Cisco CEO Robbins To Partners: IaaS Is Not An 'End Game,' Multi- And Hybrid Cloud Is Order Of Day
Steven Burke and Jennifer Follett
Cisco Systems CEO Chuck Robbins is set to rally solution provider partners at the networking leader's Cisco Partner Summit this week to take the cloud high road by focusing on multicloud and hybrid cloud rather than competing in head-to-head Infrastructure-as-a-Service warfare with Amazon Web Services, sources told CRN.
Cisco insiders say the new strategy represents a broad, far-reaching bid to be what the company is calling solution providers' "No. 1 preferred cloud vendor" by looking beyond just the IaaS opportunity and focusing on monetizing cloud across the entire spectrum of cloud -- public, private, hybrid or Software-as-a-Service.
The Robbins message, according to one Cisco insider: "IaaS is not an end game. It is one piece of the puzzle. The cloud ecosystem is much more complex, and we know where the greatest opportunities lie. And that is where we are playing."
[Related: CRN's Cisco Partner Summit 2016 Coverage]
Cisco said the path to monetization includes private cloud infrastructure, Cisco CloudCenter (formerly CliQr), an application cloud management platform, Cisco One Enterprise Cloud Suite, a comprehensive cloud management platform with automation tools, CloudLock, a cloud access security broker platform and cloud services routers and virtual ASA firewalls. "Using software and products built for the cloud partners can monetize premises-based hybrid and public cloud opportunities from the broadest portfolio in the industry," said Cisco.
Cisco maintains that "fundamentally" cloud is as much about "business strategy, including application strategy" as it is about technology. "Cisco is the only technology leader enabling customers and partners to thrive in a multi- and hybrid cloud world," the company told CRN.
Ron Dupler, CEO of Kittery, Maine-based GreenPages, one of the leading national solution providers investing aggressively in making the cloud transition, said he sees the new multi- and hybrid cloud focus as another sign of Cisco refocusing under Robbins' direction.
"Cisco is focused right now on providing great plumbing in the cloud, security and digital transformation, and they are leaving the concept of public cloud up to the public cloud providers," he said.
Dupler compared the Cisco cloud strategy shift to VMware's decision two weeks ago to ink a landmark deal to team with AWS on VMware Cloud on AWS -- set to be released in mid-2017.
"VMware was in the same boat," said Dupler. "Most of the ecosystem is realizing that the public cloud provider space is a scale game, and AWS and [Microsoft] Azure are way out in front. To try to chase them and reinvent what they are doing does not make a lot of sense. You need to refine the strategy in the context of managing in a hybrid cloud world."
The Cisco CliQr offensive -- launched when Cisco acquired the application-defined cloud orchestration platform company for $260 million in April -- is evidence that Cisco's strategy is centered on "being relevant in a multicloud/hybrid cloud world [rather] than trying to be a public cloud provider," Dupler said.
Cisco partners, for their part, said the vendor's cloud strategy has shifted from being a public cloud disrupter against AWS in 2014 to a private cloud disrupter against AWS in 2015 to a multicloud broker of private and public clouds -- including AWS -- enabling and securing workloads with CliQr, which in 2016 was dubbed Cisco CloudCenter.
San Jose, Calif.-based Cisco in a statement to CRN confirmed the multi- and hybrid cloud focus: "Cloud permeates Cisco’s entire portfolio, and as the leader in enabling organizations and partners to embrace a multi- and hybrid-cloud world, Cisco is fully committed to enabling our partners to leverage multiple clouds to grow their businesses and be successful. Certain workload and application requirements are best suited in a private build -- Cisco has the industry’s leading private cloud stacks built around UCS (Unified Computing System), Nexus/ACI (Application Centric Infrastructure), Next Gen Firewall, and tremendous storage partnerships."
Cisco also conceded that certain workloads are better suited for public cloud. "We have a robust and growing portfolio of CMSP [Cloud and Managed Service Provider] partners that are delivering IaaS and IaaS-based services," said the company. "Whether customers embrace CMSP or other public cloud capabilities, our partners derive more opportunity as they look to implement Routing (Cloud Services Router), Security (Adaptive Security Virtual Appliance), and secure workload management solutions (CloudLock)."
Finally, Cisco reaffirmed its commitment to what it called a "robust and growing portfolio" of SaaS offerings spanning security, collaboration, core networking, and data center. "Our reseller partners, CMSP partners, and even software integrators are embracing these recurring revenue offers to help customers architect an end-to-end cloud strategy and then further optimizing the SaaS experience for customers with Cisco IWAN," the company said.
Cisco also is incenting "hybrid cloud acceleration" through its Solution Incentive Program (SIP). In addition, Cisco is aggressively pushing partners to sell Cisco-hosted applications such as Cisco Spark chat and video calling and Meraki wireless networking and collaboration.
Cisco is using its long-standing lucrative VIP (Value Incentive Program) rebates to drive home the multi- and hybrid cloud focus. Under the current VIP incentive program, which launched Aug. 1, Cisco is rewarding data center partners with a 10 percent rebate on ACI and Cisco CloudCenter. Cisco also is paying a 10 percent rebate on Enterprise CloudSuite (Cisco One) – software for secure data center networks for public, private and hybrid, connecting branch/campus, and voice and video collaboration.
But even as Cisco moves to amp up incentives on some cloud offers, it has eliminated or reduced others in its cloud ecosystem.
Cisco in the current iteration of VIP eliminated rebates for partners selling Cisco Powered Cloud Services.
Cisco also has reduced MDF, business acceleration benefits and rep support for some Cisco Cloud Service Providers and CMSPs, sources said.
"Cisco is retracting big time on public cloud," said the CEO of a Cisco Powered cloud service provider who is no longer attending the Cisco Partner Summit this week in San Francisco. "The Cisco cloud strategy has morphed from public cloud to ecosystem cloud provider with Intercloud to now a software story. Eliminating the rebate incentive for partners selling our cloud service is going to hurt us."
Cisco confirmed that the Cloud Services Reseller track is no longer part of VIP, noting that the program has achieved its objective of helping providers build their channel model and seed Cisco Powered cloud services in the market.
Furthermore, Cisco said the Cloud Services Reseller track was "always intended" to provide a "bridge" for partners as they transitioned to new business models to capture the cloud opportunity.
The CEO of a Cisco Powered cloud provider, who did not want to be identified, said the elimination of the Cloud Services Reseller track from VIP represents a major shift away from Cisco's onetime ambition to battle AWS head-to-head in the cloud services game.
"I think a lot of folks are conceding to AWS and Microsoft," said the CEO, who bemoaned the lack of support for Cisco Powered cloud service providers. "Cisco is under a lot of economic pressure as a public company. They are cutting payroll and expenses and restructuring the company. I see it as an identity crisis. They are trying to reinvent themselves, and providing public cloud is no longer part of the vision. They are moving on and focusing on other areas and paying lip service to Cisco Powered cloud providers."
Under the retired Cloud Services Reseller track, partners received 4 percent rebates on 14 Cisco Powered cloud services: Infrastructure-as-a-Service; Disaster Recovery-as-a-Service; Cisco Intercloud Services; UC-as-a-Service based on Hosted Collaboration Service; video- and Telepresence-as-a-Service; Desktop-as-a-Service; Contact Center-as-a-Service; Foundation for Software-as-a-Service; Bring Your Own Device-as-a-Service; Intelligent WAN-as-a-Service; hosted Security-as-a-Service; Cisco IaaS consumption for hybrid cloud bundles; Cisco Powered architecture for Microsoft Cloud Platform; and Cisco Cloud Cell Architecture for SAP HANA.
The previous VIP program required a minimum booking of $16,000 for total services with the 4 percent rebate "capped at $300,000 per year per Cloud Services Reseller partner per country/country group."
As for the reduced MDF funding for some Cisco Powered cloud service providers, Cisco confirmed the reductions but emphasized that it is not eliminating MDF for CMSP partners. In fact, the company said it has expanded MDF to include other products such as MetaPod, Tetration and CloudCenter.
Cisco also confirmed that how partners accrue MDF has been adjusted based on its "hybrid cloud strategy" and market dynamics.
A top executive for a Cisco Powered cloud service provider, who did not want to be identified, said Cisco partners did not aggressively move to capture the Cloud Services Reseller VIP rebates. "The partner community just did not capitalize on the cloud VIP incentives," he said. "It was just another program they didn't understand. The solution provider owners never moved the rebates down to the sales rep level."
The retirement of the Cloud Services Reseller track wasn't the only major VIP change to take hold in August. Cisco also added a new Service Provider Technology track, focused squarely on hardware for service providers.
The Cisco call to action on the service provider track: "Benefit from tremendous business opportunities as [the] service provider market is transitioning to SDN -- the biggest market transformation in decades."
The Service Provider Technology incentive was an "existing program that was folded into VIP so partners selling into service provider core networks are incentivized and rewarded in the same way as other Cisco solutions covered in the VIP program, reaffirming our commitment to Service Provider Technologies," said Cisco.
Cisco said the Service Provider Technology track is "not a replacement" for the Cloud Services Reseller track and is not related to the retirement of that VIP benefit.
Nevertheless, some Cisco Powered cloud service providers said they saw the simultaneous changes as a sign that Cisco is de-emphasizing IaaS in the Cisco Powered service provider market.
"Cisco has gone from incenting partners to sell cloud services to rewarding partners to sell Cisco routers and switches to service providers," said a top executive for a Cisco CMSP, who did not want to be identified. "Partners that were getting six-figure checks every six months for selling cloud services are now going to be forced to revisit their cloud strategy to sell hardware to service providers rather than build their own recurring revenue services."
Under the new Service Provider Technology track, Cisco is providing 1 percent rebates on a wide range of switches and routers including the ASR 9000 Aggregation Services routers; the Network Convergence System 5500 and 6000 Series routers for cloud-scale WAN aggregation; Cisco ASR 903, 920, 901 series aggregation routers; and NCS 2000 and 1000 Series routers to "economically scale large enterprise" vendor and service provider data center networking architectures, and drive sales of the next-generation network management solution with Evolved Programmable Network Manager (EPMN) 2.0.
The elimination of the Cisco Cloud Services Reseller VIP rebates comes three months after the "founding father" of Cisco's cloud strategy, Nick Earle, disclosed plans to leave Cisco after 12 years with the company.
Earle began the Cisco cloud charge at the Cisco Partner Summit in 2014 promising that Cisco was taking its rightful place as a market disrupter with a public cloud offensive under the moniker Intercloud – a worldwide network of interconnected clouds. At the time, Earle said partners were clamoring for Cisco to get into the public cloud market as an AWS alternative.
Cisco confirmed that it is no longer using the term Intercloud. "While Cisco no longer uses the term Intercloud, the core concept is still very relevant to the industry and our customers," said in a statement to CRN. "At its core, it represents a cloud of clouds and the desire for organizations to move and manage workloads between clouds in a growingly complex world of many clouds. Powerful technologies like Cisco’s ClicQr, a hybrid cloud management platform organizations rely on to model, migrate and manage applications across a multitude of clouds is a great example of this."
At the 2015 Cisco Partner Summit, Cisco was still boasting about taking on AWS – this time with an OpenStack Private Cloud bundle that he claimed was 40 percent less expensive than AWS for developers utilizing at least 200 virtual machines.
A top executive for a Cisco cloud service provider, who did not want to be identified, said the networking market leader has moved firmly beyond public cloud to a multicloud broker strategy, enabling and securing workloads with CliQr, CloudLock and OpenDNS.
"The train has left the station on competing in a public cloud arena with AWS or Azure," said the executive. "I think they are more interested in being a cloud broker, enabling and securing workloads with CliQr [now Cisco CloudCenter], CloudLock and OpenDNS. They want to quarterback cloud integration, tying multiple clouds together through a software subscription model."
The cloud service provider executive said the VIP changes come with Cisco partners having a hard time making the transition to cloud. "There will be a lot of partners that just don't make it," he predicted. "The majority of the Cisco channel is stuck in project-based, time-and-material-based, capital expenditure network product sales. There is no doubt there is confusion on cloud among Cisco partners."
Cisco, for its part, said its commitment to all of its partners to "profitably meet customer cloud needs is unwavering" – even as AWS becomes a bigger and more profitable force in the cloud services market.
AWS last week posted yet another blockbuster quarter for the three-month period ended Sept. 30, with operating income of $1.02 billion on a whopping 55 percent increase in sales to $3.2 billion.
Cisco, however, said that together with partners it is "well positioned" to succeed in cloud whether through "profitability programs such as MDF and VIP, to sales incentives, to helping partners build their cloud competencies, to building software life-cycle and software integration skills."