Cisco Sets Limits to Cloud Strategy

Cisco Systems’ Padmasree Warrior says the networking giant has no plans to fully engage in cloud computing market, but rather act as a player that supports and enables the remote delivery of applications and services.

In a virtual roundtable with journalists and analysts around the world, Cisco’s chief technology officer described Cisco’s boundary in the cloud computing universe as stopping short of providing IT infrastructure as a service in ways similar to that of a hosting company or semi-public cloud computing platforms such as Amazon’s EC2.

“It’s not our business model because it would require us to build large data centers and spend billions of dollars,” Warrior said. “And we won’t do it because it would put us in competition with our customers.”

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Warrior may exclude Cisco from the infrastructure portion of cloud computing, but not the other three pillars in which the company already has a significant presence: software as a service, platform as a service and IT foundations (data centers).

Over the last several years, Cisco has amassed software assets to deliver security and collaboration functions as services. The Tuesday roundtable, in fact, was conducted both with its high-definition telepresence technology as well as its Web-based Webex collaboration and presentation application.

Much of Cisco’s SAAS effort is centered on collaboration; it hosts more than 220,000 minutes of online presentations a day through Webex. Cisco plans to integrate Webex and its telepresence technology, providing crossover collaboration and conferencing capabilities, as well as enhance Webex with voice services it acquired through Jabber last year. Cisco executives even hinted at the potential to integrate or develop productivity applications—similar to Google Apps or Zoho—with its Web-based collaboration offerings.

“One of the things that differentiate Cisco from others is the idea that the infrastructure is the point of collaboration,” says Doug Dennerline, senior vice president and general manager of Cisco’s collaboration software group.

Cisco has long been a staunch supporter of managed services, providing technical and logistical support to MSPs. At the Cisco Partner Summit in Boston last month, Cisco unveiled changes to its managed services programs that will provide discount price protection to MSPs that buy equipment for their data centers and allow smaller MSPs to leverage the capacity of larger, certified service providers.

“We deliver a lot of managed services through service providers, and our job is to help enable more services,” Dennerline says.

While cloud computing and managed services are growing at rates far above market averages, Cisco and other vendors are pursuing a hybrid model in which business-technology consumers buy and support a mix of Web-based applications and assets as well as on-premises infrastructure and software.

Some solution and service providers are expressing concern that the exponential growth in cloud-based services will drive down already suppressed hardware prices. For the last six months, Cisco has been pushing financing offers and special rebates to partners to stimulate the sale of core technologies—routers, switches and other hardware devices—which have seen sales slip 20 percent.

Warrior says cloud computing will not further commoditize hardware pricing because of the foreseeable need for on-premises hardware at every level of the end-user implementation. “I don’t know an enterprise or small business that’s willing to give up all of their existing infrastructure,” she says.