Cisco’s acquisition of CliQr (I hate these fancy multi-case names; they just make it harder for me to type and spell-check so I won’t use the name from here forward!) raises a whole series of questions. Foremost, at the industry-strategic level, is the matter of the value of the hybrid cloud and how that value might change IT. At the vendor-competitive level, you have to wonder if Cisco is, instead of being the next IBM, is now focused on being the current one. It’s possible they might succeed, and if they do it will say more about the industry than about either Cisco or IBM.
Rarely do earth-shaking changes in a market occur when buyer requirements are static and the benefit case driving purchasing is likewise. We can see creeping trends but not revolutions. On the other hand, a major shift in a paradigm will open a broad opportunity that didn’t exist before, and if some player can grab it, the results can be transformational.
Earth to marketplace; if Cisco spent over two hundred million on buying what’s primarily a hybrid cloud management vendor, they don’t think the whole world is going over to public cloud. Smart on Cisco’s part because it’s not. Even under the best of conditions, my model currently has the maximum share of IT spending represented by public cloud services not reaching 50%. Since I agree with the hype (gasp!) that every enterprise and mid-sized businesses and about a third of small businesses will embrace public cloud, that means we are looking at a lot of hybrid cloud prospects.
At the 50% penetration level, and given that about half of that penetration will be in the form of pure-cloud, only-cloud, applications, there is little risk to IT vendors that the cloud will eat their direct business sales. In the net, they’ll gain both hardware and software revenue in the transition. Which of course impacts the industry and competitors at the same time.
Staying with the industry, a pure-cloud positioning could be risky for vendors if that’s cast as being a vote for pure public cloud. Enterprise IT has always been more against cloud than for it, providing that it’s public cloud we’re talking about. Enterprise line management, who have often been for anything that seemed to them to cut through the labyrinthian IT bureaucracy and insufferable arrogance, are finding that IT from outsiders is even less responsive and that somebody who’s delivering arrogance is at least delivering something. Even line departments now think they’ll need their own data centers.
That doesn’t mean that populism in IT is dead, which is another reason why hybridization in general and cloud management in particular is important. Line departments have tasted (illusory, to be sure) freedom and they aren’t going to give it all up. Cloud management is important in hybrid models if you presume that line organizations are driving the bus. If internal IT was, they’d simply harmonize public and private in their own special (arcane) technical way.
If line organizations are going to run hybrid clouds then the internal IT processes will have to be more private-cloud-like than simply legacy-integrated applications. That has major implications for application vendors, users, network vendors, and just about everyone. We’re going to drive a model of true virtualization, where resources are resources no matter where they are.
This argues for building more cloud/networking tools into the OS than are there today, and doing so in a more agile way. PLUMgrid approach could be the secret sauce in this area; build out the OS to be more cloud-aware so that cloudiness isn’t an overlay that could be done inconsistently in public versus private cloud deployments. It also argues for NaaS deployment coequally with cloud services because you can’t have today’s fixed-site network model when half of your spending is on virtual elements.
For vendors in general, the hybrid move is as important a guarantee of future revenue as you’ll see in this chaotic market, as I’ve already suggested. That could relieve the stress of “bicameral marketing” where vendors sell IT to enterprise like the cloud is never happening while trying to sell to cloud vendors like nothing but the cloud matters. Fifty-fifty is a fair split of opportunity, particularly when the cloud’s half is Greenfield money and not stolen from CIO data center budgets.
That doesn’t mean every vendor is a winner, which is surely what’s behind Cisco’s move. Cisco has no real data center incumbency; they’re primarily a network-linked server vendor. That means that they know that they can step out quickly and with safety when legacy IT vendors will still have nagging worries whether the cloud will hurt more than help, in the near term at least. Cisco also knows that despite the fact that most of the cloud opportunity is new money, early cloud applications will evolve out of the data center apps, and thus will demand more sophisticated integration.
Cloudbursting and failover are things that can be addressed as requirements now, even though they should in the end be automatic byproducts of resource independence. That’s a horse Cisco can ride because current applications aren’t agile in a resource sense, and a management system can go a long way in making them cloud-ready. Cisco, because they don’t have a big stake in the current IT paradigm, can focus on facilitating the transformation to the new one when incumbents in the data center of the past have to be more circumspect.
This is nice for Cisco right now. It doesn’t stay nice.
Let’s say that hybrid cloud becomes the rule, and that it absorbs that 50% share of IT spending. We have today a set of fixed sites linked to a set of fixed data centers. We’re in a position to sell private networking to businesses because there’s a rigid IT structure that justifies those switches and routers. What happens when there is no real focus of traffic because there’s no real focus of IT? Gradually, in the world Cisco is betting on, private networking diminishes everywhere and in the WAN it is subducted into a completely virtual network vision. WAN services transform to agile NaaS.
A completely agile NaaS pretty hard to differentiate at the device level. If white boxes have a future outside the data center, this is where that focus would have to be. And inside the data center, without any fixed LAN-to-WAN relationship to play on, there’s no reason to think white boxes couldn’t sweep that segment too. At the very least, commoditization of networking seems the outcome.
So is Cisco stupid? Most incumbents are, if you take the long view, but here we have to admit to another possibility. If network commoditization is inevitable, then there’s no point worrying about what drives it. The key is to get yourself positioned in an area where commoditization won’t happen, where differentiation remains. Where problems need a combination of a new solution and a trusted vendor. Where you can acquire somebody at a very rich price because you have a lot at stake. Ring any bells? I think it does.