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Cisco's big cloud play: Why it had little choice

Another day, another enterprise IT giant cloud stack to ponder. Will Cisco's effort ring true or me too?
Written by Larry Dignan, Contributor

Cisco Systems announced its big cloud play---technically an "Intercloud" sold by the networking giant and a bevy of partners---and a $1 billion investment to grow the business.

The two-year build-out effort, as outlined on Cisco's site, is a bit formulaic:

  1. First, you spin the cloud into an Intercloud, a network of clouds, to be inline with Cisco's software and ambition to be a big connector of networks and computing power.
  2. Then, you note that the global cloud is "architected for the Internet of Everything," which could use some standards similar to what networking needed to thrive.
  3. Finally, you pick a nice round number---say $1 billion---to prove that you're serious about growing your cloud business. That $1 billion figure is an IBM staple whenever it launches a new unit---Watson, mobile commerce, analytics etc.

Playing with the building blocks of the cloud: Getting IaaS right

Here's the reality behind the moves: Cisco wants to be an IT partner of choice for the enterprise. The problem for Cisco was that it was selling gear to enable cloud computing, but not offering services.

IBM went cloud crazy via acquisitions and has built out its stack. Microsoft has Azure. Oracle is talking a summer cloud fiesta. Hewlett-Packard has its cloud stack. From a different angle, SAP talks about the cloud with a heavy dose of HANA non-stop. Verizon has a low-cost cloud as does AT&T. And every vendor is chasing Amazon Web Services, which cuts prices at a rapid clip. Toss in Rackspace and you have a crowded cloud.

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Cisco had to play the cloud game and wrap its software, security and gear around a hybrid approach. And offer cloud services itself. Cisco was at a disadvantage without an as-a-service story.

Cantor Fitzgerald analyst Brian White said:

In our view, Cisco's IT competitors such as Hewlett-Packard, IBM, VMware and others have aggressively rolled out their own cloud services, placing Cisco at a disadvantage in supporting the needs of its customers.

It's unclear what this cloud play will do to gross margins at Cisco. Cisco will likely have to build out a complete stack with OpenStack just like everyone else.

cisco cloud strategy

One unique spin is that Cisco has a bevy of partners helping it sell its cloud services. Australian telco Telstra is on board, as is Wipro and a bevy of service providers.

Here's a look at Cisco's cloud lineup on deck:

  • Platform and infrastructure as a service. Good news: Cisco may land more customers. Bad news: Margins will hurt and Cisco isn't accustomed to keeping up with the likes of AWS.
  • Cisco Cloud powered by SAP HANA optimized for Cisco's Unified Compute System. This bundle can be summed up in two words: Cross sell.
  • Collaboration. WebEx powered suite. Eh.
  • Security. Threat defense. Could be a hit.
  • Network infrastructure management cloud. A use for Meraki.
  • Virtual desktop as a service. Brought to you by VMware, Citrix and Cisco.
  • Hosted collaboration services. A white label approach with partners.
  • Videoscape Cloud DVR. For carrier partners.
  • Virtualized Mobile Internet. More for carriers.
  • Virtualized managed services. Faster network provisioning promised.
  • Remote management and compliance and configuration services: An enterprise play.
  • IT service management.
  • Energy management services. Watching network electricity use.
  • Voice and contact center as a service.

Cisco's portfolio has a decidedly networking spin to it and that move isn't all that surprising. The big question is whether Cisco's cloud efforts ring true to IT buyers or just sound me too. 

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