Cisco plans $1 b capex to expand cloud business

Networking giant Cisco will invest US$1 billion (about Rs 6,200 crore) over the next two years to expand its cloud business and build a “network of clouds” with partners to take on rivals like IBM and Amazon.

Cisco intends to build the world’s largest global “Intercloud” or a network of clouds to capitalise on the growing trend of companies opting for services rather than buying and maintaining own IT infrastructure.

The service will be delivered through global partners, including India's third largest software firm Wipro, Australian telecom firm Telstra and tech distributor Ingram Micro.
Using Cisco's cloud, partners would be able to offer services like email, conferencing and security.

“We will invest US$1 billion in engineering work, setting up Cisco data centres and sales and go to market work. We have over 65,000 partners across the globe and we will engage with them and offer open, high value networks that are secure,” Cisco Senior Vice President Worldwide Cloud Sales & Go to Market, Nick Earle, told reporters here. He added that the addressable cloud market
for Cisco and 'our' partners is expected to rise from US$ 22 billion to US$ 88 billion between 2013-2017.

Partners will have the option of selling the services under Cisco name or co-brand it.

Timing is right

“The timing is right for Cisco and its partners to invest in a groundbreaking, application-centric global Intercloud to provide broader reach and faster time to market,” Earle said.

Cisco will also expand its cloud services portfolio, which includes SaaS offerings like WebEx and Cisco Cloud Web Security and differentiated cloud services such as hosted collaboration and cloud DVR.

The California-headquartered firm built its fortunes of over US$ 49 billion in revenues, largely selling networking equipment.

For the second quarter ended January 25, 2014, Cisco's net income fell 54.5 per cent to US$ 1.4 billion, while its revenues declined 7.8 per cent to US$ 11.2 billion compared to the same quarter in the previous fiscal.

The present move by the networking giant is an indication of the strong traction that new technologies like cloud and mobility are gaining as clients move from a capex to opex model, investing on services rather than on owning hardware at huge costs.
Its biggest competitor in this space would be Amazon's Web Services.

On the role of Wipro, Earle said the Bangalore-based firm will act as a “builder” to offer cloud services and reduce the cost of ownership for customers in the country.