Cisco’s Bold Networking Start-Up

Three of Cisco’s top engineers with a strong record in building some of the company’s most important products are in negotiations to create a new type of network switch for data centers, according to people with knowledge of the talks.

The product they are discussing, called Insiemi, would be designed to work in high-end computer centers that use “software-defined networking.” This type of data center, increasingly used in cloud computing, typically carries out much of its computing with cheaper off-the-shelf semiconductors, while complex software handles tasks that were previously done using expensive machines full of custom semiconductors.

Cisco is known for such custom network switches and routers, which have a high profit margin. It is facing competition from new companies like Arista Networks, which use commodity silicon for very fast switching, and Nicira, which uses software-based network virtualization to cut down on data center manpower.

In a recent call with journalists, John Chambers, Cisco’s chief executive, said the company had “reinvented” itself and was now a big believer in software-defined networking. Insiemi could be a networking product that would bridge the custom and commodity worlds for Cisco.

In an interview on Thursday, Mr. Chambers declined to comment on Insiemi. “We do not discuss our plans or internal investments,” he said. People with knowledge of the matter say discussions about Insiemi are expected to be completed in the next few weeks, and if successful are likely to be announced in the late spring.

Insiemi could be one of the great face-offs in enterprise computing. Two of Arista’s founders, Andreas von Bechtolsheim and David Cheriton, sold an earlier company to Cisco. They are also both billionaires, thanks to early investments in Google. Arista’s chief executive, Jayshree Ullal, is a former chief engineering director at Cisco. The three Cisco engineers involved in Insiemi, Mario Mazzola, Prem Jain, and Luca Cafiero, are also wealthy, thanks to their work inside companies they led, which were hatched inside Cisco, financed largely by Cisco and then purchased by Cisco.

Cisco’s use of so-called spin-in projects, the opposite of the more typical business process of spinning a technology out from a company in order to create a new venture, have been controversial in the past.

While Cisco is guaranteed a product that fits well inside its overall technology plans, Cisco’s internal morale can be challenged. The spin in is seen as a kind of star system of top engineers, who work on a what, essentially, is going to be a Cisco device, earning a payout several times their normal Cisco salary. Ms. Ullal, who declined to comment on Insiemi, was a critic of spin ins while at Cisco.

The three men involved in Insiemi had their first spin in about a decade ago with Andiamo Systems, a storage networking company. The second, Nuova Systems, made a fast switch that could handle lots of different types of computing tasks in big data centers.

Nuova was purchased by Cisco in 2008 for a total of as much as $678 million, following an initial investment of $70 million for an 80 percent stake. Nuova’s core technology, the Nexus switch, has become an important part of Cisco’s product line.

Insiemi, like the names of the other companies, is Italian, the native language of Mr. Cafiero and Mr. Mazzola. Andiamo means “let’s go.” Nuova means “new.” Insiemi translates as “collection” or “assembly,” in the sense of orchestration.