Enterprise IT lessons from Cisco's Earnings!

I have been following Cisco for couple of reasons - its business interests around architectures and IT services. Though the core competency of Cisco is around network equipments serving corporate/government customers, it recently ventured into direct-consumer-centric businesses such as IT services and home-networking/retail products.

In the last two years, Cisco's Leadership often talked about company's ambitions to make it big in the new businesses. Indeed it was promising and raised lots of expectations in the market!. Cisco was making audacious attempt to transform itself from being a product-in-a-box provider to end-to-end solution provider. The company launched quite a few campaigns such as smart+connected communities that would put network-centric platforms as the core to deliver new, innovative services for urban communities!. Clearly, Cisco was trying diversify beyond its core competencies!. And that was the challenge.

Have written about Cisco in my blog earlier here and here!

The challenge showed up in Cisco's earnings in the last couple of quarters and they were below market expectations!. Cisco was not delivering upto shareholder demands and its own benchmarks. Consequently, Cisco's Chairman John Chambers recently wrote an internal memo to all its employees explaining the challenges the company is facing and its future directions. The company has already initiated the organization restructuring process to bring back the focus to its core portfolios.

Couple of interesting observations - Cisco is selling its recently acquired retail video camera business (Flip) and plans to stay out of services business, especially in emerging markets. The second one was interesting. The company has said it doesn't want to compete head-on with other IT service companies like IBM/Wipro, etc. Instead it wants to partner with them to deliver the services to the market. With the new plan, it would tie up some strategic partnership with some of the system integrators/service providers and would help in delivering the core platform and together they would come up with goto-market strategies. That's a significant development!. Cisco is on back foot from directly selling to its customers especially in IT services/solutions business. There are couple of reasons behind this movement:

1. Cisco's margins in traditional network equipment businesses is challenged as it faces fierce competition from vendors like Juniper.

2. Cisco's recent interests in new services/retail products diverted its attention from focusing on its core competencies.

3. The services business / retail business is typically low margin compared to its traditional network instruments' business margins. If services has to make business sense, Cisco need to pump up the volume of those services. This could again change the portfolio mix of its core businesses.

Ok, Why are we discussing this issue in this blog?. How does it impact Enterprise IT shops?. How is this issue relevant to CIOs?

One of the emerging trends that we have been discussing in this blog as well as in the industry is that CIOs need to be business partners. They shouldn't just deliver value in contributing to the bottomline of the company but also to the topline of the company, by delivering IT-intensive services. Isn't this exactly the same Cisco tried to deliver?. Am not sure how much of Cisco's IT organization / CIO's office was involved in delivering its new consumer-direct, IT services/solutions business. But, IT has a role to play!.

There are good amount of lessons to be learnt in Cisco's journey. Cisco's Chairman himself agrees that there is nothing wrong in company's strategy or vision. Its just the execution that has failed. So, for companies that want to venture into transforming themselves from product businesses to services businesses, IT certainly can be a partner. But, delivering on the transformation doesn't look like an easy task!.

As an additional note, IBM has recently acquired a building management software company to accelerate its Smarter Planet initiative!. Would be interesting to watch the developments.

Disruptor in the Data Center

In the last few years,I have had opportunity to work with with Enterprise Architects in Infrastructure Management Teams during the deployment of new systems/applications. The key observation was that we spent lot of time discussing the application sizing requirements, security requirements and network requirements to arrive at a suitable Solution Architecture [infrastructure] that would evenutally solve the problem at hand.

The actual 'System Integration' between the hardware resources like servers, storage, network/firewall typically needed to be hand-crafted and hence took significant time and effort. The scenario would be much more complicated if we were talking about Internet facing applications or the complexity of the application was high.

Coming from the Application/System Architecture background, I am thinking - Wouldn't be possible to come out with several design/architectural patterns in Solution Architectures [Deployment/Infrastructure architecture] as well. For example, Internet transactional system can have a pre-integrated topology and intranet system can have its own pre-defined / prescriptive topology and based on a standard model and the additional discussions can be had according to the very specific project requirements.

Am yet to talk to my Infra Architect counterparts to understand the viability of such a thought process.

But, It looks like Cisco has observed this very practical problem prevailing in the data center and come out with an 'Architectural approach' to solve this issue. Cisco's new offering 'Unified Computing System' is not centered towards a specific solution architecture. It is positioned as a holistic data center platform where many such 'Solution Architectures' can be crafted and deployed seamlessly.

In this new offering, the Platform is a hardware + software combination that has the 'inherent' capability to orchestrate server, storage and virtualization with high-speed network equipments. Yes, I said 'Inherent' capability with no 'plumbing'.

For the first time, Cisco is entering into the data center market, not as a network gear provider but the 'Server provider'. And Cisco has taken this daring move disrupting its own long-term partners such as IBM and HP.

By providing a 'Pre-integrated/Architected System', Cisco aims to eliminate the manual system integration that typically is the case in data center operations. Am personally excited with the 'Architecture approach' as it attempts to think out-of-the-box. [hardware box :-) ]

Cisco CTO claims that today's data centers are fragmented and innovations like virtualization are not enough. Applying those innovations would only increase the operating expenses, She states. I couldn't agree more!.

To support Enterprise data center requirements, Cisco has roped in several partners such as EMC and VMWare to work in a unified Environment. The UCS System will have the capability to seamlessly orchestrate various data center resources from its partners, thus resulting in a plug-n-play environment. With this approach, Cisco's UCS emerges as the 'Brain' in the Enterprise Nervous system [Infrastructure layer].

When I read the offering in detail, I draw strong similarities between Cisco's Unified Computing System and the SOA principles. The UCS effectively implements the SOA principles to seamlessly orchestrate different heterogenous resources using industry standard protocols.

This is clearly a disruptor to the data center/infrastructure industry. And Cisco actually in the path of realizing Sun Microsystem's Visionary statement - 'Network is the Computer'.