Cisco celebrated the 25th anniversary of CiscoLive this week by building on a theme that has been at the heart of the company’s evolution – collaboration. At the company’s chief annual customer event held in San Francisco, the collaboration team introduced new solutions to improve the individual user experience, including Android-based DX70 and DX80 devices that simplify the desktop through integration of purpose-built tools such as speakers, phones, monitors and webcams, and the Collaboration Meeting Room service, an “always available video collaboration space in the cloud” that is unique to each person. But as betokens the larger presence in the industry that Cisco has developed over the past quarter century, the company also focused at the event on a more ambitious interpretation of collaboration – Intercloud, a global cloud network that Cisco aims to build out with partners who adopt the Cisco delivery platform to address the anticipated explosion of demand for compute services predicted by evangelists of the Internet of Everything.
Cisco’s new found determination to develop public cloud services is a reflection of broader market acceptance of the hybrid cloud paradigm. Through marketing of its UCS portfolio, Cisco has operated as a provider of the enterprise infrastructure needed for private cloud implementation and now boasts number two spot in terms of blade server shipments; however, growth of public and hybrid cloud deployment spells market opportunity of a different kind. While Forrester has recently estimated a CAGR of 19% for 2013-2020 in the global public cloud market, Techaisle Research has uncovered some of the complexity behind this kind of growth estimate. The slide below shows significant penetration of cloud in the Canadian SME segment (from 25% to 46%), with adoption of public cloud in combination with other cloud platforms as the predominant pattern into 2016-2017.
Responding to growing market interest in this hybrid deployment, virtually all of the major IT vendors have created public services to complement private platform offerings. Up to now, Cisco has taken a different path, relying on the sale of cloud infrastructure building blocks to service provider ‘partners’ as an indirect means to capture public cloud opportunity. According to Rob Lloyd, president, Cisco development and sales, the company currently has established this type of relationship with 60 service provider customers. While this approach obviates the risk associated with large investments in public infrastructure, it does not guarantee the service continuity that customers require of hybrid environments, an area in which Lloyd stated that Cisco now aspires to be “the number one provider.”
To get to top spot, Cisco has announced a $1 billion investment over the next two years in Intercloud – a global network of partner clouds – dedicating a new leadership team and 3,700 staff to building out the platform. So how is Intercloud different from the cloud services that Cisco has provided up until now? According to Lloyd, there are three key differences: “the Intercloud partnerships will be based on ACI, application centric infrastructure with consistent profiles for business workloads that can scale from private to public [environments]; Intercloud partners will embrace the idea of workload mobility or hypervisor independent workloads, a recent innovation that offers customers choice so they can move from a vSphere developed application into an Amazon or an Azure application; and a third difference is that many of the services that we bring into Intercloud will be cloud-based network services…so ACI, OpenStack orchestration federating across a different group of players, and Intercloud Fabric and networking as a fundamental value proposition are the main differentiation factors.”
The secret sauce in Intercloud appears to ACI, a new networking architecture that provides centralized automation and policy-driven application profiles to enable rapid provisioning and scale across enterprise networks – from the data centre, through WAN to the WiFi edge. Consisting of the new Cisco Nexus 9000 series switches, the Cisco Application Virtual Switch for the virtual network edge and centralized policy management through the Cisco Application Policy Infrastructure Controller, ACI features advanced telemetry to provide real-time visibility into infrastructure and analytics for application health monitoring, integration of physical and virtual infrastructures, application centric security policy, open software for DevOps teams and ecosystem partner integration and an open ecosystem of network, storage, management, and orchestration vendors. As Soni Jiandani, SVP of Cisco’s Insieme business group, described it, a “foundational principle of ACI is that policies track workloads” – in other words, ACI automation helps networks to react dynamically to the applications in the network. While not strictly new – other vendors have introduced templating or blueprinting to scale resources based on application requirements – Cisco’s new application focus is designed to address some of the complexity in the network for large enterprises that may house thousands of applications or even SMEs that may run hundreds. ACI is Cisco’s answer to SDN – a flexible, software-based solution to address networking hardware management in our increasingly app-centric world.
According to Cisco, the Intercloud will also help customers achieve compliance with local data sovereignty laws since customers may choose (and move) the location for their cloud deployment and data from amongst a global partner roster. Built on OpenStack, Intercloud will provide APIs for rapid application development, adopting an open crowd source approach that Cisco believes will combine with partner delivery to accelerate adoption. Describing Cisco’s decision for in favour of continuing its partner strategy (as opposed to building its own resources), chairman and CEO John Chambers explained, “we don’t move into a market unless we think we have a realistic chance of gaining 40% market share with sustainable differentiation. And we try not to move into markets that don’t have good gross margins unless they are unusually strategic for us. This is a market that is very price sensitive; it involves taking on the big giants in Google, Facebook and Microsoft, etc. Those are the kinds of situations where we look more at a partnership opportunity than at acquisition.” Designed to provide Cisco with global reach and customers with global access to cloud resources, Cisco claims that its new Intercloud technology will offer partners the tools needed to compete against the “giants.” From a partner perspective, however, the “inter” in cloud is also a key benefit that may be used in customer conversations as it allows the smaller partner to offer global delivery capability. Cisco is looking to build a “star alliance of cloud providers,” according to Lloyd, and “any one of those companies, competitive or not, would be part of our Intercloud roadmap. If they embrace the constructs we described, such as ACI architecture, SDN at scale, OpenStack, automation that can be federated across the open source community, the constructs of Cisco and networking based workloads, we’ll expand the ecosystem to include any company that we think of today as a major cloud provider.”
If Cisco’s inclusive approach to cloud collaboration promises global delivery capability, it also begs a question: if each partner runs the same infrastructure, wherein lies their competitive differentiation? Intercloud partners on hand at CiscoLive 2014 offered their own responses to this question, focusing on their unique value adds: while Steve Nola, CEO of group cloud solutions for long time Cisco partner Dimension Data, noted his company’s consulting and advanced integration services capabilities, CTO of Sungard Availability Services Josh Crowe pointed to his company’s strength in security services, VCE CMO Nina Hargus described VCE’s unique ability to provide for rapid deployment of hybrid cloud through preconfigured Vblock Systems, and director of solutions marketing Adam Fore outlined NetApp’s data management (as opposed to storage) technologies, and new potential to deliver hybrid cloud solutions to customers through the integration of Intercloud Fabric and ACI control into FlexPod.
Interestingly, while key to partner success, this differentiation also raises issues for the “star alliance.” If global service delivery is the attraction of Intercloud, but not all services equal, what happens when a customer chooses to move from one cloud provider to the next? Similarly, how are partners compensated for their value add services and how are these measured when billing is managed by Cisco on behalf of partners in a single charge system? And how is will it be possible to maintain consistency in user experience and service levels needed for true customer workload portability when the service is delivered through a potpourri of Cisco branded and white label partner platforms? In ambitious programs like Intercloud, the devil is always in the details, which may have impact on take up by cloud provider customers. On the partner management front, Cisco has a good track record – delivering over 90% of products/solutions through partners – that may stand the organization in good stead as it works to negotiate the added complexity introduced by Intercloud. A bigger challenge for partners and ultimately Cisco is likely to be competition from non-commercial forums like the CloudEthernet Forum, which has just announced its own open cloud architecture, the head start that many large cloud vendors have in the development of hybrid offerings and global delivery – and the existing investment they have made in building the efficiencies needed to introduce highly competitive rates, evidenced in the price reductions announced by Amazon (50%) and CenturyLink (60%) this month alone. It’s no slam dunk, but Cisco is betting on strength in numbers.