10 Reasons Cisco's Public Cloud Is Set To Shake Up The Market

Up In The Clouds

Cisco Systems Monday kicked off its Cisco Partner Summit with the launch of its public cloud strategy, a plan that will see the company roll out Infrastructure-as-a-Service and Platform-as-a-Service offerings housed in its own data centers. In addition, the San Jose, Calif.-based company is working with a number of service providers who will themselves offer public cloud services on Cisco gear. These partners are dubbed "intercloud providers" in Cisco parlance, together forming a "network of clouds." It's a radical shift for Cisco, which up until now has focused much of its business on selling network infrastructure. Nick Earle, Cisco's freshly minted senior vice president of cloud sales and go-to-market, lays out the reasons why Cisco thinks the strategy will bring big returns for it and its channel partners.

1. Partners Have Been Asking Cisco To Move Into Public Cloud

Some people said, 'will this be a threat to partners? Is this a direct model? I said, 'are you kidding me?' Partners have been saying to us, 'Cisco, when are you going to do this because I'm having to offer public cloud, and today you are telling me to go to AWS (Amazon Web Services) or go to Google or whatever. Give me some options.'

2. We're Offering A Profitable Public Cloud For Partners

We are now going to provide the partner profitability model for the cloud world that the market has been waiting for. The fact is it is not a great business just straight reselling AWS. It is a pretty low-margin business. This is not an IaaS play. This is not an IaaS play because there is no money in it. Nobody makes money competing with Amazon with their price cuts. That is a loser's game. What we are going to do is give our partners the ability to move up the stack into differentiation around application centricity and hybrid cloud. The fact is that is where the money is. That is where the margin is, and that is where the opportunity for differentiation is. AWS is a commodity play, which frankly in many cases is commoditizing the partners. I think it has been a big concern of the partner community.

3. 'This Is Not An AWS Copy'

The differentiation will be at the application level. This is not an AWS copy; it is clearly very different, even to [Microsoft] Azure in the way it's rolling out. In these stacks, these ruthlessly standardized architectures, there are a lot of our capabilities around, for instance, ACI (application centric infrastructure). What ACI does is allow not only lower cost of network operations , but ACI allows differentiated application performance, or to put it simpler: when SAP is ACI-enabled it runs better on our environment than on any other environment because the application can directly program the network for the first time. It does not see it as black box.

4. Our Network Legacy Puts Us Ahead Of HP

If you think about it, this is all about the network. [Hewlett-Packard is] not the network. I can see 50 million boxes out there. I can see an installed base of $180 billion of [Cisco] equipment that is out there that still has got lights blinking on it. HP does not have that. Secondly the service providers are going to play a really, really key role in this. The service providers are going to be powering the cloud. HP does not have the core, the edge, the credibility in the service providers. [Then] look at our partner channel; it has loyalty and profitability. Look at the awards we have won for channel loyalty, differentiation and profitability. I don't think HP has any of that.

5. Cisco 's Public Cloud Is Built For The Post-Snowden Era

Believe me, people are very, very emotional about data sovereignty thanks to [NSA whistleblower ] Mr. [Edward] Snowden and the NSA. I mean seriously emotional. We do not believe a build-it-as-you go strategy which slowly covers the geographies, slowly covers the world and in most cases sends data back to the U.S. even though you have a POP locally is going to pass [muster with] what customers want. That [desire for data sovereignty] is only going to get bigger and bigger and bigger. A lot of people told us our cloud is differentiated because it's global.

5. The Customer Need For Hybrid Cloud Solutions Is Enormous

You can't even from a finance point of view add up how much money you're spending on cloud because people are doing it [on their own]; they're breaking ranks.

At one pharmaceutical company, we found that because the IT department couldn't provide them with collaboration as a service, the R & D guys were putting unencrypted data into AWS and Dropbox so they could share with their colleagues around the world. Could you think of the implications of that? That's the crown jewels.

6. Cisco Is Expanding Its Services P&L

What we are doing here is we are using this opportunity to expand the charter of our services organization. There are three P&Ls inside Cisco. There is Cisco Capital, the financing arm. There is Cisco Inc. which is everything. And there is a P&L called Cisco Services. Cisco Services up until now has been the maintenance, the professional services and some limited managed services. As part of this, we are expanding the charter of Cisco Services to include this [Cisco public cloud] part of our business -- not to rip it away from anywhere else. It is naturally housed within a services organization.

7. There's Potential For An App Store Here

Going forward we think there is an opportunity to create an app store-type play. If we can create tremendous supply and, consequentially, demand as result of driving traffic to this through incentives, rebates commission plans, then we think going forward we can bring a whole new set of vertical apps -- which we're calling here IoE [Internet of Everything] apps -- to the market.

8. It's Key To Cisco's Aim To Be The No. 1 IT Company

We think this is $1 trillion of addressable market. This expands the TAM (Total Addressable Market) bigger than anything Cisco has ever done.

What John has been saying for the last few years is Cisco is going to be the No. 1 IT company, and people looked at that and scratched their heads. They thought we were going to go after everybody's classic TAM.

John was predicting we were going to do a disruptive play. I think that when people see this and see how differentiated and how big it is, then they will say 'Now I know what Cisco's play is.' This is our play. This is the next Cisco that you see.

9. Cisco Is Talking About Partner Profitability From The Get-go

We are not ready to release details on that and we won't be specific on that in Las Vegas [at Cisco Partner Summit].

What I can say is that it's not just technology that built the greatest partner ecosystem in technology; it was the fact we did it from the patner in and used OIP, VIP, SIP [financial incentive programs] and billions we have paid out over years. So we will be using the exactly the same instruments to drive this program. We are absolutely going to do that...we are going to be talking to partners about this get their views and release more specifics as we go forward.

10. Reinventing An Icon

People are saying we have an opportunity to reinvent an icon. People are jazzed. They are excited. They are working like crazy, but it is massively exciting. We have gone through a period where perhaps we weren't leading the disruption. It felt like we were being disrupted. People are saying, 'We're back! We're back doing what Cisco has always done, which is to take the lead and to disrupt. And it just feels great.