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Cisco Gives Its Software Licensing a Makeover

Mitch Wagner
1/28/2015

As part of Cisco's big pivot to a cloud and software focus, Cisco today announced its ONE Software strategy, to allow network operators to streamline licensing and upgrade to new software features without having to upgrade hardware. It also introduced Meraki services for managing an entire enterprise IT infrastructure from the cloud.

"We've been in the software business for a while. But we made the software look like hardware," said John Brigden, Cisco SVP of Software Strategy and Operations, in a recent media briefing. "We sold you the software in a box. When the box wore out, you had to buy all that again."

While Cisco is a hardware company, it's also the fifth-largest software provider by revenues, and third-largest SaaS and hybrid services provider.

The ONE Software strategy replaces hundreds of à la carte separately priced software features with three "solution domains," Cisco said in a paper emailed to media.

The Foundation domain includes core networking, security, systems software, network and energy management.

The Advanced layer includes software capabilities specific to the business problem being solved.

And Advanced Security does what it says on the tin -- adds more advanced security features.

"It helps change our conversation from a focus on selling systems to a focus on selling outcomes and solutions," Brigden said.

Customers will have the option of licensing the software via perpetual licenses, subscriptions or enterprise license agreements, while continuing to have the option of buying à la carte.

License portability means customers won't have to re-license software when they upgrade hardware within the same family, Cisco says.

While the new cloud and software focus are a significant change for Cisco, the company isn't abandoning its existing strategy, says Brigden.

"We will continue with our current model. Our current model is pervasive and deep and will serve many customers for a long time to come," he says. Today, Cisco's strategy is based on platforms such as its UCS servers and Nexus switches, and features based on those platforms. In the previous model, hardware devices are sold à la carte, software licenses are tied to hardware, and licenses are perpetual for the life of the box. Under Cisco ONE, software suites will be sold as a package, licenses will be portable, and Cisco will offer perpetual as well as subscription licenses and enterprise licenses.

The second part of Cisco's announcement is about the expansion of Meraki cloud services for enterprise network management.

The new services are designed to help enterprises whose networks are transforming from cost centers to strategic assets. The reason for the change: Business is becoming digitized, said Rob Soderbery, Cisco's SVP of Enterprise Products and Solutions, on the media call. Companies including Amazon.com Inc. (Nasdaq: AMZN), Uber, Lyft and Airbnb are revolutionizing industries and forcing incumbents to become digital. IT organizations are struggling to respond to the increased demands on their networks.

The new demands require agile network management, which is where Cisco says its Meraki services come in.

Meraki is designed for large enterprises managing thousands of sites, to let IT manage those sites from the cloud, without requiring IT in each of the sites, Soderbery said.

"It brings the speed and agility of clouds to on-premise IT," Soderbery said.

Cisco acquired Meraki Networks Inc. , primarily known for cloud-based management of wireless networks, in January 2013. (See Cisco Shells Out $1.2B for Meraki.)

The acquisition has been a success for Cisco, which noted 86% year-over-year growth in Meraki business in its last quarterly earnings call, and a 400% increase in the two years since Cisco acquired the company, Soderbery said. (See Cisco Busts Slump Despite Carrier Slowdown.)

Cisco is expanding Meraki to encompass a full range of network management services, all done from the cloud, including switching and routing, location analytics, Bonjour Gateway for managing Apple devices, content filtering, user management, intrusion prevention, VPN, and application management.

Intrusion detection uses Snort technology from Sourcefire Inc., which Cisco acquired in 2013. (See Cisco to Buy Sourcefire for $2.7B.)

Finally, Cisco introduced a new private cloud software solution -- the ONE Enterprise Cloud Suite -- designed to make it easier for network managers to manage private and hybrid clouds.

Cisco makes its pivot to software and cloud as SDN and virtualized routing threaten its traditional hardware lines. (See Cisco: Software, Cloud to Be 'Main Focus'.)

Cisco faces stiff competition from companies such as Brocade Communications Systems Inc. (Nasdaq: BRCD) and Juniper Networks Inc. (NYSE: JNPR), which are making big bets on SDN, as well as a host of SDN startups.


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But Cisco already has software and cloud business. In addition to Meraki, Cisco announced the Intercloud program last year, a hybrid cloud to offer enterprises connectivity to and freedom of choice among multiple cloud providers, in partnership with communication service providers. (See Cisco Beefs Up Its Intercloud, Adds Telco Partners .)

And in summer 2014 it acquired network management and orchestration software vendor Tail-f. (See Cisco to Buy Hot Startup Tail-f for $175M.)

That was about when Cisco shipped its Application Centric Infrastructure (ACI), a software framework for programming networks running on Cisco Nexus switches, appliances such as firewalls and load balancers, and other devices. (See Cisco Ships Its SDN Architecture -- Almost.)

— Mitch Wagner, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief, Light Reading. Got a tip about SDN or NFV? Send it to [email protected]

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MarkC73
MarkC73
1/28/2015 | 7:26:22 PM
Re: On track
I actually took it the other way where they sold a ton of software because for every piece of hardware you needed a license.  With SDN you could load and run open source software for most of the features and that posed a threat to the model.  Of course they're apart of the SDN game too and I don't expect them to be left behind.
Mitch Wagner
Mitch Wagner
1/28/2015 | 11:25:08 AM
On track
Unbundling software licensing from hardware seems to be a good move, as hardware becomes less valuable in the long term. In the short term, Cisco will need to keep that hardware revenue rolling in as it transitions its business model. 
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