When you hear the term “cloud computing,” Amazon, Google, VMware, and Microsoft are the companies that you most likely think of first. Well, it seems Cisco Systems wants a spot on that list of companies known for their cloud services. Cisco announced in March that it plans to begin offering Cisco Cloud Services to its corporate customers. Cisco is fully committed to making this happen and is ready to invest more than one billion dollars over the next two years to do so. I would venture to say that Cisco is putting its money where its mouth is to enter and compete in a market that is now led by Amazon.
Although Cisco is known primarily for its networking hardware, it has been slowly positioning itself to compete in the cloud computing space. Back in the year 2009, Cisco launched its Cisco Unified Computing System (UCS). This server platform was the first significant step away from Cisco’s bread-and-butter business selling network technologies. In that same year, Cisco presented the UCS platform as its contribution toward the formation of Acadia, a joint venture with EMC Corporation, with additional investments from VMware and Intel Corporation. Fast forward to the year 2011: Acadia gets transformed into the Virtual Computing Environment Company, or VCE. I have to be honest—for the longest time I thought that VCE stood for VMware, Cisco, and EMC, but I digress.
I believed it was just a matter of time before Cisco ventured down this path, but at the time I thought it would begin this process sooner rather than later. At Interop last month, Cisco unveiled an alternative to OpenFlow for software-defined networking. I am going to venture a guess that Cisco is basically re-inventing the OpenFlow wheel while proposing its new OpFlex protocol as a standard even though a protocol already exists. The objectives of these protocols are quite different. Cisco’s OpFlex protocol is intended to maintain control intelligence within the network infrastructure rather than centralizing it in a separate controller. This separate controller is the essence of the OpenFlow control and forwarding model. OpFlex seeks to keep the network infrastructure hardware as the foundation and controlling element of the SDN rather than employing a centralized, software-based controller for the SDN.
Could the development of OpFlex be one of the main reasons why Cisco has been waiting to enter the cloud space, or is it just a coincidence that announcements of Cisco Cloud Services and Cisco OpFlex happened within weeks of each other? Cisco says that its investment spending will go primarily toward building up data centers to help run Cisco Cloud Services, but it also will rely on the data centers of its partners to help it attain a global presence with this new service.
Cisco’s approach to the cloud is going to be quite different from the likes of Amazon, in that much of Amazon’s business and customer base comes from web startups that never really built their own computing systems. Cisco’s approach is also different in that, in some cases, the company plans to sell its cloud services to telecom companies that will package and resell these internet-based services. Another notable difference in Cisco’s plan is its intention to tailor its services to work with different software companies like SAP, AG, Microsoft, and VMware, which have products already in widespread use in a good portion of large companies.
Does this push to the cloud have anything to do with the fact that Cisco’s revenue has dropped by just over three percent during the last two quarters of 2013? Or the fact that Cisco predicts a steeper decline in revenue moving forward? Are companies slowing down their investment in networking equipment as they spend time evaluating whether SDN is the direction to take moving forward, or is Cisco really starting to feel the pinch of rival lower-cost networking equipment from China’s Huawei Technologies Company and other companies selling systems based on inexpensive components? I also have to wonder how much Edward Snowden’s revelations about US government spy agencies play a part in the decline of Cisco and other US-based technology companies’ global sales? Regardless of the reasons, now is the time for Cisco to make a change in its business model if it wants to remain strong and relevant in the twenty-first century.