Wu Zhou, an analyst at IDC who studies services, speculated that Chambers may be pushing Cisco to become more of a software provider instead of a hardware provider, similar to how Cisco competitor Avaya Inc. recently created a new software-based pricing model. Such an approach makes sense for companies selling data and voice network convergence products because of the complexities in setting up VOIP and the reliance of such systems on software, she said.

Cisco's services business is a "very profitable" part of its overall business, even under the current structure of allowing customers to get software upgrades packaged with maintenance services, Zhou noted. Cisco has been able to leverage what it learns from one customer's problems to share with other customers, which has helped lower costs, she said.

Overall, Cisco services accounted for 16 percent of revenues in the third quarter of 2006, with the gross margin of profit on services for the quarter at nearly 68 percent, according to a Cisco spokeswoman. With revenues of $7.3 billion for the third quarter, services accounted for more than $1 billion in revenue.

Several Cisco customers said they try to lower or eliminate annual costs paid for maintenance services by buying spare IP telephones and other gear, rather than pay an expensive annual service fee on the gear. That way, they have equipment to substitute in the event of a failure.

David Siles, CTO at Kane County, Ill., said he has in the past purchased spare Cisco routers rather than pay $200,000 in annual services fees on the ones he already has. "They could do better on their services costs," he said.