Cisco-ver 2: Fixing Spokes While The Bicycle Is In Motion

cisco

Dallas, a very business-like city was playing host to Cisco, which just redefined its business all over. if you are thinking routers, switches and other hardware pieces, think again. CEO Chuck Robbins was rather emphatic about it. He talked about intuitive networks, analytics, security, focusing on newer business models such as subscription based revenues, open cloud, multi cloud. There was nary a word about the hardware part of the business, that still contributes to around half its revenues.

Meet Cisco ver 2, software driven company.

“Cisco has fallen in love with the network again,” Said CEO Robbins, quoting IDC, which was made apparent in every single presentation or discussion that followed.

In the week preceding the Cisco Partner Summit, this writer had met with a motley crowd of Silicon Valley fraternity. On being asked about Cisco, most responses were - networking company, enterprise networking, networking hardware company and so on. The reality was that few really knew what ‘exactly’ Cisco was up to. One of the analysts put it very succinctly “Cisco is like water. Nobody knows what color it is, but everybody knows you can’t live without it.”

On a warm November morning in Dallas, Chuck Robbins put all this speculation and metaphors to rest. “We are a networking company, help customers to leverage the data moving across the network in a multi cloud to solve business problems.” And that was, essentially, that.

So how does the new Cisco (if we can call it that) work? It works on the premise that enterprises will deal with multiple clouds and ensures that it provides solutions across the whole spectrum of solutions that the enterprises will need, or want. Cisco has envisaged a world, which essentially operates across four vectors;

robbins

·         Cloud Advisory – which comprises a whole gamut of advisory services ranging from Migration, Connect, Protect and Consume

·         Cloud Connect – comprising the range of products of Cisco including Umbrella, vEdge, CSR and Cloud

·         Cloud Protect – which includes AMP for end points, Meraki Systems Manager and Cloudlock

·         Cloud Consumer – which includes Cloud Center and Appdynamics APM.

If you take a look at the above stack, what strikes you (at least it struck me), is the fact that over half the offerings are non-hardware, once again reinforcing CEO Robbins’ ‘software driven’ company slogan.

The second, and a tad more important factor that struck me was the fact that Cisco is, finally, trying to assume its rightful place in the New Digital World – one of being an end-to-end provider of networking solutions to the enterprise, a role that it played admirably in the pre-cloud era.

Given the equity that Cisco enjoys amongst the enterprises in the networking space, it will be interesting to see how the company executes its promise.

tan

Another (very) interesting strategic change that Cisco is pushing through is getting into a subscription based revenue model as against one Time Sale (OTS). Arguably, it is a strategy that augurs well for all players concerned, except possibly a short-term pain for the resellers, which Cisco says it will bankroll, through Easypay, an offering from Cisco Capital. According to Irving Tan, President of Asia Pacific Japan (APJ) at Cisco, “APJ is actually ahead of the company average (in subscription-led revenues), a lot of which is led by Australia and India,” and a move which he said will only accelerate going forward. However, extending Easypay in markets like India will be linked to interest rates and admits that “India has a high interest rate” and hence “market nuances” have to be kept in mind for introducing Easypay in other markets.

In order to ensure that it does, Tan says that even the compensation structures of his own team has been changed and will reflect the revenue flows as against the order booking flows.

One upshot of the change is strategy will be the composition of the partners. While in the past, with its focus on networking, the company’s reseller network had partners strong in networking and hardware solutions; the changed eco-system will need partner network with very strong software and app credentials. When queries, both CEO Robbins and APJ Head Tan, did not seem to duly concerned. While Robbins said that the new structure will be inclusive as in having more number of players in the partner network, Tan suggested that the existing partners will also upskill themselves so as to take advantage of the new order.

As a strategy, it works. On the ground, what Cisco has going for it is its huge experience in the enterprise networking space and now, a complete repertoire of solutions, along with a sizeable partner network. Given the speed at which this market is moving, it will be a test for Cisco to ensure that its message gets conveyed to the enterprise as rapidly as it wants to move and be able to leverage its presence along with a change in the revenue model which will have a major impact on the expense budgets of its clients. To that extent, there are many moving parts – change in business strategy, change in product offering; change in revenue models and possibly, even a change in partner network skillsets.

After all, God is in Execution.

[L Subramanyan Was in Dallas attending the Cisco Partner Summit at the invitation of Cisco]