software.

How do you determine which software services belong in the network vs. at a higher level in the IT infrastructure?

Over time, there's a general progression of services from the application layer, through middleware and into the fabric of the network. Multicast started as an application running on servers, it migrated over time into the network and is now part of the network fabric. Firewalling is another technology that started as a stand-alone application that's now integrated in with the network. What you're seeing now is other services following that same path. Presence, for example: When presence is locked inside an application it only provides value to other users of that application. There's a huge amount of benefit to being able to bring presence into the network and make it a more universal service that enables multiple different applications. So I can see from my IM screen whether or not my colleague is on the phone and able to take a call. Being able to move presence from the application layer down into the services layer and maybe even ultimately into the network layer provides tremendous value. Policy is another service that for the most part today is locked up inside of applications, but customers already perceive tremendous benefit in unlocking it from those applications and moving it into the network platform where all of their applications can take advantage of that service.