The Next Reinvention of Cisco: Networking Giant to Focus on Software and Services

by Matt Klassen on October 20, 2015

There was a time back in 2002 when Cisco stood as the world’s most valuable company, worth $555 billion thanks to its domination providing the switches and routers that made our connected world go ‘round. In fact, Cisco was mostly responsible for creating the foundational infrastructure for the Internet during its first explosive growth period.

But those days are long passed, and Cisco once again finds itself at a crossroads, forced to make a decision about the forward direction of the company; management tasked with navigating unknown waters in an effort to avoid ruin.

In fact, with the rise of cloud computing, the burgeoning growth of IoT, the dominance of other competitors both here and abroad, one might say the future looks quite bleak for the once great networking giant. Despite all that, however, long-time CEO and newly minted executive chairman John Chambers is confident his company can once again reinvent itself amidst this changing technology scene, expanding its focus from networking hardware to include software and services as well.

There’s no question that over the last two decades of his leadership of Cisco, Chambers has seen plenty of companies come and go, falling to the wayside as they fail to adapt to an evolving technology landscape. The most crucial mistake they make, Chambers argues, is they miss those big market transitions or simply aren’t agile enough to change with the times.

The second point of failure for companies, Chambers notes, “is they make the classic mistake of doing the same thing too long”.  So while Cisco has created its empire on the back of supplying the infrastructure needed to undergird the Internet, it now wants to be known as more than just a hardware company. In fact, it needs to become more, because in the wake of the advent of cloud computing, the hardware side has changed radically, now flooded with a host of new competitors offering their own low-cost hardware.

Cisco’s annual report (PDF) lays out the need for change: “For example, if we do not introduce products related to network programmability, such as software-defined-networking products, in a timely fashion, or if product offerings in this market that ultimately succeed are based on technology, or an approach to technology, that differs from ours, such as, for example, networking products based on ‘white box’ hardware, our business could be harmed.”

So what services will Cisco look to offer? Simply put, the new Cisco will focus on bringing together our increasing disparate digital world, with a particular focus on the Internet of Things. In fact, current CEO Chuck Robbins believes IoT is the most important area for growth for his company. “I do believe this is bigger than the first wave of the internet. It has to be,” he said at the company’s Global Editors’ Conference in San Jose, where company management proposed reinventing the networking behemoth.

“The transformative opportunity for us is to really grow into software and scale that side. Things are going to stay connected: the basic concept of routing and switching is not going away — you need a network and you need to be able to connect. I think the intelligence of that routing and switching is what’s going to change dramatically,” says Biri Singh, Cisco’s CTO.

In the end, the newly reinventing Cisco will still provide the switchers and routers it always has, as that still accounts for almost half of the company’s revenues, but the new Cisco will offer more: more interoperability services and more software options that will allow Cisco to evolve into a data management company of the future…instead of yet another hopeless relic stuck in the past.

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