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Cloud Strategies

Cisco: Software, Cloud to Be 'Main Focus'

Disrupt yourself
Disruptive? You bet. But Cisco CEO John Chambers doesn't shrink from disruption. Speaking at the Consumer Electronics Show (CES) early this month, Chambers said companies that fail to disrupt themselves risk becoming victims of disruption, adding that keeping up with the pace of change is just as important as the change itself.

Chambers has also predicted that, in 10 years, most of today's top tech companies "will not exist in a meaningful way." Speaking at the CiscoLive company conference in May, Chambers said companies that produce standalone products rather than complete architectures will be in trouble. (See Cisco's Chambers Predicts 'Brutal' Tech Consolidation.)

Cisco is simply moving in the direction the industry demands it go, says ZK Research analyst Zeus Kerravala.

"Anybody who looks at the world today from an IP perspective will support the perspective that it's going in a software and cloud-focused [direction]," Kerravala says. "But hardware isn't going away -- networks need hardware to run on."

That's true -- hardware will never go away. But the nature of that hardware is changing and that is driving the traditional vendors in new directions. In addition to Brocade, Juniper Networks Inc. (NYSE: JNPR) made a big push into virtual networks, cloud and DevOps late last year, including the launch of a virtualized software version of its flagship MX Series 3D edge router. (See Juniper Launches Virtual Routers, DevOps Capabilities.)

Alcatel-Lucent (NYSE: ALU), meanwhile, launched its virtual router offering in November, and plans a strategic shift to NFV. AlcaLu has a separate business, Nuage Networks , focused purely on SDN developments. (See Alcatel-Lucent Joins Virtual Router Race.)

So what does this all mean? Cisco is a massive business: Its revenues in the most recent full financial year were $47.1 billion and investors will not want to see that eroded. As pressures grow on its hardware unit and it develops its new lines of business, there's every reason to believe that organic growth will be harder to come by than ever before. (See Cisco Halts Revenue Decline – Barely.)

What Cisco will want to figure out is how to keep its ship steady, generate the maximum possible sales from its hardware portfolio in the coming years (because, after all, it's not going to disappear any time soon), and introduce software and cloud products and services that can make it invaluable to enterprise users and network operators.

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t.bogataj 1/19/2015 | 4:46:29 AM
Strategy or hoax? Any chance to see Cisco's software running on non-Cisco platforms, say, white-box switch or COTS server, in the short term?

If yes, the announcement is serious. If not, and customers will still have to buy Cisco boxes, then this is pure marketing bulls**t -- and only an attempt to capitalise more on software licences.

T.
R Clark 1/15/2015 | 8:38:12 PM
Brave call A brave call to bet the company on new segments, though easier said than done. Apart from winning over customers management has to win over the company. The legacy product groups have to be incentivised so that they win from the new strategy.

I was in the new business unit of a big firm and we got steamrolled by every day by the incumbent business units because our interests weren't aligned (worse, they really enjoyed it).

But the rule holds: if you're going to get cannibalised you may as well cannibalise yourself.
Mitch Wagner 1/13/2015 | 2:12:34 PM
What it needs to do Cisco seems to be doing what it needs to do here. It takes guts for a company to cannibalize its own business, but sometimes it's necessary -- either a company does it itself, or its competitors do it. 

But it's difficult to do.
kq4ym 1/13/2015 | 12:40:21 PM
Cisco's Cloud Play Cisco has seemed to me for a number of years to be 'in the clouds' in their search for new business strategies. "With the advent of SDN and the virtualization of routing capabilities, Cisco's traditional hardware business is under threat," and it seems that's been a looming dark cloud for Cisco for some years now. Whether their growing acquistitions list will keeps profits rolling or not is the question.
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