Old School Cloud Computing
Taking a look at the top ten companies in the cloud computing sector provides an interesting insight into the state of the industry today.
According to Forbes, the top five slots are dominated by Microsoft, AWS (Amazon), Salesforce, SAP and IBM. What’s interesting is that several of the largest and most commercially technology companies of the early tech boom are not present.
Evolving Cloud Computing Expectations
This is intriguing for close watchers of this industry because it shows that the demands and constraints of the cloud are changing consumers wants and expectations. As one Forbes contributor wrote, for much of the industry’s history, “the enterprise-tech business has communicated with the world from an ‘inside-out’ perspective that leads every discussion with product features, product specs, product details, and product POVs.”
This no longer works, as cloud computing has both accelerated and transformed the way that companies do business and make decisions. Thanks to the vast array of options, companies are more “me-focused.” Thus, in this fast-paced climate “business people are making the buying decisions and they want the sales conversations to be focused on their needs, their opportunities, and their customers.”
Going Old School
As this change in the expectations occurs, old school companies like Cisco are having to adapt quickly. This sometimes includes moving away from their once rock solid business propositions. While Cisco still makes a healthy margin on its hardware—The Economist notes that the company is still responsible for the sale of all new switchers and routers. This makes up half of the company’s $50 billion annual revenue, even though the overall market share has declined. What’s more is that a cloud platform that Cisco introduced in 2014 has already been shuttered. This occurred with the announcement that in March the company moved “enterprises apps and data elsewhere including to another, unnamed public cloud provider,” which many suspected was Amazon.
Slowing Sales
The reason that companies which sell hardware are under threat is due to the proliferation of cloud computing. This means that fewer companies need to buy hardware of their own, including network equipment – the bread and butter of Cisco. And when they do buy hardware, they are often wanting a more customized experience.
As The Economist went on to note: “Instead of paying for an ‘end-to-end network’ from Cisco, big cloud operators such as Amazon and Microsoft prefer gear that precisely fits their requirements. This is why Cisco’s cloud sales have disappointed, while more specialized vendors such as Arista have made inroads.” In addition, we’ve seen a lot of vendors like Amazon and Google build their own network hardware from scratch in response to the growing cloud demand.
Fighting Back
However, Cisco appears to be taking the challenge on board and finding ways to edge itself back into the top five of the cloud computing game. Aware that software is growing avenue through which computing is done, the company is shoring up its efforts in that area.
As The Economist detailed: “It is offering tailor-made products to the big cloud providers. It has beefed up its software and services business and, to ensure more stable revenues, is making more of its products available as a subscription.”
The company is betting on its ability to help companies manage the Internet of Things (IoT) more efficiently than software-focused companies. By relying on its reputation and name recognition—as well as its knowledge of hardware-centric value propositions—Cisco may well manage to eke its way back into relevance. But it will only happen if they continue to innovate in the face of the massive changes that cloud computing has wrought.