Cisco’s big challenge

Cisco is a hardware company that is facing a software challenge as the move towards a software-defined network (SDN) strikes at the heart of its business model. So what does the networking giant have up its sleeves and what can channel partners expect as the company navigates through these market shifts in the region?

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Cisco’s big challenge
By  Manda Banda Published  January 31, 2016

After 18 years working at one of the most influential IT companies in the world, Cisco Systems UAE managing director and general manager Rabih Dabboussi is no stranger to change. In fact, Dabboussi is quick to note that navigating market transitions and emerging from them stronger has for decades been key to Cisco’s success in the global networking market.
Today, however, the pace of market change is accelerating and the transitions Cisco faces are some of its toughest yet, since it shipped the first router in 1985.

Even looking at its track record, some channel partners question how Cisco, a company whose DNA is so deeply rooted in hardware, can continue to win in a network and infrastructure market that’s racing so quickly towards software. How Cisco plans to compete, and go to market, with cloud services through its new Intercloud strategy is another question weighing heavily on partners’ minds in the region.

That said, Cisco isn’t the first IT vendor to get caught flat-footed in the rapidly changing world of technology and it won’t be the last.

Software giant Microsoft famously missed the impact the Internet would have on its business model and it had to take its founder Bill Gates to turn the battleship.

The Cisco miss, of course, is the snowballing move toward a software-defined network (SDN), something that strikes as much at the heart of the networking giant’s business model as the Internet did to Microsoft’s model of loading software locally.

However, Cisco maintains that it believes in reinventing itself as market transitions occur. “Our success has been defined by how our company has anticipated, captured and lead through market transitions. We are building off a very strong foundation,” Dabboussi told Channel Middle East. “Over the past few decades, we have leveraged market transitions to grow our business, move into new markets and provide increased value to our channel partners and their customers.”

Dabboussi added that today, every customer on the planet, every company, city and government is being disrupted. “The digital transformation – the connection of cities, companies, devices, machines and countries to the Internet – has emerged as the most transformative means to ignite sustainable growth and improve society. “We are shifting from technology as an enabler to technology defining new business models,” he said.

Of all the market transitions Cisco has tackled over the 31 years it has existed, SDN is one of the toughest. It’s a trend that takes direct aim at Cisco’s bread-and-butter hardware business, transforming the high-end functions of switches, routers and other networking gear into software that can run on cheap, commodity hardware.

As SDN adoption moves downstream from major cloud and service providers to the enterprise, research firm IDC expects the SDN market to soar to $3.7bn by 2016.

The SDN threat, to be fair, is not unique to Cisco. It’s a technology that poses a significant challenge to all network hardware incumbents. But the specific impact of SDN on Cisco, given its nearly 70% share of the overall network switching market, could be “particularly dire,” according to a research note last year from Credit Suisse analysts.

Dabboussi emphasised that Cisco is focused on building outcomes for partners and their customers, and this means a combination of hardware and software.

He said given the industry shifts around Internet of Things (IoT), cloud, digital transformation, mobility, SDN and other trends, the company has implemented changes in its partner programmes to better align Cisco’s partners with current market trends. “An ecosystem of partners is required more than ever to compete in the next generation of IT and deliver business outcomes,” he noted. “For partners to be successful, they need to play key roles in defining, selling, deploying and optimising service provider technology solutions that will deliver clear business outcomes and meet customers’ needs.”

He pointed out that Cisco has made significant investments to broaden its software offerings, delivery and buying models, and ecosystem capabilities to deliver business outcomes to end user customers. He added Cisco closed three acquisitions in the first quarter of 2015, which include OpenDNS and Pawaa in software. “We are building a strong foundation and software is playing a pivotal role in Cisco’s network and infrastructure offerings going forward,” he said.

In November 2013, Cisco revealed its long-awaited answer to SDN in the form of its new Application Centric Infrastructure (ACI). Consisting of Cisco’s new Nexus 9000 switches and Cisco’s Application Policy Infrastructure Controller (APIC), Cisco said ACI takes the core concepts of SDN a step further by making networks more programmable, automated and easier to manage.

Specifically, Cisco pointed out that ACI is the next evolution beyond network virtualisation overlays, a common type of SDN deployment that involves running a separate, software-based layer on top of existing network infrastructures.

As SDN continues to evolve the face of not just Cisco but the networking industry as a whole, so, too, does the cloud.

Cisco on its part shook up the industry with the launch of Intercloud in March 2014, a global network of public and private cloud services to be hosted both within Cisco’s own data centres and Cisco partner-owned data centres that are powered by ACI.

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