Light Reading
Plans data center investments to enter cloud computing market dominated by Amazon.

Cisco Set to Launch Cloud Services

Ray Le Maistre
3/24/2014
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Cisco is set to unveil a cloud computing service on Monday that will pitch the networking technology giant against the likes of Amazon Web Services LLC (AWS), according to a report in the Wall Street Journal.

And the router giant is looking to the telco sector to support the hosted offering, dubbed Cisco Cloud Services: It has already signed up Australia's Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) and Canadian business services specialist Allstream Corp. as partners. (See Telstra Extends Cloud Capabilities With Cisco and Are Telcos Still Playing Cloud Catch-Up?)

According to the report, the vendor, which already sells its networking hardware to companies (such as telcos) that are building their own cloud services infrastructure, will invest $1 billion during the next two years on the data center infrastructure needed to support Cisco Cloud Services, which is due to be presented to potential customers today.

The move suggests that Cisco is feeling the impact of existing infrastructure-as-a-service (IaaS) offerings: As more companies sign up to use shared, hosted IT (compute, storage, networking) capabilities, so they have less need to invest in their own IT infrastructure, which for many includes networking hardware from Cisco.

By offering a cloud computing service, Cisco will, in effect, be leasing capacity on its managed infrastructure to enterprise customers, generating revenue from its products through a different business model.

The market for IaaS services is growing rapidly -- various industry projections put the annual growth at around 40%, while Cisco estimates the market was worth about $15.6 billion in 2013 -- and is starting to generate significant income for those that moved early. While Amazon doesn't report the revenues from its AWS division, analysts estimate that it generated sales of $1 billion in the fourth quarter of 2013.

Other companies that offer cloud computing services include Computer Sciences Corp. (CSC), Microsoft, Rackspace Hosting, Dimension Data, Verizon Terremark, CenturyLink Technology Solutions (formerly Savvis), HP, IBM, and many others. (See Verizon Scores Oracle Cloud Breakthrough, CenturyLink Cloud Goes Hyper, and Windstream Makes Regional Cloud Play.)

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

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Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
3/25/2014 | 5:45:28 PM
Re: Late to the party?
sam masud -  That's not so off-the-wall. Cloud in data center business are not so different from each other.
sam masud
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sam masud,
User Rank: Light Sabre
3/25/2014 | 2:55:00 PM
Re: Late to the party?
Mitch,

This might be totally off the wall, but Cisco already has a $5 billion data center business. Could it be be that offering cloud services in partnership with telcos like Telstra and Allstream is just a way for Cisco to further extend it data center business? Also a bilion dollar investment doesn't sound too bad if this whole Cisco cloud thing is being done with data center rival VMware in mind....

 
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
3/24/2014 | 11:36:55 AM
Re: Late to the party?

$1 billion doesn't sound like a lot, given Cisco's size and the size of this market. If the investment is as small as it sounds to me, you have to wonder how well Cisco can compete with entrenched competitors. Perhaps Cisco is expecting its telco providers to kick in large investments as well?

Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
3/24/2014 | 10:46:09 AM
Late to the party?
Business analysts today were saying that Cisco might be a little late to the party with cloud services, with some companies already somewhat entrenched. The other factor that business analysts were mentioning was that IBM and several other companies were saying they offer cloud now.

Add to that all of the recent cloud-related IPOs, the slices of the cloud pie are shrinking, so how much of it Cisco will be able to grab is questionable.
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