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Cisco's evolving software, cloud strategy will hinge on hardware

Jim Duffy | Jan. 28, 2015
New licensing strategy will use installed hardware base as the "real estate" on which to build.

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."

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.

 

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