The software and expanded Cloud strategy Cisco is announcing this week is an attempt to leverage the company's installed hardware base while addressing the software centrism sweeping the industry.
Cisco this week formally launched the Cisco ONE software licensing strategy it hinted at last March, and expanded its cloud offerings by extending the capabilities it came by with the $1.2 billion acquisition of Meraki in 2012. The Cisco ONE software licensing plan seeks to take hundreds of separately priced Cisco, hardware-specific perpetual licenses and offer them as three hardware-independent software suites available via perpetual, subscription-based or enterprise licenses.
The intent is to offer customers consumption flexibility, including easier procurement options, with the hope that will increase sales.
"Cisco had a very disparate approach to licensing in the past," says Ray Wang, principal analyst and founder of Constellation Research. "The software-centric approach takes the decoupled model of software license by device and centralizes it for customers. While this software centrism is a trend, the reality is that the devices are outliving the software. Organizations will want their updated software for their intelligent devices."
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The expanded cloud offering, called Cloud Managed IT service, builds off of Meraki's cloud-based WiFi management heritage. It's designed to provide a cloud model for managing on-premises IT infrastructure, including switches, routers and security appliances, in addition to WLAN gear.
Cisco has said previously it wants to up its software investments, developments and expertise, all in an effort to increase the contribution software represents as a percentage of revenue. Cisco claims it is the 5th largest software company in the industry and the third largest SaaS provider with offerings like Meraki and WebEx conferencing.
This week's announcements reflect that evolving software centrism while retaining Cisco hardware as the launch pad.
"Hardware is the real estate. Software is the improvements on real estate," says Wang. "Basically, if you have the real estate, the long term value is in how much software can run on the hardware. This was true of PC's before cloud. This is true of networking in a SDN pervasive world."
But it is also an acknowledgement by Cisco that IT buying patterns are changing. Customers want simplified software licensing and more cloud-based offerings to augment and perhaps cap some of their legacy on-premises footprint and operational obligations.
The three newCisco ONE software suites are Data Center, WAN and Access. All three include core, networking, security and systems software, including Cisco's Application Centric Infrastructure fabric, applications and more advanced security software and appliances.
The Data Center suite, for example, includes foundation software for networking and compute; data center fabric and enterprise cloud applications; and threat defense for advanced security. The Access suite would include foundation software for switching and wireless; campus fabric and mobility services applications; and access identity services for advanced security.
Cisco also announced this week the Cisco ONE Enterprise Cloud Suite, which is designed to simplify the deployment of hybrid clouds by combining several deployment disciplines into a single model. The Enterprise Cloud Suite includes tools to combine on-demand service catalogs, infrastructure configuration and policy automation, workflow automation, and support for multiple hypervisors.
For users looking to off-load IT operations to the cloud, Cisco this week rolled out Cloud Managed IT. This service offers a cloud model for managing on-premises IT infrastructure, including switches, routers and security appliances, in addition to the WLAN gear Meraki already addressed.
"As the market gradually embraces cloud for rolling out various networking technologies, the market potential for cloud-managed enterprise networking is significant," says Rohit Mehra, vice president of network infrastructure research at IDC. "What started as a niche segment in the enterprise WLAN market, is slowly but surely spreading to other networking/security domains such as LAN, WAN, and security."
The Cloud Managed IT service provides centralized management of users, applications, mobile devices, firewalls and VPNs, and provides content filtering, intrusion prevention and location analytics, Cisco says. And it integrates with on-premises management through support for Cisco's Prime Infrastructure management platform, Identity Services Engine policy system, and Connected Mobile Experience, Intelligent WAN and Sourcefire threat detection offerings.
Cloud Managed IT is targeted at enterprises managing thousands of sites that don't have IT personnel at every site, Cisco says.
Mehra says Cisco will face competition from virtually every company offering a broad or niche cloud managed service for infrastructure.
"Cisco Meraki, as the incumbent and market leader, would see competing platforms and solutions from some of the cloud-managed networking vendors, including Aerohive, Aruba, Ruckus, besides others," Mehra says.
Aerohive, relative to its size, has a broad cloud-managed portfolio, including WLAN, LAN and WAN. Aruba and Ruckus are more focused WLAN vendors, both growing rapidly. Besides network vendors, the systems integrators and managed service providers who cover networking, also will potentially compete in this emerging market segment- as this cloud-based "as a service" networking model grows and gets more traction with enterprise IT."
There will also be opportunities for cooperation between these competitors as MSPs need technology vendors for their innovation, and technology vendors need MSPs for channel distribution, Mehra says.
IDC estimates the market for cloud-managed WLAN products and services to reach $2.5 billion by 2018. Adding other IT components naturally will expand this to multiple billions of dollars.
But this is still small compared to traditional on-premise technologies for networking and communications, a market that will exceed $46 billion by the year 2018, according to IDC.
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