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What Can We Learn from Cisco's Numbers?

Cisco's latest earnings report was a nice change from the all-too-familiar litany of network CEOs saying they had no good news about the recent past and no visibility into the future. Unless you're a financial geek, though, the most interesting thing about the report may be in some of the details. There's a lot of hints about the future of our industry crammed into a short financial call!

Probably the most significant point you could take from the call is that having strategic influence on your buyer is really critical in getting good results during bad times. Cisco is one of the few network firms who have been increasing their ability to influence buyer planning and strategy over my last three surveys (a year and a half). When you combine this with Cisco's usually excellent and aggressive sales performance, you have a formula for success. That should tell everyone that however much buyers say they want best of breed and change, they tend to stick with the vendors they've been committed to as long as those vendors have credible responses to buyers' problems.

This point explains why trends ranging from UC/UCC adoption to cloud computing and software-defined networking always advance a lot faster in the press than in the real world. Any tech investment is a commitment, not only of money but of resources in integrating the technology into the enterprise and the vendor into the support chain. You don't change this sort of thing quickly, especially if the vendor you have is able to sustain your trust. And the vendor you already have isn't usually the vendor who has an interest in driving a radically new view of the technology future.

The second interesting point from Cisco's earnings call is that Cisco's servers are for the first time actually pulling through sales of network equipment and not the other way around. Cisco's UCS positioning is primarily directed at the cloud opportunity, so this suggests that buyers are increasingly cloud-builders and not network-builders. If that's true, then it might mean that network vendors who don't have any servers in their portfolio may have to start thinking about more aggression in the cloud software space--anything to give them a specific cloud story to link to their network hardware.

This servers-sell-networks thing has a lot of really significant implications if it becomes a broad industry trend. For one thing it suggests that the IT organization will gain total supremacy in technology buying (some of that is already happening). Another impact is that the evolution to the cloud, whether for cloud services or private clouds, will be driven from the computer and software side, with the network being dragged along. Software-defined networking may or may not be a result of this server-dominance shift, but it seems inescapable that it will be driven by the change if it continues.

The third point from the call is that Cisco continues to struggle with collaboration, which given their recent executive change is probably no surprise. But the interesting thing is that Cisco believes the response to the problem must come through the creation of a single architecture to bridge its TelePresence, UC, and WebEx stuff into a unified product. Sure, it shouldn't be rocket science that "unified communications" would benefit from unification, but Cisco isn't the only player who has either multiple separated offerings in the space or perhaps only a limited offering.

What Cisco is saying is that if you don't cover the UC waterfront pretty thoroughly you may not have enough mass to create utility for the buyer. In particular, I think, they're saying that high-end telepresence can't stand alone.

Given Microsoft's decision to integrate its UC product, Lync, with Skype, one obvious question for Cisco that intersects all of these points is whether you have to be a "service provider" to be a software provider or a cloud provider. Microsoft, with Skype, has a combination of a premises UC platform and a WAN service that can function as an entry-level UC tool or as a connectivity extension to a more robust hosted or premises UC approach. Cisco could in theory expand WebEx to provide some of that same thing, and frankly I think such an expansion is almost a given in any kind of bridging architecture for their telepresence, UC, and WebEx elements. How else could an OTT service like WebEx be integrated? And of course if Cisco and Microsoft are going to build UC around a web service, who in the UC space is going to be able to avoid taking the same steps?

But it's the cloud that poses the big question for Cisco, and for other vendors. If servers are pulling through networks and the cloud is pulling through servers, then the cloud is pulling through networks. Does that mean that network vendors will have to, first, offer cloud software, and then host it themselves, to create a form of public-cloud service?

Vendors have dabbled with private network services for developers and partners, and maybe now they'll have to extend it to customers as well. This could be a windfall for the cloud community, both because it would enrich the total scope of services offered from the cloud and because it would likely increase the number of competitors. That means better choices and lower prices.

Interesting, huh? Maybe everyone in tech needs to start listening to earnings calls!