Cisco To Enter Amazon's Shore With Cloud Services

by CXOtoday News Desk    Mar 24, 2014

ciscocloud

Networking major Cisco Systems is joining the cloud computing services bandwagon, a market currently led by the world’s biggest online retailer Amazon.com. The company is reportedly spending $1 billion over the next two years, says a WSJ report.

The journal reported that Cisco said it will spend the amount to build data centers to help run the new service called Cisco Cloud Services. The company which deals in networking hardware, is looking to rent computing services rather than buying and maintaining its own machines.

The shift to cloud

Cisco built its business, which has about $49 billion in annual revenue, largely on selling equipment that funnels data among servers in corporate-computing hubs and between those machines and the Internet. The company’s latest push is fresh evidence that the cloud is causing technology giants to rethink their strategies as more companies shift spending from their own hardware to external services.

Experts believe as enterprise hardware spending has plummeted across the globe, companies are coping with shrinking budgets, uncertain economies. In such a scenario, a fundamental migration to cloud computing would reduce demand for equipment by outsourcing data management and computing needs.

“Companies are looking for different ways to get IT done,” said Rob Lloyd, Cisco president of development and sales. “Everybody is realizing the cloud can be a vehicle for achieving better economics [and] lower cost,” he told the journal.

A different approach

Online retail Amazon, has been a pioneer in the market. Analysts estimate that its cloud business, known as Amazon Web Services, pulls in $3 billion or more in annual revenue. The journal suggests that many of Amazon’s customers are Web startups that never bothered to build their own computing operations.

Lloyd however mentioned that Cisco’s approach differs from Amazon’s. In some cases, Cisco plans to sell its cloud services to telecom companies that will then use them in a package of Internet-based services the companies already sell to others.

The company, unlike Amazon, also plans to tailor its services to work especially well with software from companies such as SAP AG, Microsoft and VMware, to target larger enterprises in this segment, says the report.