Cisco Live, the company's annual user conference, kicks off this week in Orlando. Given the fact that CEO John Chambers has boldly claimed that Cisco's goal is to be the #1 IT vendor within five years, I'm sure we'll see "next generation IT" be a pervasive theme there. The goal of being the #1 IT vendor is certainly brash and may seem a little farfetched given the "IT" competitive landscape that includes the likes of IBM, HP, VMWare and Oracle.
The competitive landscape certainly may look tough given all of the other 800-pound gorillas, but Cisco does have a shot at IT dominance, as IT is in a state of change. I'm a firm believer that significant market share transitions only occur when markets themselves are in transition, and it's clear that IT is in transition. We are moving from a very compute-centric IT model to mobile and cloud computing, which are both network-centric, and that's Cisco's big opportunity. Even virtualization today is becoming more reliant on the network, furthering Cisco's position of strength.
The challenge for Cisco, though, is that the other IT vendors have noticed this as well, as evidenced by M&A activity such as Oracle buying Tekelec and Acme Packet, VMWare purchasing Nicira, and IBM buying Blade Network Technologies.
Last week, Cisco made an announcement that bolsters the company's IT position, stating its intent to acquire San Mateo-based Composite Software. The purchase price is $180 million, and is expected to close in the next calendar quarter.
Composite Software makes data virtualization software and services that take data from disparate sources and provide companies with a single view of the data. Composite's solution can take data from both traditional repositories as well as emerging data sources such as cloud environments and big data solutions. An easy way to think about the solution is that an organization could have hundreds of individual data sources, and Composite would make it look like all of the data was stored in a single place. The centralization and "single pane of glass" view into the data allows IT departments to make smarter, more informed decisions based on the data. Almost every CIO has a desire to make IT more agile, and it's hard to be truly agile without agility at the data level.
While the acquisition of Composite doesn't instantly make Cisco the number one IT vendor, it is an important step for Cisco as it looks to expand its business beyond just network gear. As I said before, computing is becoming more network-centric, but Cisco does need to focus on more than just the network. Cisco has had success in the server market with its Unified Computing System and now Composite gives Cisco a play in data.
Cisco moving into data isn't a total surprise. Within the data center, Cisco owns most of the market share for networking gear, has a server business that's growing faster than any other vendor--but doesn't have a play in storage. Many have speculated that Cisco would acquire either Network Appliance or the increasingly more competitive EMC to move into storage and fill that gap. Given the valuation of those companies and Cisco's lack of US cash due to the ridiculous repatriation laws, it is tough to see how Cisco might pull off an acquisition that large without having to debt-finance. I like the acquisition of Composite as it gives Cisco a key role to play in the management of data without having to actually own the data.
The Composite solution will actually be integrated into Cisco's services group, indicating that the solution will be services-led rather than technology-led. This is consistent with Cisco's claim that architectures are created through a combination of hardware, software, ASICs and services.
This purchase is highly complementary to the acquisition of SolveDirect made in March, which simplifies the connection to cloud infrastructure and enables companies to share data with third parties, such as partners and customers. The combination of Composite, SolveDirect, UCS, the network and Cisco services will help Cisco create an architecture for a unified data center platform that spans the entire stack.
This was a good move for Cisco but certainly won't be the last acquisition it makes in the IT landscape. We should expect to see more money being used to strengthen Cisco's cloud and software positioning as the company looks to transition itself up the stack. However, we're also likely to see the traditional IT vendors make more moves themselves. One of Cisco's new tag lines is that "Tomorrow starts here"--well, so does the company's new competitive landscape.
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