Cisco Launches Its Cloud Business With a Bold Strategic Shift to Services

Archived Published: 27 March 2014 ID: G00263473

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Cisco's plan to deliver a Cisco Powered cloud platform and services that will be available from multiple partners puts the IT world on notice that it will now become a cloud services provider as well as an equipment supplier.

News Analysis


On 24 March 2014, Cisco announced it will become a service provider through a global public cloud strategy, and that it will partner with service providers and its channel to build, manage and operate public cloud services on its Cisco One and Application Centric Infrastructure (ACI) technologies. Cisco will invest $1 billion in its InterCloud services platform, focusing on engineering, building out data centers that will host and sell Cisco cloud services, and organizing a go-to-market strategy.


Cisco's plans represent a bold marketing move and an important pivot to its strategy, aimed at helping it to compete in a new age. For years, Cisco has used its strong ecosystem of 65,000 channel partners — including some of the largest telco service providers in the world — to sell and support Cisco products and services for their joint customers. Now Cisco itself will:

  • Build and deliver its own public cloud, and provide a service platform that service providers can use for their own offerings, or that Cisco partners can use to deliver Cisco's or its partners' applications.

  • Offer Cisco applications within the Cisco Powered cloud environment, including WebEx, ScanSafe and Cisco's Meraki Wireless LAN solution.

  • Offer its InterCloud solution, a Cisco Powered cloud and managed services offering based on OpenStack APIs, which will provide the ability to move between private and public clouds. Cisco will sell InterCloud directly to customers, as well as with and through partners in a revenue-sharing model. InterCloud will focus on the applications and services that enterprise customers typically use. Cisco itself will host some of the services in its data centers, including its collaboration and video services; it will host others through hybrid clouds that will rely on private and public cloud implementations.

Cisco’s partners have purchased its hardware and software to create services and have acted as service providers; now, however, Cisco partners will become brokers, aggregating, integrating and customizing cloud services in Cisco’s cloud environment. Cisco will dynamically “provision” its cloud, rather than shipping physical components that partners must then “buy and implement” to turn into services. Cisco hopes this “build your own” approach will reduce costs and time to market, enhance its agility and give it the scale necessary to compete in the public cloud market and provide cloud services as well as cloud collaboration applications to service providers and partners.

Cisco maintains that it does not intend to compete with Amazon Web Services, Google, Microsoft Windows Azure and other public cloud services. Gartner believes Cisco's pricing will be a concern: The pricing model and margins associated with public cloud services differ considerably from the premiums that Cisco has sought to attain in new markets. To provide an end-to-end cloud solution, Cisco will need to rationalize its strategic partnerships, since Cisco does not provide all of the components necessary to implement its cloud strategy (such as storage).


Current and prospective Cisco customers:

  • Expect a ramp-up period as Cisco’s direct sales staff becomes better educated about selling Cisco’s cloud solution or InterCloud capabilities.

  • When evaluating the new cloud offerings, factor in Cisco's limited experience in operating global cloud offerings that are resold by multiple partners. Cisco’s numerated partners are mostly focused on private cloud and remote management services; they do not meet Gartner's definition of mature cloud service brokers.

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