Cisco pushing hard in competitive cloud market could lead to zero

Martin Banks Profile picture for user mbanks September 29, 2014
As Cisco expands its Intercloud partner network, it needs to understand that the value-add with the cloud will lie elsewhere in software and business services.

When it comes to the cloud one of the important questions is whether size is everything? Is having access to the world’s largest Intercloud – defined by the term’s creator, Kevin Kelly, as a cloud of clouds – of vital importance?

For Cisco it certainly is, for the company has just announced that its own efforts in this direction have been significantly expanded by the addition of 30 new cloud service provider partners adding a total of 250 data centers around the globe to its existing Intercloud.

The list of new partners includes some of the big gorillas of the internet infrastructure business, such as Deutsche Telecom, BT and Equinix.

Each will bring their own flavour to the partnership. For example, BT will focus on delivering cloud solutions, while Equinix will target secure connection to the public cloud.

All of them, however, will be part of Cisco’s ability to offer users a more comprehensive solution to working with data sovereignty issues.

Cisco’s Intercloud is based on OpenStack, which puts it in the same market space as a large number of other large cloud service providers such as OpenStack founding father, Rackspace.

To help it compete here, the company is planning to invest as much as $1 billion from its own finance division, Cisco Capital, in providing funding to help customers and partners transition applications and services to its flavour of the cloud.

The funding will focus on financing Cisco Applications Centric Infrastructure; facilitating technology migrations; and providing flexible payment structures.

This capability, arguably, puts it one step ahead of Amazon in the cloud services marketplace, but on a par with the likes of Rackspace, VMware, HP and IBM, all of which offer similar customer transition services and, to varying degrees, global service coverage.

It will be interesting to see how the financing packages work out over time, for both end users and partners. Given that OpenStack is an open standard with many vendors participating, there would seem to be no reason why a customer should not use Cisco’s services to help the transition to the cloud, and then move to an alternative (most probably lower cost) service provider.

Once in the cloud, it might be only the specific terms of the `flexible payment structures’ which then preclude any customer or partner decision to move to lower cost services.

In the end, while the company is the undoubted big gorilla of network sservices – the capillaries that keep the internet well fed and functioning – there is only a partial logic to there being obvious follow-up success in providing cloud services. This is especially the case where the infrastructure component is increasingly standardised, such as OpenStack.

Here, competing on price will be the main game plan unless the service provider has a specialism or geographic advantage, or has a global name as a provider of business management services, such as HP and IBM.

John Lloyd, Cisco’s president of development and sales, is quoted in a company announcement as saying:

just as Cisco played a leading role in connecting isolated islands of LANs to architect the modern Internet, Cisco’s Intercloud Fabric and Application Centric Infrastructure innovations uniquely position us to connect disparate cloud services to unlock the full potential of cloud, and with it a new era in IT.

But that unlocking is in practice likely to come from somewhere else.

That is the use of APIs to loosely integrate applications, tools and services together into collaborative business services, regardless of the underlying infrastructure.

Yes, the faster and more reliable the connections the better the collaboration are likely to be, but even that will only be crucial where real latency issues are in full play.

My take

Pushing hard at an increasingly competitive market where the bottom line is bound to tend towards zero.

The value-add with the cloud, especially when OpenStack contributes to the standardisation and commoditisation of cloud infrastructure, will lie elsewhere in software and business services.

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