You can always learn a lot from Cisco earnings calls. Not everything that’s said is meaningful, of course. For example, they always attribute anything good in revenue or earnings to their latest initiative (intent-based networking, in this case), and if they fall short it’s because that initiative hasn’t had time to percolate through the market. They also always talk about things that are experiencing “exponential growth” (security threats this time) and increasing complexity and proliferation of devices (IoT). You can usually skip the first couple of minutes of a call.
There are some truths exposed later on, and even hinted in the early fluff. One is that Cisco’s intent portfolio is actually doing them some good, even though it’s about half PR and half technology. Cisco’s claim to fame in modern transformation politics has been an explicit and even in-your-face acceptance of the terminology and goals combined with an implicit (often subliminal) rejection of the technology changes being proposed. Translated, that means saying that the market is right about opex savings, transformation, and zero-touch automation, but wrong if they think that means buying something other than Cisco routers and switches.
It’s not that Cisco’s “Intuitive Network” is gaining them market share as much as that it’s protecting them from the potential impact of new technologies overhanging purchase decisions. That sounds cynical, but it’s a sound business strategy, particularly when they know that there is little marginal benefit to a wholesale transformation from routing/switching to SDN and NFV. Specialized value for some situations? Sure. Total transformation? Reckless, which means operators won’t do it anyway, but might waffle on the business case long enough to mess up a quarter.
That’s critical right now, because we’re coming off a period of extreme pressure on capex into a period when some relaxation of CFO policies is likely. If there’s money to be spent, you don’t want the buyers tied up in technology debates. They’re going to do what they want, which is to stay the course in technology terms, anyway.
You could argue that if there’s a fifty-fifty split between fluff and substance with Cisco, then where’s the other half? The fact is that eventually operators will have to reduce total cost of ownership, and intent-modeled zero-touch-automatable infrastructure and service operations is the way to get that. Even if Cisco wanted to promote capex reduction (which, since it would impact sales, would be idiotic), that pathway won’t save enough. Cisco has highlighted the true path to network enlightenment. Listen to Robbins on the earnings call: “The network is also a key enabler for our customers as they increasingly adopt a multi-cloud strategy. They need a unified, automated and scalable environment across their data centers, private clouds, and public clouds.” Gospel truth.
And Cisco has not yet really delivered it, which is the risk inherent in the Cisco story. There’s value in Cisco’s approach, but it’s not fully integrated from top to bottom, either for enterprises (where the top is the application) or network operators (where it’s the services being sold). What Cisco has delivered fully is a resource-layer automation strategy that works. They could expand that to reach the top of both enterprise and provider pyramids, but they aren’t doing that yet.
One reason why is that old axiom of sales “Never sell more than the buyer asks for.” What network buyers want right now is insurance, not an implementation. Tell me it will be OK. At some point, of course, the buyer will want something more, and then Cisco will have to be prepared to deliver something.
If you’re a Cisco competitor, the logical thing to do now would be to deliver the full goods, then make the buyer want it now instead of later. It wouldn’t be all that difficult for any of Cisco’s competitors (Juniper and Nokia in particular) to deliver a full top-to-bottom service and application operations solution. I think you could cobble together something that would be dazzling after a week of planning, in fact.
One way Cisco is preparing for the execution of the future and stalling competitors at the same time is by exploiting their unique data center position. Cisco sells servers, and they’ve now decided to sell container solutions. Again, quoting Robbins: “Further extending our cloud-focused software offers, we recently introduced a Cisco Container Platform to simplify the deployment of cloud native applications and containers with Kubernetes.” Containers in general, and Kubernetes in particular, combine with the cloud to create a seismic shift in virtualization and the data center. For two decades, strategic control of the data center in enterprises guaranteed control of networking. Since 2012 that’s also been true of network operators.
The trick for both Cisco and competitors would be selling this to the market, and there Cisco has the advantage. They don’t want to drive the revolution, so they don’t need to sell anything, just wait for the demand to build to a critical point (at which time, presumably, they’d just buy a company or two). Competitors have to not only have a compelling full-scope solution, they have to make it attractive. That means positioning it in the press, and that’s a problem.
Network writers and editors don’t generally write about software, containers, Kubernetes. They don’t write about the challenges of address space and connectivity management. Even a topic like multi-cloud networking is difficult to get insightful stories on. It’s hard to do a thoughtful piece on any of this stuff in less than a couple thousand words, in fact, and you’re not going to get that much space easily. Can Nokia or Juniper, neither of which have been wizards of articulation, sing pretty enough to get traction for a pre-revolution mode on Cisco? Not unless they change up their approach in a major way. Read Juniper’s website material on its multi-cloud story, and the media reports of the same development. You’d never get any sense of the value proposition.
Meanwhile, let’s go back to Cisco’s call. The first question they got from the Street was whether the interest in Cisco’s intent-based network model was confined to the US. The response from Robbins was “First of all, we’re incredibly pleased with the early acceptance of this intent-based portfolio. I called out in my opening comments that this Catalyst 9000 is the fastest ramping product in our history, which is pretty impressive. I’d say it’s fairly balanced across the geographic regions….” This shows that what Cisco is doing is anchoring their future strategy to a current product first, then worrying about the actual question second. Wise moves, particularly given the lack of wise articulation we see from Cisco’s competitors.
Those competitors are the ones who should be paying attention here. Cisco turned in decent numbers, and if they did it by staying the course in technology terms, that only proves that the default path for an industry favors its incumbents. Surprise? If the other players in network equipment want to see growth in their own market share, changes in the technology framework for the industry, they’re going to have to do a better job of showing buyers why that would be good for them.