Cisco Systems partners say the tech giant will require the assistance of the channel to successfully transition the majority of its portfolio to an as-a-service model.
“Cisco is going to need to work with partners like us. They have been so entrenched in the IT space, and every vendor wants so badly to be relevant with the lines of business,” said Mike Trojecki, vice president of digital solutions and services for Logicalis, a Cisco Gold partner.
Cisco Chairman and CEO Chuck Robbins during the company’s fourth-quarter fiscal 2020 earnings call Wednesday explained that the COVID-19 pandemic has had far-reaching implications on IT buying across the globe and, as such, the company would need to “re-examine” its own business and portfolio. Robbins made it clear that every Cisco product would be evaluated and nothing was off the table.
“It is literally across the portfolio,” Robbins told investors. ”We‘re looking at everything from our compute portfolio to clearly our software assets, [which] are already in the midst of that transition, and many of them are already being sold that way. And we’re even looking at how we deliver our traditional networking hardware as a service over time.”
New York-based Logicalis has been offering consumption-based IT services, including IoT as a service and services through HPE Greenlake, even before Cisco got into the consumption-based IT game. In fact, Cisco has been tapping Logicalis for input in building out its as-a-service strategy, Trojecki said.
A larger consumption-based IT strategy from Cisco will allow partners to focus on the technology without worrying about the financial structure around infrastructure, Trojecki said. Many end customers don‘t realize that solid infrastructure is the most important piece they need in place to accomplish their IT goals, like data collection and analysis, he added.
“Now that Cisco is stepping in, it should make it easier for us to get to market without having to build everything on our own, which was our plan,” Trojecki explained. ‘We’ve been calling for this for years.”
Cisco over the past three years has been gradually transitioning specific pieces of its portfolio to a consumption-based model, such as its collaboration portfolio, which includes the popular Webex video platform. Cisco in 2019 launched a Hardware-as-a-Service pilot within the collaboration portfolio. Robbins said that the company has been working on the systems and operational capabilities needed to move to a consumption-based model for more of its products.
IT spending has slowed globally as a result of COVID-19 causing an economic turndown. Cisco‘s own fourth-quarter fiscal 2020 revenue fell 9 percent to $12.14 billion year over year. Cisco’s conversations with customers have been around how technology strategies are adapting to ensure greater resiliency and agility, while cutting costs. Robbins said that as a result, Cisco has also had to rethink its own approach to the market.
Specifically, the pandemic gave Cisco the air cover it needed to push more research and development dollars to areas such as cloud security and cloud collaboration and away from the company‘s on-premises portfolio, Robbins said.
“I‘d say that it’s clear that many of our customers do want to consume the technology as a service, so we’re currently looking at the entire portfolio to see how deeply we can get into the portfolio relative to delivering as a service,” he said. Robbins said to expect more of these offerings to hit the market by the end of 2020.
But Cisco “absolutely” won‘t succeed if it leaves out the channel on its mission to move to everything as a service, said John McCarthy, president of rediTech solutions for Cisco partner ATSG.
“When you think about the percentage of business that is done through the channel at Cisco, the change wouldn‘t happen—it couldn’t happen,” McCarthy said. ”The good news is every partner that’s worth anything is shifting their business model to recurring revenue right now. The ability to sell an enterprise agreement or a collaboration solution on a monthly or quarterly basis helps all of us move toward that recurring revenue model.”
ATSG has been an early adopter of many as-a-service offerings. Today, the company is providing a work-from-home as-a-service, desktop-as-a-service, backup-as-a-service and infrastructure-as a-service-offerings to customers. ATSG is also selling Cisco‘s contact center solutions in a consumption-based model.
McCarthy, a member of the Cisco Partner Executive Exchange, is confident in Cisco‘s direction because the market is ready, he said. Partners, but more importantly, end customers, all want more consumption-based IT offerings, he added.
“My strong belief is that Cisco will get there. They are well on their way and there‘s no turning back,” he said.
An as-a-service IT model fits in well with Cisco’s software and services focus, Logicalis‘ Trojecki said.
“I think Cisco will do well in the consumption-based IT space,” he said. ”I think they don‘t have much of a choice.”