Cisco Extreme Makeover: Meraki, Cloud & Software Licensing

Towards the end of 2012 anted up $1.2 billion for Meraki, a developer of wired/wireless LAN and security products managed via the , and primarily targeted at SMBs. While SMBs are at best an adjacent-market opportunity, “ filled a hole in the company’s portfolio”, it has been wildly successful, and has been one of the “consistently strong performers at the company over the past few years”, said analyst Zeus Kerravala.

Fast forward two years and Meraki (and Cisco) is getting an extreme makeover as the company looks to reinvent itself once again, ‘rewriting the rules of IT’. Meraki is being re-launched as an enterprise class, cloud-managed IT solution. The company also is announcing Cisco ONE Software, which offers a simplified solution to the most relevant, frequently-used customer scenarios in the data center, wide area network and local access networks, according to John Brigden, SVP of Strategy and Operations. “ is a big deal, and it’s an important piece of our larger software strategy in a world where value is increasingly delivered to customers through software.”

In an editorial briefing prior to the announcements, executives said the latest developments help them change the conversation from selling systems to selling outcomes. We’re the fifth largest software company on revenues, and the third largest SaaS provider, said Brigden.

Cisco’s Rob Soderbery, SVP of Enterprise Products and Solutions, said enterprises are dealing with three big ideas: ; simplification; and new models for IT. Businesses are being disrupted and at least 70% are prioritizing and accelerating IT, especially cloud-based, cloud-managed IT. To address this rapidly evolving market Cisco has embraced the cloud, and cloud-enabled network management, he said.

The idea behind the new and improved Meraki is to make the network as  easy to operate as your iPhone, said Soderbery. The acquisition was never just about Wi-Fi or SMBs. It’s about making any network of any scale manageable via any browser. It’s about making the network so simple that customers can deploy and troubleshoot it from anywhere without sending IT people to set up new sites, he said.

Meraki has added more than 50,000 customers since the acquisition, and grown 108% in the last 12 months, said Soderbery. Now they’re taking it upmarket to large enterprises.

Cisco ONE software suites, currently 13, are broken into three categories (called domains): Data Center (covers both networking and compute [UCS]); WAN (Intelligent WAN [iWAN] to connect branches & campus); and Access (wired switching and wireless). The domains are broken into three solution layers: Foundation (includes core networking, security and systems software along with network and energy management); Advanced (advanced software capabilities that are specific to the solution domain and use cases); and, Advanced security (advanced security software across all the domains).

Licensing is also getting a facelift: Cisco ONE Software can be purchased via perpetual licenses, subscription licenses to distribute spend over time as an operational expenditure, or through an Enterprise License Agreement (ELA) to provide enterprise wide access to the suites. Also new is license portability: customers don’t have to repurchase new software when they upgrade their hardware within the same family.

Customers want choice and flexibility, said Brigden. ‘Our customers want to more effectively capture and realize value from IT across their business.’

He said Cisco is enabling that with a software strategy built on four principles: user experience first; everything cloud ready; simple and open; and, consumption flexibility.

It’s been a bumpy road as far as revenue growth and profitability, but Cisco has a history of making bold moves – i.e. servers and the datacenter – so adding software and the cloud to its core shouldn’t surprise anyone. CEO John Chambers stated in December that the company is “moving more and more to be a software company”. However, by 2018 78% of all workloads will be in the cloud, with a 4x increase in cloud traffic, most of it software as a service (SaaS).

The cloud isn’t for everybody, said Soderbery. But Cisco is making sure everything is built for the cloud, and is simple and open. “The absolute simplest solution is an automatic solution. Open is critical to our software strategy.”

Kerravala noted that as a small business Wi-Fi product, Meraki has been a nice addition to the Cisco portfolio, but its evolution to a full-stack management tool focused on enterprise-class customers will make Meraki a core product for the company. ‘The new Meraki platform enables Cisco to deliver on its vision of “FastIT.”

The fundamental premise of FastIT is that IT needs to be more agile to enable the business to be agile, he stated. ‘Organizations have spent billions making servers, storage, and applications more agile, but the network has stood still, and the long lead times required to manage networks could cost organizations millions through missed opportunities.’

Author: Steve Wexler

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