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With Intercloud, Cisco Ends Role as 'Arms Dealer'

When it comes to cloud, Cisco just shifted from acting as an "arms dealer" to becoming a cloud services provider in its own right, according to analysts at Technology Business Research (TBR).

My colleague Jeffrey Schwartz covered Cisco's announcement earlier this week at the networking giant's Las Vegas partner conference. Here's how Jeff described the news:

The company [Monday] said it will invest $1 billion over the next two years to offer what it argues will be the world's largest cloud. But rather than trying to beat Amazon Web Services, Microsoft, Rackspace, IBM, Hewlett-Packard, Salesforce.com, VMware and other major providers that offer public cloud services, Cisco said it will "join" them together, figuratively.

Cisco said it will endeavor to build its so-called "Intercloud" --  or cloud of clouds -- aimed at letting enterprise customers move workloads between private, hybrid and public cloud services.

Cisco's expanded cloud strategy, revealed at this week's Cisco Partner Summit. (Source: Cisco)

In an analysis Thursday, TBR's Michael Sullivan-Trainor and Scott Dennehy characterized the announcement as a notable change for Cisco:

The move is a significant departure from the company's previous strategy of being just a cloud "arms dealer" (i.e., providing the infrastructure elements to service providers and enterprises that enable public and private clouds).

Changing positions in the cloud world holds some significant risks for Cisco, according to the TBR analysts:

TBR believes the new cloud strategy will negatively impact Cisco's hardware sales, particularly in the service provider segment, as customers will be able to leverage Cisco's application-centric, network-aware services without buying routing and switching infrastructure for their cloud environments. ... the move will place Cisco into competition with other key partners, such as IBM, as well as customers like Verizon that sell public cloud services using their own infrastructure. ... TBR believes Cisco will face challenges executing its new cloud strategy, as the focus on applications and services does not play to the company's core strengths in hardware.

For all those challenges, the TBR analysts say they expect Cisco to "quickly establish itself as a key player" by investing in additional partnerships and tuck-in acquisitions.

Posted by Scott Bekker on March 27, 2014 at 1:42 PM