Cisco has pledged to spend over $1 billion entering the cloud computing market in order to offer corporate clients the same services as rival firms.
The San Jose, CA-based firm is giving itself two years to enter the market, as reported by the Wall Street Journal. As many companies begin to shift their focus and offer third-party IT solutions for enterprises -- rather than only computing systems -- Cisco hopes that cloud computing will pave the way to improved future profitability.
The $1 billion investment will be spent on the construction of data centers designed to run the new service, dubbed "Cisco Cloud Services." Corporate clients will be able to use the service to keep tabs on customer orders and supply chains -- and will also give employees a secure platform to connect to their work computers across any other device. For firms that are implementing bring-your-own-device (BYOD) policies, these kinds of services may help keep networks safe.
Rob Lloyd, Cisco president of development and sales told the publication:
"Companies are looking for different ways to get IT done. Everybody is realizing the cloud can be a vehicle for achieving better economics [and] lower cost."
One company that dominates the cloud industry is e-retail giant Amazon; the firm's Amazon Web Services generates billions in revenue every year. However, Cisco may not directly compete with Amazon, as the tech giant says cloud services will be focused on B2B, including telecom firms which will use Cisco's cloud in a package of Internet-based services sold to others.
For example, Cisco will be working with Telstra, which is ploughing AU$800 million in to cloud services in Australia. Nick Earle, Cisco's senior vice president for worldwide services sales, told ZDNet that Cisco will be providing service-level agreements to Telstra, which the company can then sell on to customers.
Cisco ANZ managing director Ken Boal also commented that Cisco is undergoing a "philosophical" change about how it brings products to market, as it moves from being a hardware vendor to becoming a software provider as well.
"[Customers] will only part with their investment money if we can make them money, save them money, or keep them out of trouble," he said.
"There's still going to be thousands of customers that we still only provide products for, but the more substantial customers — or customers that want to go deeper into the engagement model — will move to an outcome-based model."
Cisco also said that it plans to tailor the cloud to work well with software from companies such as Microsoft and VMWare.
The Silicon Valley firm's finances have slowed down recently, attributed to slow order growth in emerging markets and the delay of large clients due to renew their products and systems. In Q2 2014, Cisco reported a net income of $1.4 billion, or 27 cents per share. Non-GAAP earnings were 47 cents per share on a revenue of $11.2 billion, both figures down by nearly eight percent year-over-year.