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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