The tech industry has been certain about one thing: Cisco’s move into cloud computing is signaling a larger shift into the technology, whether or not Cisco’s own investment will prove fortuitous.
This week, Cisco, which until now offered mostly hardware solutions to its clients, announced it would be spending a billion dollars to build a new cloud solutions service, called Intercloud. Cisco is hoping that Intercloud will be able to compete against big name competitors in the cloud industry such as Google, Microsoft, and Amazon, among others.
According to Business Insider, this move was nothing if not an industry-savvy one. As they point out in a recent article, companies today are frequently choosing to invest in cloud rather than going and purchasing new software and computers for the IT projects they want to run. Companies spent $131 billion in 2013 on cloud solutions, and this number is projected to rise to $174 billion in 2014. Not surprisingly, this money has to come from somewhere, and it’s often at the expense of network hardware providers like Cisco. Cisco’s profits have now been down for several quarters and counting.
Cisco’s repositioning has put it in a unique place — what many may have forgotten is that three years ago, Cisco more or less promised its investors that it would not become a cloud solution company. The customers Cisco works with are frequently cloud services, and Cisco didn’t want to get into competition. It’s been increasingly difficult to stick to that promise, however, as major Cloud providers continue to gobble up revenue without purchasing their hardware from Cisco.
Eventually, something had to give — and Cisco decided the gamble with its customers was worth it. The company will now offer to sell cloud directly to its largest customers, and ask its service providers to resell it to others. There are, without doubt, risks involved in this plan. Not only does Cisco lack experience with cloud, but it’s going to be competing against industry elites like Amazon. Cisco’s current company culture also moves much more slowly in comparison, releasing new features every six months, while cloud solution providers like Amazon are often releasing new features on a daily basis.
Cisco, for its part, sees a bright future and a role as a future industry leader. “We’re not late to the game — this is a very nascent market,” countered a spokesperson for the company. Whether or not Cisco succeeds, the reality of their decision seems obvious — cloud computing solutions are here to stay.
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