Cisco's Top Cloud Exec: We're Not Following Amazon On 'The Race To Zero'

Cisco Systems' top cloud executive wants to make one thing clear: Cisco is not, and has no ambition to be, the next Amazon Web Services.

"Our strategy is not to follow AWS on the race to zero," said Nick Earle, senior vice president of cloud sales and go-to-market at Cisco, in an interview with CRN. "If you look at what they are doing, it's clearly a line grab and they are cutting prices and strategically losing money. Cisco does not believe in strategically losing money."

Cisco tapped Earle in March to lead its newly formed cloud sales and go-to-market organization, and he is one of the driving forces behind Cisco's Intercloud strategy for building out a global network of public and private clouds.

Related: Cisco Partners: Intercloud Strategy Still Fuzzy, But Peres Could Turn Things Around

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Cisco unveiled Intercloud at its Global Partner Summit in March, and it represents the networking giant's formal entry -- and one it says was long-awaited by partners -- into the public cloud arena. The Intercloud model consists of a mix of cloud services that will be hosted within Cisco's own data centers and Cisco partner-owned data centers that are powered by its new Application Centric Infrastructure (ACI).

Earle declined to say how many data centers Cisco plans to use to host its own Intercloud services but said the bulk of the hosting -- nearly 95 percent of it -- will be done by partners.

Through Intercloud, Cisco will offer IaaS, SaaS and PaaS directly but also through its network of cloud hosting partners, which today consist of Australian service provider Telstra and systems integration giant Dimension Data.

More Intercloud hosting partners will be unveiled next month, said Earle. Telstra, meanwhile, is already live with some Intercloud services.

One of the biggest differences between Cisco's cloud strategy and those of competitors such as AWS or Rackspace, he said, is that Cisco won't engage in the race to the bottom in terms of pricing. The reason, he said, is that Cisco wants partners to make money.

"Will we be competitive? Yes, absolutely. But ACI and dynamic programmability of the network allows us to have differentiated and higher-value services," Earle said. "Our IaaS capabilities will be competitive to the market but … we are not trying to be the cheapest."

Pricing details for Intercloud services have not been finalized. Earle said they will be "competitive" but still yield rich margins for partners.

Harry Zarek, CEO of Compugen, a Richmond Hill, Ontario-based Cisco partner and No. 56 on CRN's 2014 Solution Provider 500 list, said Compugen views Intercloud as a much greater, and more lucrative, opportunity for solution providers compared with AWS.

"Amazon has an incredibly small margin model [that is] more aligned to a distributor than a solution provider," Zarek wrote in an email to CRN, noting that Compugen had explored a partnership with AWS but ultimately walked away from the opportunity. "I expect [Cisco with] Intercloud will recognize that and motivate partners."

Skip Tappen, COO of NWN, a Waltham, Mass.-based Cisco partner and No. 81 on the 2014 Solution Provider 500, said NWN views Cisco Intercloud as one of the most channel-centric cloud models in the industry today.

"I do believe [Intercloud] continues to demonstrate Cisco's dedication to the channel and to partners. If you look at what a lot of the other players are doing out there, they are actually building out [a cloud] and then you potentially get a chance to resell it, but even your resale options are limited," Tappen said. "My impression is that Cisco is truly looking to enable the channel and to enable partners, as opposed to doing it themselves."

NEXT: Earle Says Intercloud Delivers 'Higher-Value' Services Than AWS

Cisco also is adamant about not following in the path of competitors such as Rackspace, which have raced to build out their own cloud hosting infrastructures rather than relying on partners to help create that scale, said Earle. The high cost associated with that model is one of the reasons Rackspace in May hired Morgan Stanley to start exploring strategic options, he suggested.

According to a recent report by Bloomberg, Rackspace's revenue growth is on track to slow for a third straight year.

"I think a lot of the public cloud plays that have been rewarded by the stock market, they are shaking. Financially, the wheels on those cars are shaking because this is a really expensive game," Earle said. "To keep on building data centers and to keep on dropping prices is not the strategy we believe in. And it's not a strategy that delivers partner profitability or partner sustainability, either."

With Intercloud, Earle said, it's different. Cisco, for starters, will employ a cloud services pricing model that may, at times, be steeper than Amazon's by roughly 20 percent or 30 percent, he said. But it's a price Cisco believes customers are willing to pay for the "higher-value" services they'll get from Intercloud. These services include the ability to move workloads between a network of private and public clouds and to automate network and security policies across this hybrid cloud environment, something made possible through ACI.

What's more, Earle said, the Intercloud global network gives customers the peace of mind that their data will always be hosted locally. This is becoming increasingly important as more and more countries lay out data sovereignty laws requiring companies to host data only with cloud providers that have headquarters in that country, he said.

"You can charge for that," Earle said. "People will pay for security and compliance."

Also crucial, Earle said, is the concept of Intercloud being "open." And it's not open just in the sense that it's based on OpenStack but because it eliminates the need for customers to be "locked in" to a single cloud provider, he said.

"We bet that there would be a backlash against public cloud vendor lock-in," Earle said. "We know that, obviously, public cloud got off to a very fast start, especially with the poster child AWS. And that's great. But the fact is that it's a proprietary lock-in. It's not open.

"What we actually found is that people wanted choice," he continued. "So we bet that the model would not be public cloud, and that it would be hybrid."

Amazon did not immediately respond to CRN's request for comment.

NEXT: Cisco Looks To Put Partners First With Intercloud

Unlike other cloud providers, Cisco views partners as being critical to Intercloud's success, according to Earle.

Apart from the fact that nearly 95 percent of the data centers fueling Intercloud will be partner-owned, Earle said all Cisco partners -- ranging from major service providers to ISVs to resellers -- will play a critical role in the Intercloud ecosystem.

"It still fascinates me that most cloud companies don’t believe the channel will be relevant in this world," he said. "We have held this belief, clearly, for 30 years -- the belief that it is relevant -- but most companies are building out data centers as fast as they can and actually selling the bulk of their services direct from the vendor."

Some Cisco partners, and especially those that have invested in building out their own Cisco Powered cloud offerings, initially were skeptical of Intercloud , raising concerns that it would put Cisco and major Intercloud hosting partners such as Telstra in direct competition with their own cloud services push.

Earle, however, told CRN that Cisco is taking multiple steps to ensure that doesn't happen.

For starters, he pointed to the recent appointment of longtime Cisco channel chief Edison Peres to head up Cisco's new Cloud and Managed Services Organization. In his new role, Peres is responsible for recruiting new partners to go to market with Intercloud and for helping existing Cisco partners transition to the cloud model. He reports into Earle.

Partners largely applauded Peres' move, embracing it as a sign of Cisco's commitment to making Intercloud a channel-friendly play.

NWN's Tappen, for his part, said Cisco still has some "heavy lifting" to do in terms of Intercloud execution and specifically spelling out the rules of engagement for different Intercloud partners. "There are a lot of details that need to be worked on," Tappen said.

Still, he added, NWN plans on going "all in" with Cisco's cloud strategy, given the company's track record with the channel.

"Cisco has earned it," Tappen said. "In all of my experiences working with Cisco, they have always made a significant effort to really think about the partners."

Partners that have invested in their own Cisco Powered offerings will be able to participate in the broader Intercloud network through the Cisco Intercloud fabric, said Earle. This will enable Intercloud workloads to be moved to and from these partners' Cisco Powered clouds, he said.

In addition, Cisco Powered partners will be able to include their services within the Intercloud services catalog Cisco plans to launch as part of what Earle called "phase two" of the Intercloud rollout. The idea, he said, is that all Cisco partners that are Intercloud-enabled -- meaning they are either using the Intercloud fabric to connect to the Intercloud network, or they are an Intercloud hosting partner -- will be able to put their cloud services offering into a single software-based catalog that will be made available to enterprise customers.

"The next stage, which we haven't announced yet, will be the catalog," Earle said. "Anyone who is Intercloud-enabled will be able to connect to the catalog and put their services into that catalog. Right now, we are building the Intercloud. Phase two is monetizing that Intercloud."

Although Cisco is still in the early stages of building a global network of Intercloud services, Earle said customer interest in Intercloud already is taking off. The company is generally holding between 25 and 30 customer briefings on Intercloud each day, he said.

Cisco also has completed its internal reorganization around cloud, which included the creation of the dedicated cloud organization headed up by Earle. The organization consists of 450 people, including those in Peres' channel-focused arm.

"The organization is complete. InterCloud is open for business," Earle said. "The next step is to empower our 20,000-strong sales force around Intercloud's value proposition so they can go out and Intercloud-enable every customer and every partner."