In terms of innovation, 2016 did not seem like a big year for Cisco. The company might be doing lots of cool stuff, internally, but it’s keeping most of it secret if that’s the case.
So, is Cisco slipping on innovation?
According to some analysts who cover the company, Cisco is doing fine with innovation. It’s just been distracted in 2016 as its new CEO Chuck Robbins reorganizes the company’s business units.
“My viewpoint is: Robbins has been turning the company around,” says independent analyst and co-founder of Packet Pushers Greg Ferro. “Cisco needs to fix itself internally before it can innovate.”
And analyst Michael Howard with IHS, says, “I doubt they are lacking in innovation, but maybe they are getting a good story together.”
New CEOs often make executive changes, and Robbins has certainly done that. The shuffling began even before he officially became CEO. Some of the most startling changes happened this summer when the famed MPLS team, consisting of Mario Mazzola, Prem Jain, Luca Cafiero, and Soni Jiandani, resigned. The team was in charge of Cisco’s Application Centric Infrastructure (ACI).
In an example of the internal shifting, Goeckeler recently announced via a corporate blog that Cisco has created an “integrated next-generation data center team” led by Roland Acra, who rejoined Cisco as SVP/GM of the company’s Data Center Business Group.
“Acra’s group will include all data center switching products,” including the families of Nexus hardware switches, UCS, SAN, and “associated products and programs,” wrote Goeckeler. “We will consolidate all of the NXOS development team under this group as well.”
Ferro says the new data center group effectively “mashes five or six business units together,” including ACI.
Besides doing a lot of internal reorganizing, another reason it may seem as if Cisco is falling behind on innovation is that the company hasn’t been making many product announcements. Under the reign of former CEO John Chambers, it made tons of product announcements.
451 Research analyst Peter Christy suggests this is because Robbins views marketing differently than Chambers. One of the personnel changes made during the transition to Robbins was to replace Christy Blair, Cisco’s former chief marketing officer, with Karen Walker.
Walker told CRN in 2014 that she wanted to move marketing from a “fluffy” function to a revenue generator. And she wants marketing’s primary function to support the sales team.
“Marketing can really accelerate the sales process,” she wrote in a 2014 company blog. “If you are able to see (with Big Data) exactly what your customer has already purchased from you, how they’ve traversed your social and digital communities, what they’ve looked at, then you are able to give your sales teams a really good sense about what they’re interested in.”
Besides the marketing pivot, Cisco has not had a chief communications officer since Melissa Selcher left in March 2016. However, CMO Walker just recently announced the hiring of Oliver Roll as Cisco’s new SVP and chief communications officer. Roll had been the chief communications officer at VMware.
So perhaps we’ll see more product missives from Cisco in 2017.
The analysts SDxCentral spoke to seemed to think it was reasonable for Robbins to reorganize the company into more logical business groups given the upheavals in telecom equipment.
And perhaps it’s a great idea to transform marketing from a “fluffy” promotional department to a revenue generator.
But back to the original question: did Cisco actually innovate much this year?
At its Cisco Live conference in July, the company introduced three new technologies to embed security into its branch office routing products. However, all three of those products derived from startups that Cisco acquired. It announced only one product it created in-house. That was its Cloud Defense Orchestrator, a means of managing security from the cloud.
Although in-house innovation was sparse, analysts are impressed with the company’s pivot from security that is sold as a one-time product to subscription-based security that provides recurring revenue. And they like how the company is connecting security with its existing network products.
“Their security business is on a roll, no question,” says IDC analyst Rohit Mehra. “Quarter-on-quarter and year-on-year, it continues to grow rapidly. A lot of their subscriber revenues come out of security now.”
In its most recent earnings report, Cisco reported that although its overall product revenue dropped, security, which is in that segment, increased 11 percent. And it was the fourth consecutive quarter in which security garnered double-digit growth. David Ulevitch, who was recently promoted to group leader for security, said the business unit has a $2 billion revenue run rate.
“Their security revenues also bode well for the fact that networking and security increasingly go hand in hand,” says Mehra.
And 451 Research analyst Christy concurs. He says that Cisco has an advantage in security because its networking, equipment is so widely deployed, providing a built-in platform for security sensors.
Service Provider Business
Also related to its existing network products, earlier this month Cisco announced some innovations to its distributed routing operating system — the IOS XR. The new IOS XR capabilities provide unified underlay and overlay networks with the ability to consolidate the disparate data plane and control plane protocols used across various service provider domains, including the central office, metro, core network, and data center.
“This announcement of a cross-domain network fabric, which can be programmatically controlled using real-time telemetry data, positions Cisco to be a vendor of choice for service providers looking to transform their infrastructure to a software-defined cloud architecture,” wrote Mehra in a report for IDC customers.
Perhaps the biggest innovation from Cisco this year pertained to its new Tetration analytics platform to monitor every action in the data center. Tetration is based upon a 39-rack-unit appliance that’s installed on-premises at the data center. Customers have to buy new Nexus switches with it, as well. Cisco’s ACI is based on its Nexus 9000 Series switches.
“In its last earnings, the ACI portfolio was at a $3 billion run rate; it did about $750 million in the last quarter,” says Mehra. “With that increased presence, it can leverage Tetration for those clients who want to work in a multicloud environments.”
But analyst Ferro says Tetration is too expensive, and it uses a lot of electric power in the data center. “You’re looking at $3 million as an entry point,” he says. “That’s not for most people. But for people buying ACI, or niches like financial or government, those customers may see value in that product.”