For the past several years, the #1 topic we’ve discussed on this blog is the ongoing shift of business, consumer and IT offerings to the Web – a key element of a broad and profound market transformation IDC has called “hyperdisruption“. So, with all due modesty, the emerging “cloud” model and its growing impact on the market is hardly new news. But 2008 is bringing a big surge in awareness of, and momentum around, this shift to online delivery and consumption; as we predicted, this is being driven by big players – traditional and disruptive alike – finally dropping big cloud-related announcements and offerings on the market.
So when I met last week with Cisco CEO John Chambers, I was particularly interested in his perspectives on the opportunities and threats for Cisco, as the cloud model shifts into a higher gear. There are, of course, many implications for Cisco from the cloud model – and lots of them should be very positive: more and more customers accessing more and more consumer and business services over the Internet, will drive huge growth in network equipment. But in this post, I want to focus on one just one dimension of Cisco’s opportunity in the cloud: the company’s intriguing effort to become a cloud-based provider of business and IT solutions, a business Cisco has stated it would like to build around WebEx, and a strategy we’ve written about quite a bit.
When I asked John to assess the progress the company has made in this area, particularly in the crucial area of recruiting IT and business solution ISVs, he said: “In terms of the standard report card [financials, customer satisfaction, integration with the rest of Cisco], I’d give them very high marks, versus what was realistic to expect. But we do need to move faster. And as we move faster, we’re often doing it in areas where we do not have as much experience. So attracting everything from SaaS partners (like SAP, Oracle and Salesforce), or attracting a new community of users that haven’t traditionally thought of Cisco for that, is an area we probably need to be more aggressive in.” He added: “and when you move into a new market adjacency, you’ve got to bring in some people who already understand it”.
This was a candid acknowledgement that moving ahead on the “Cisco as a business solutions provider” vision has proved to be a lot slower and tougher than Cisco might have wished. His comments that the company needs to move faster in cloud solution partner recruitment and in educating customers about Cisco’s evolving role, as well as about the need to bring more experienced people into that effort – certainly suggests there will be accelerated investment: think acquisition of online application platform (and ecosystem) companies; recruitment of executives from the likes of Microsoft, IBM or Oracle; and more branding investments around Cisco as an IT and solutions player.
But wait just a minute…
John continued: “The key issue there for us is prioritization. There are so many opportunities for us to go after with just WebEx alone, never mind the other two dozen cross functional priorities we’re going after. In fact, one of the things this year for the first time we’re doing, is budgeting for every new area we move into for the implications on every other group – not just engineering, but think about sales, marketing, services, etc. – we look at the interdependencies much earlier on. You quickly realize there are many more costs than just the engineering or the initial pilot approaches. So prioritization, from a cost and sequencing perspective is very key.”
So what does that mean? The Cisco CEO said that they have to do more – and faster – if they are going to succeed in evolving WebEx into a business solutions hub. But at the same time, he said that they have two dozen major initiatives fighting for investment, leaving us wondering: where does this effort – which requires significant investment, sits outside Cisco’s traditional skills base and brand image, and admittedly will take years to fully develop – rank among Cisco’s strategic priorities?
Frankly, it left me a little confused. Is Cisco going to step up its effort to build WebEx into its bridge into the broader world of IT and business solutions (particularly for the SMB segment)? Or is it going to decide that this vision is just too ambitious, challenging and long-term in nature to draw precious resources away from Cisco’s other big initiatives (telepresence, the home, various service provider transformation initiatives, media industry partnerships, etc.), and that the WebEx vision should stay close to its current “collaboration services” scope?
In fairness, John acknowledged that the company is – right now – in the midst of a comprehensive formulation of Cisco’s cloud computing strategy (including, we trust, strategies for capturing more of the high-growth cloud service provider business from “scale-out” competitors). He noted that Padmasree Warrior, Cisco’s new CTO, has a group of about two dozen Cisco VPs and individual contributors outlining the company’s strategy for Cloud Computing, and that she is going to set Cisco’s strategy there. He said: “We’ve got some good ideas here, but I’d say we’ve got a ways to go before things are set in concrete in terms of our prioritization and our strategy.” So, rather than confusion or indecision, it’s fair to say that Cisco’s in a moment of deliberation.
One thing we know for certain: this is a “crossroads moment” for Cisco (and others) aiming to be major solutions hubs “in the cloud”. credible players in the business IT space. These companies appear to have made the decision that they are going to “go for it” in the IT and business solutions space. So the competition for the “Cisco as a business solutions provider” vision is not just Microsoft, IBM, Oracle, SAP and Salesforce; it is now clearly also going to include Google, Amazon, Yahoo, et al. The stakes are going up big time.This is because the competitive field is getting larger and tougher as we speak. One effect of the growing buzz around “cloud computing” is that the “.com” disruptors we’ve been watching for the past several years – Google, Amazon, Yahoo and others – are finally starting to be seen (and are promoting themselves) as
So my advice to Cisco – if the company really wants to become a broad business and IT solutions provider in the cloud – is: make the big moves now, or don’t bother.