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Cisco Builds Its House on the Cloud

Cisco's reorganization, disclosed this week, is testimony that the cloud is the future of both enterprise and service provider networking and computing.

The cloud is -- paraphrasing VC Marc Andreessen in another context -- eating the world. It is a fundamental transformation of computing and networking infrastructure. The cloud has already changed a lot, but there is much more to come.

And Cisco Systems Inc. (Nasdaq: CSCO) is looking to stay on top of those changes. Just look at the executive shuffle that was part of the company's reorganization this week. Kelly Ahuja, who led Cisco's service provider business through 18 years, is out. In his place, Yvette Kanouff is heading up a newly reorganized service provider business unit that includes the core SP business, as well as cloud, video, NFV and mobility. (See Cisco's Ahuja Quits as Robbins Revamps His Top Team.)

Cisco is making other organizational changes in the engineering department, around networking and market segments; IoT and applications; and security. But it's the shift to cloud that's most interesting.

What was Kanouff's previous job? Why, she was SVP and GM of cloud solutions. When you promote your cloud boss to a top-level executive position, in place of a longtime veteran, that's a sure sign that cloud is front-and-center in your strategic thinking.

Kanouff's elevation is only the latest sign from Cisco of the strategic importance of the cloud. Last month, Cisco bought Internet of Things cloud provider Jasper Technologies for $1.4 billion. (See Cisco Looks to Jasper Acquisition to Transform Enterprises – & Itself.)

This month, Cisco tore down and rebuilt its enterprise networking strategy, reducing the focus on hardware sales to instead offer networking services through software and the cloud (though hardware sales remain a big component). (See Cisco Rewrites Enterprise Networking DNA in 'Monumental Shift'.)

The enterprise networking change -- Digital Networking Architecture, or DNA -- follows a change to its software licensing strategy early last year that saw Cisco decouple software from hardware and offer licensing for each separately. (See Cisco Gives Its Software Licensing a Makeover.)

Cisco's legacy business model is selling high-performance, proprietary switches and other networking hardware. Industry-wide, the days of that business model are numbered, as proprietary equipment is being eclipsed by white box hardware and merchant silicon. It's still early days -- proprietary networking sales are strong now and will continue to be strong for a long time, dwarfing white box sales. But the ascendance of white boxes for mainstream networking is inevitable, and Cisco is getting ready for that transition. (See Cisco's Robbins Foresees White Box Coexistence.)

For Cisco -- and for the industry as as whole -- cloud is part of a fabric that's fundamentally changing networking, business and society as a whole. As former Cisco CEO John Chambers has said: Dramatic as the last 20 years of changes seem right now, they are like nothing compared to the changes yet to come.

We can no more see where that future will end up than a person from the 1970s (these people, for example) could predict the technology of 2016. But we can sense the seismic forces that will shape the landscape.

The Internet of Things will define the networks of the future: While smart homes and self-driving cars get all the IoT publicity, the real action will occur when the IoT goes to work -- for example, in industrial equipment and smart cities.

Cloud and IoT are linked; when you have smart sensors saturating the environment, you can't just attach traditional computing and networking to those devices and expect the whole thing to work. Indeed, cloud as we know it today -- based on compute that runs in data centers -- isn't enough. Compute and storage need to be located at the edge, in and near the sensors. Cisco calls this "fog computing" and it forms another pillar of its strategy. (See Cisco Preps IoT Platform of Pillars & Products.)

5G networks are required to connect this new generation of clouds. 5G isn't just about bandwidth -- it's not even mainly about bandwidth -- it's about increased agility, the ability to reconfigure networks on the fly, delivering connectivity as easily as we now deliver compute and storage. It's about delivering low-bandwidth connections to remote devices requiring thrifty power usage and running years on a single battery. In other words, it's about New IP networks.

And, indeed, 5G is strategic for Cisco as well, both going solo and as part of the major strategic partnership it announced with Sweden's Ericsson AB (Nasdaq: ERIC) in November. (See Cisco & Ericsson Forge Killer Partnership.)

Deep learning and machine learning are the wild cards, but Cisco believes deep learning and analytics will be critical to network orchestration in future. (See The Future Is Networks on Demand, Says Cisco Chief Architect.)

Want to know more about the cloud? Visit Light Reading's cloud services content channel.

But network configuration is just the beginning for deep learning -- this is where we see predictions that software could eventually take many of our jobs. Look to IBM Corp. (NYSE: IBM)'s Watson and Google (Nasdaq: GOOG) for leadership in this area. (See IBM Unveils Watson IoT Global HQ.)

This week's transition, significant as it is, is just the beginning. By focusing on cloud, the Internet of Things, 5G, security and other emerging areas, Cisco has articulated a strategy that could extend its industry dominance into the future.

But can Cisco execute? That's the key question. Many people can articulate a winning strategy, but the hard part is to act on it.

— Mitch Wagner, Follow me on TwitterVisit my LinkedIn profile, West Coast Bureau Chief, Light Reading.

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