Anthony J. Pennings, PhD



Posted on | April 20, 2017 | No Comments

Len Bosack and Sandy Lerner combined several technologies being developed at Stanford University and the Silicon Valley area to form the networking behemoth, Cisco Systems. However, success was by no means foreseen in the early years. The key was when the pair obtained access to Bill Yeager’s source code for the multiple-protocol “Blue Box” router in 1985. Yeager’s software became the foundation for the Cisco router operating system and a major stimulant for the adoption of the Transmission Control Protocol and Internet Protocol (TCP/IP) in data communications systems around the world.

In 1980, Yeager became responsible for networking computers at the Stanford Medical School. A number of devices were proliferating on campus such as the DEC10, PDP11/05 and VAX Systems, and especially a number of Xerox machines, including PARC Lisp machines and Altos file servers and printers. The Xerox influence was substantial as the project started with routing Parc Universal Packet (PUP) for the Xerox PARC systems and mainframes. It was later configured to include IP addresses for the new VAX750s and Xerox’s own proprietary network XNS – Xerox Network Services.

After some controversy, the Stanford Office of Technology Licensing eventually decided to allow Cisco to use the technology. The venerable institution ultimately decided they would try “to make the best of a bad situation,” and on April 15, 1987, licensed the router software and two computer boards to Cisco for $19,300 in cash and royalties of $150,000 as well as product discounts. It refused equity in Cisco Systems as “a matter of policy.”[1] The agreement named Yeager as the principal developer of the source code, making him one of the unsung heroes of the Internet age.

The couple initially ran the company from their home at 199 Oak Grove Avenue in Atherton, CA. Using their credit cards for startup capital, they set up an office and started assembling routers in their living room. Self-financing, they even installed a mainframe computer in their garage for $5000. They needed the big computer to stay on the ARPANET and take orders for their network equipment, making them an early e-commerce innovator.[2] Bosack focused on technology and Lerner on marketing. Lerner’s ad meme “IP Everywhere” was ahead of its time.

The early years were tough. Venture capital was difficult to acquire, and the couple reportedly made over 70 visits to potential investors to find money for their company. At that time, only semi-conductor companies were being funded, and the Internet was barely known outside of academia. Finally, Sequoia Capital stepped in for a considerable percentage of the business. Don Valentine had passed on Steve Jobs and Apple Computers and consequently had developed a more open mind to new innovations. They put in $2.5 million for one-third of the company and the ability to make major management decisions.

By the end of 1986, the company was growing rapidly. Although it took two years to get out of the garage, the computer and communications revolution was taking off. PCs were becoming commonplace and even more important, becoming networked. Also, TCP/IP was gaining traction. The Department of Defense mandated its use at the center of the ARPANET and granting projects that coded TCP/IP implementations for IBM machines and operating systems such as UNIX. The emerging NSFNET had also required TCP/IP protocols and compliant networking technologies. By mid-1985, almost 2000 computers hosted TCP/IP technology.

Despite the growing enthusiasm for TCP/IP in the military/academic/research institute sphere, the major manufacturers of computer communications equipment were focused on the OSI models and believed market forces would eventually move in its favor. However, in 1986, advocates of TCP/IP took action to improve and promote their protocols. The Internet Advisory Board (IAB) began to implement strategies in two parts. The first was to encourage more participation in TCP/IP standards development. It resulted in the May 1986 publication of RFC 985, “Requirements for Internet Gateways” and other recommendations. The second was to inform equipment vendors about the features and advantages of TCP/IP. This involved organizing several vendor conferences including the “TCP/IP Vendors Workshop” on August 25-27, 1986 and the “TCP/IP Interoperability Conference” during March 1987.

While some vendors were disappointed that no certification and testing process was forthcoming, it allowed the advocates of TCP/IP to provide some guidance for equipment manufacturers to incorporate their protocols. It was with under leadership of Dan Lynch that these conferences were started and in 1988 they came under the heading of INTEROP. As the industry took shape with innovations like Simple Network Management Protocol, or SNMP, introduced at INTEROP ’88, Cisco was one of its main beneficiaries.

In 1986, Cisco introduced the F Gateway Server (FGS) remote access server and also their first commercial multi-protocol network router, the Advanced Gateway Server (AGS). The “Massbus-Ethernet Interface Subsystem,” was an interface card made for DEC computers and could create bridges between local area networks of different protocols such as TCP/IP and PUP and its highest line rate on the system was 100Mbps FDDI. The AGS was capable of connecting multiple LAN and WAN networks. Its technical characteristics included a throughput of 10M bits a second and it could process 300 packets a second. The AGS supported 200 routing tables and cost approximately $5,550. The AGS was quickly adopted in networks such as CSUNet at Colorado State University. Soon, universities all around the country were calling and emailing them about their equipment.

In November 1986, Cisco moved to their first office, 1360 Willow Road, Menlo Park, CA. Revenues had reached $250,000 a month. By May of 1988, sales had doubled, and then just three months later, they doubled again. By 1989, Cisco had three products and 115 employees and reported revenues of $27 million.[2]


[1] Information on Cisco’s origins is relatively scarce and dominated by Cisco public relations. Tom Rindfleisch of Stanford University and Bill Yeager, a Senior Staff Engineer at Sun Micro Systems, Inc. present a larger story at
[2] Information on Cisco’s habitats from Segeller, (1999) Nerds 2.0.1: A Brief History of the Internet. New York: TVBooks. pp.240-247.



AnthonybwAnthony J. Pennings, PhD is Professor and Associate Chair of the Department of Technology and Society, State University of New York, Korea. Before joining SUNY, he taught at Hannam University in South Korea and from 2002-2012 was on the faculty of New York University. Previously, he taught at St. Edwards University in Austin, Texas, Marist College in New York, and Victoria University in New Zealand. He has also spent time as a Fellow at the East-West Center in Honolulu, Hawaii.


Comments are closed.

  • Referencing this Material

    Copyrights apply to all materials on this blog but fair use conditions allow limited use of ideas and quotations. Please cite the permalinks of the articles/posts.
    Citing a post in APA style would look like:
    Pennings, A. (2015, April 17). Diffusion and the Five Characteristics of Innovation Adoption. Retrieved from
    MLA style citation would look like: "Diffusion and the Five Characteristics of Innovation Adoption." Anthony J. Pennings, PhD. Web. 18 June 2015. The date would be the day you accessed the information. View the Writing Criteria link at the top of this page to link to an online APA reference manual.

  • About Me

    Professor at State University of New York (SUNY) Korea since 2016. Moved to Austin, Texas in August 2012 to join the Digital Media Management program at St. Edwards University. Spent the previous decade on the faculty at New York University teaching and researching information systems, digital economics, and strategic communications.

    You can reach me at:

    Follow apennings on Twitter

  • About me

  • Writings by Category

  • Flag Counter
  • Pages

  • Calendar

    June 2024
    M T W T F S S
  • Disclaimer

    The opinions expressed here do not necessarily reflect the views of my employers, past or present.