If I think about that architecture that I described to you earlier, some of the key areas we need to focus on are accelerating the automation of programmability of the entire network, unleashing the analytics that are of value that exist within the network today. That can then be combined with analytics from Accenture and we’ve got some great capabilities there. I think we need to accelerate the security architecture and our teams have done a tremendous job. The Sourcefire acquisition has been great. We believe the OpenDNS acquisition is going to be really key to us and you’re going to see us focus on accelerating that.
Those areas I think are clear cut. The teams are actually doing the right things so this isn’t me saying they’re moving too slow. These are just areas that we have to continue to accelerate. As I think about our customer segments, we’ve got reasonably good architectural alignment with most of our service providers, as an example, and we’re moving faster now on delivering virtualized managed services. It’s a general response when we see market transitions occurring. You’re going to see us assess those transitions, embrace those transitions and then accelerate them for our customers.
You also talked about simplification. What is the simplification that is required? How will the process of getting things done at Cisco change under you?
We need to think about it across everything we do. How we articulate our value proposition externally to our customers, how we talk about the value of the technology to the business. I think that as long as we are trying to move with speed, then the simpler the messaging, the greater our ability to move. It’s a general desire to take complexity out because as we think about moving faster, complexity is our enemy. It’s that simple.
Who do you view as the key competitors for Cisco? Your largest market share competitor in traditional networking is still pretty small. But who do you worry about?
I love a competitor that tries to build a better product because we do really well against those. John has talked over the last four or five years about this emerging threat from white-box. That’s still a competitive threat but if you think about the objectives of the IT organization towards driving more business value inside the organization, they need technology that works together architecturally faster. The whole notion of disaggregating software and hardware just for the sake of 10-15% [savings] on the upfront CAPEX cost, honestly, most customers don’t see the value in that. They’re trying to move quickly to get technology in so that they can begin to achieve the business benefit from it. It’s not about saving 10% on that old systems integration work that we used to do. That’s one area that I think we’re well positioned on.
As we look ahead, I think that the biggest competition will come from market transitions and, increasingly, many of the market transitions are business-model oriented. Our biggest risk is not paying attention to those and, where they make sense for our customers, embracing them quickly and moving forward with them.
When you think about the goal of helping customers with digital transformation, are you competing conceptually and from a breadth-of-solution perspective with IBM, EMC, HP Enterprise? Who is it? There’s got to be somebody you point the team to and say "go kill these guys."
Realistically, we have a lot of technology competitors but when we think about what’s required in helping our customers, one of the key things is going to be a very holistic ecosystem. We spent the last 15-20 years building up what I believe to be a huge competitive differentiation for Cisco, which is our ecosystem. As I think about our ability to execute with our customers, I actually think we’re uniquely positioned right now. That doesn’t mean we have every element of what they need, but it means that we have the network, which is the thing that’s going to be pervasive. We have this distributed infrastructure capability, we have the ability to deliver analytics, provide automation and programmability at the application layer. I think we are uniquely positioned there.
I want to go back to a comment you made that you love when people try to compete at the product level. Is that to say you don’t think that there’s a significant enough shift in networking that a product-oriented networking company could make significant inroads against Cisco? I’ll give Cisco credit here while you’re mulling that because over the years, whether it’s fast Ethernet, Gigabit Ethernet, wireless LAN, security, you have navigated those transitions. SDN would seem to be the next competitive landscape. Do you think that because of the ‘holistic ecosystem’ that it just would be too difficult for one of the competitors to really change the dynamic in networking?
You have two things going on. You have customers that buy into architectures because they’re trying to get the business benefit now. If the ROI to digitize manufacturing floors or mining facilities or cities is defined well enough, they’re not going to disaggregate the hardware to save 10%. They want to move with someone they trust who can help them implement that. On the flip side, if you have someone who is just looking at the upfront CAPEX cost on their technology, if that’s their priority for some reason - and I would argue that if that is your priority, then you’re probably in a pretty difficult space - then you’re going to get squeezed by the whole white box play. You’re going to get caught in the middle there and, classically, in these markets there’s only room for one real low-cost player.
How do you envision the evolution of the network market? Obviously, your ambitions and your product set is bigger than that, but how do you see the network market evolving over the next say 2-5 years?
You're going to see this distributed capability all the way through the network out to the edge where the data exists. That's the biggest change that's going to occur. I also believe that the entire network needs to be programmable and automated. We can expose that so the applications that are ultimately delivering the value from the data fundamentally define the infrastructure they need to operate within. That plus the need to drive security. If you think about this massively distributed enterprise architecture and you think about a customer who's trying to build security there, the pervasive thing across that entire architecture is the network. It's been a tremendous transition over the last five years where customers are beginning to move from these point-product security solutions to thinking about the holistic architecture that they have to build for security. That's what the network is going to evolve to deal with, and it will be a combination of automation, software, hardware, programmability, security, analytics. Those are going to be the key values out of the network.
You have a robust software-defined network strategy. What do you say to people who claim SDN is really not very good news for a company like Cisco? One Dell executive said "SDN is kryptonite to Cisco." What do you say to that?
This is where you can get religious about the technology or you can step back and look at what a customer is trying to accomplish. We see a lot of buzz around SDN and I think John may have even used a quote in your last interview that there's not a customer on the planet that woke up and said “if I could only buy SDN today, my day would be complete’. What they're looking for is flexibility, agility, greater asset utilization, operational efficiency, the ability to move with more speed. We looked at SDN as it was being espoused and asked ‘what are the benefits a customer really wants from that?’ Then we said the best way to expose that is to give the application the ability to drive policy into the data center, and that's what we did. Now we're going to expand that across the entire enterprise so that the application can fundamentally define the infrastructure upon which it runs, whether it's quality of service, security profiles, provisioning compute for some period of time, provisioning incremental virtual machines, provisioning incremental storage. We think that the value of SDN is for it to be automated and we think that we're uniquely positioned to do that through a combination of our network capabilities and then bringing automation from the top.
That's one set of objectives with virtualization. The other is that I can essentially make my infrastructure fungible. I don’t really care where it comes from. We saw that with server virtualization. Do you not see that coming with SDN over time?
If I use your server example, we entered the server market seven years ago? Six-and-a-half years ago? And if that were the case, that servers were completely fungible, then we wouldn't have entered with a premium solution and moved to number two share globally. There are unique capabilities that we still believe are brought to bear to bring value. One of the misconceptions of network virtualization is that people view it as they viewed server virtualization or storage virtualization. Virtualization of servers and storage was done because they were radically underutilized resources. You might have had 30% of a server being utilized or some smaller number. We're upgrading networks every year because they're over-utilized. So that's not the reason to do it. The initial benefits of SDN were around operational efficiency, automation, not having so much complexity and provisioning a data center for a certain application. We believe that through a combination of our technology and some of our software assets and then an automation layer across the enterprise, we can provide that capability. I think the word "virtualization" gets a little misconstrued here, when it's really automation and programmability and it's about speed and lower operating costs.
Fair enough. Given all of the potential benefits of SDN, why aren't customers excited about it at this point? Or why aren't a lot of customers excited about it?
It's like many new technologies. There are some very specific use cases that exist today that do lend themselves to our ACI [Application Centric Infrastructure] architecture and we see uptick on our customers that are looking at that application integration. I just think it's in the early stages.
Going back to the analogy that server virtualization was relatively inexpensive and a big win from a cost perspective, network virtualization is expensive and the payoff is farther out.
It gets back to the fact that we're solving a different problem than we were solving with server and storage virtualization. It's a little more complicated when you're integrating, trying to define what an application policy is, and then having that get implemented through the infrastructure. Customers are going to take their time. This is happening in the most strategic part of the IT infrastructure today, which is sitting in the data center. But look at our history, what we've done as a company - and this is why I think this is right in our wheelhouse, as is the Internet-of-everything digitization. Cisco has built this company on this notion of convergence and adding more value for our customers on top of it. Local-area network protocols all converging to IP, SNA, voice convergence, video convergence, wired-wireless - even enterprise and service provider converging. We drove converged infrastructure in the data center. ACI is the convergence of the application and the infrastructure. I joke that when I used to write code back in the '80s, you wrote applications under a set of hopeful assumptions about the environment in which they were going to operate. Today we can actually give them that convergence so they can define the environment in which they operate. If you look at the Internet-of-things, the Internet-of-everything digitization, it's the next wave of convergence. That's what we do. We converge those technologies and then we add value above that for our customers. That's why we think these are very natural for us.
You have been involved in a lot of Cisco’s acquisitions and deals over the years. How is your strategy toward acquisitions different from John’s? What should people expect?
When I come into this job, I step back and say: Okay, what's worked and what do we need to tweak? What does the future require us to do differently than we've done in the past? I’ve talked to our team about [combining] the best of today plus the best of what we need to do in the future. If you look at our acquisition strategy and our execution, that’s one of those areas that you would say we’ve done reasonably well. Now you could always, as John would say, pick out a Flip [video company] and have fun with that. But the reality is our acquisition strategy has been a core part of our innovation plan over the years. Our acquisition strategy will remain relatively consistent. We don’t think big ones work very well. We have our thoughts around cultural alignment, geographic proximity to facilities, all those things. But if I step back and look at our overall innovation strategy, I think it will continue to be made up of internal R&D, our M&A and, increasingly, even more interesting partnerships. As we move into these industrial systems you see us partnering with Rockwell and Schneider and Emerson and the like. Then the other two we’re beginning to do are co-innovation and co-development with customers, as well as our venture fund or our investment portfolio. You’ll see us be even more aggressive there with a much tighter alignment to our overall innovation strategy.
One of the things we’re seeing is companies encouraging innovation in the customer or partner base through open platforms, whether that’s IBM with Watson and the Bluemix platform or Salesforce.com with Force.com. Are there ways that Cisco can capitalize on that?