Cisco's Big 'Silicon One' Bet

Mitch Wagner
12/30/2019

Cisco's "Silicon One" strategy, unveiled this month, is as much a business story as it is a technology story. It's a seismic shift for Cisco, which is now doubling down on the components business as it chases more revenue from hyperclouds such as Amazon Web Services and Microsoft.

The Cisco Silicon One initiative is the foundation of a complete refresh of the company's product line. The vendor unveiled a new line of silicon, extending throughout the network, from line cards to high-powered routers. Silicon One replaces four or five different chip architectures with just one, speeding up development and operating expenses.

Cisco launched the Cisco 8000 Series Routers, its first generation of networking equipment to use the new silicon. It introduced an updated operating system, Cisco IOS XR7, slimmed down and promising more improvements in development and operating costs. And it's planning photonics to complement the silicon, equipment and software, based on multiple corporate acquisitions.

For links to Light Reading's full coverage of the announcement, see the bottom of this article.

Those announcements alone would be big, but this is historic: Cisco is changing its business model. It's in the components business now in a much more significant way. Cisco already sold components, through its Luxtera acquisition a year ago. But that was only the start of Cisco seeing the integration possibilities; now it is aiming to drive similar efficiencies through its switching business, one of its main revenue sources.

The Cisco Silicon One strategy focuses on Cisco's core networking equipment. The vendor will continue to sell solutions -- bundles of equipment, software and professional services -- but it will also sell components, including silicon and optics for OEMs and service providers to build their own switches, and run Cisco software on other people's hardware.

"This is a seismic change, not just in products but in go-to-market strategy for Cisco," Anuj Kapur, Cisco's SVP and chief strategy officer, said in a Q&A with journalists and analysts at Cisco's San Jose, Calif., headquarters this month.

Cisco's primary customers here are the hypercloud providers, including Amazon, Microsoft and Google.

The shift will require a different sales model, relying on direct engagement with a relatively small number of customers, each of whom has a lot of money to spend, and multiyear, engineer-to-engineer engagements, Kapur said.

Cisco is late to this party. Google started building its own data centers about 20 years ago, as it felt commercial products wouldn't suit its demanding performance and availability needs. AT&T was transitioning to disaggregated, merchant, silicon-based networks in 2013.

"We had the opportunity to sell to webscale players eight years ago. They had a desire for an engagement model we couldn't accommodate," Kapur said. Cisco paid the price for its inflexibility and now, to win more of that business, Cisco has to change its model, become direct and engage at the highest level with customer companies.

The transformed strategy will put Cisco in the awkward position of being in competition with its own suppliers, particularly Broadcom for merchant silicon. Broadcom CEO Hock Tan said on the company's earnings call that Cisco's entry in the market "validates" the disaggregation business model that Broadcom has pioneered. "...it's great to see that we're right yet again," Tan said. "So we'll welcome the competition."

But Cisco is also a customer, for Broadcom and other components suppliers.

For optics at least, Cisco isn't making everything it needs, Bill Gartner, Cisco's SVP/GM of optical systems and optics group, tells Light Reading. And Cisco prefers to dual-source its products; its own internal manufacturing will be one source of components, still requiring an external suppliers.

For more about Cisco's Silicon One strategy, see:



More videos from the event:

And more Cisco news and insights:

— Mitch Wagner Visit my LinkedIn profileFollow me on TwitterJoin my Facebook GroupRead my blog: Things Mitch Wagner Saw Executive Editor, Light Reading

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