Cisco: Where We Are (Part 2of3)

SAN JOSE: The IT industry has weathered a lot of changes over the last 30 years, many of them either pioneered – or at least cashed in on – by Cisco Systems, including , routers and converged systems. The history of Cisco is market transitions, Chairman and CEO John Chambers told a group of journalists and analysts during a three-day Cisco-thon. “We see around corners… we see the things 3, 5, 10 years ahead of the opportunity.”

While the 30-year-old remains networking’s 800-pound gorilla, and has captured the lion’s share of the surging market – some combination of , storage and/or networking – it has been active in a variety of other segments, including , , collaboration and security. While Chambers called data analytics the “one area we were missing”, he added that the company has been heavily involved in analytics for many years, but the Internet of Everything, which the company has been calling a $19 trillion opportunity by 2020, requires a new approach, bringing the analytics to the edge where most of the data resides. The key is the edge, where the analytics goes, he said.

However IoE and analytics (AKA Cisco Connected Analytics) are Cisco’s future (i.e. Part 3). According to company executives, Cisco’s today includes the usual networking suspects, as well as a variety of other segments, including security. “We have security as the number one, number two, number three, number four concern for all of our customers,” said Chuck Robbins, SVP Worldwide Field Operations.

Just in case the 25% revenue jump last quarter didn’t indicate just how important Cisco thinks security is, IDC just reported that Cisco hung on to its lead in the security appliance market, growing its share 2.8 points to 18.7% of revenues, well ahead of second-place Check Point and more than twice the revenues of third-place Palo Alto Networks. The company also announced its intent to acquire , a privately held, Chicago-based security advisory company providing risk management, compliance, cloud, application, mobile, and infrastructure security solutions to Fortune 500 customers.

Cisco’s key focus is addressing customers’ security issues, said Marty Roesch, Vice President/Chief Architect, Security Business Group/Sourcefire CTO, but solving them is more of an aspirational goal.

Over the last decade we’ve seen the industrialization of hacking.” They’re really getting professional in how they attack, with QA testing and even guarantees, he said.

According to Ponemon data, the average cost of a breach in 2014 is $5.4 million per incident, and in a recent Cisco survey, 100% of the sample was compromised. The good news, said Roesch, is that means there is a huge opportunity in the security market. One of the areas the company is working on is a comprehensive architecture (AKA Security Operations Maturity Model) to deliver dynamic controls that will enable customers to address the before, during and after aspects of data protection. The model plots a journey along a scale of controls that moves from static to human intervention to semi-automatic to dynamic and, ultimately, predictive controls.

The Converged Infrastructure (CI) market is growing explosively – more than 50% in 2014, to $6 billion – and Cisco figures prominently in two of the three leading vendors in Gartner’s Magic Quadrant. VCE is a joint venture between EMC, Cisco and VMware, which produces the Vblock solutions; the Cisco and NetApp alliance develops FlexPod reference architectures (Oracle was the third vendor). While Cisco’s Unified Computing Systems () and Nexus products will continue to be included in VCE’s portfolio, the joint venture is in the process of being acquired by EMC, with Cisco retaining a 10% equity interest.

Nobody expected Cisco to enter the server market, and perhaps other than Cisco, nobody expected it to achieve the success if has since introducing UCS back in 2008. “What enabled us to be disruptive is we don’t think of ourselves as a server company… we think of ourselves as a computing company,” said Cisco’s Paul Perez, VP/GM, Computing Systems (UCS) Product Group.

The company has accumulated approximately 40,000 customers, many of them net-new to Cisco, he said, and that’s just the beginning. We’ve only touched a fraction of the computing market with UCS, and have commitments of how we’re going to double that over the next 4-5 years, said Perez.

With a reduced share in VCE, the company is looking for new opportunities, and earlier this month partnered with IBM on the VersaStack solution. Designed to deliver high levels of ease, efficiency and versatility for cloud, big data and analytics, and deployments, the integrated solution combines UCS with IBM’s Storwize storage system. Eventually, it is planned that the platform will be optimized for IBM business applications, while integrating Cisco innovations such as Application Centric Infrastructure () and Intercloud Fabric.

Perez said discussions with IBM, already a strategic partner, especially in services, have been ongoing for some time, but that the process accelerated once IBM sold off its x86 server business. “Our hope is to insert ourselves into old x86 relationships. Think of it as a pilot shop… if it gains traction then we can do more.”

Cloud is another market that has seen Cisco rise from relative obscurity. Infonetics included Cisco along with such cloud powerhouses as Amazon, Microsoft, IBM, and Google in its recent examination of top cloud service providers for the North American enterprise market.

“The majority of the CSPs named by respondents as top three cloud providers have a long history as a software vendor and professional services provider or were a very early entrant into the off-premises cloud services market. Cisco is the one exception, having been able to leverage its dominant position in networking and communications to launch a Web collaboration offering with significant market recognition.”

For example, Cisco announced plans to build the world’s largest global Intercloud – a network of clouds – together with a set of partners back in March. The company said it was being architected for the Internet of Everything, with a distributed network and security architecture designed for high-value application workloads, real-time analytics, “near infinite” scalability and full compliance with local data sovereignty laws.

Initial partners included: Australian service provider Telstra; Canadian business communications provider Allstream; European cloud company Canopy, an Atos company; cloud services aggregator, provider and wholesale technology distributor Ingram Micro; global IT and managed services provider Logicalis Group; global provider of enterprise software platforms for business intelligence, mobile intelligence, and network applications MicroStrategy; enterprise data center IT solutions provider OnX Managed Services; information availability services provider SunGard Availability Services; and IT, consulting and outsourcing company Wipro. At the end of September Cisco announced more than 30 new Intercloud partners, including Deutsche Telekom, BT, NTT Data and Equinix, with expansion to 250 new data centers in 50 countries. It also shipped Intercloud Fabric, an open, and flexible hypervisor-agnostic cloud interconnect technology, and committed $1 billion in cloud financing.

DISCLAIMER: Cisco, which is in my investment portfolio, but is not a customer, looked after transportation and accommodation expenses.

Author: Steve Wexler

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