{"id":17037,"date":"2016-11-18T00:06:05","date_gmt":"2016-11-18T05:06:05","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/ciscos-fight-to-remain-relevant\/"},"modified":"2017-02-21T17:51:28","modified_gmt":"2017-02-21T22:51:28","slug":"ciscos-iot-transition","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/ciscos-iot-transition\/","title":{"rendered":"Cisco\u2019s IoT transition"},"content":{"rendered":"

Intro<\/strong><\/p>\n

Founded in 1984 by a pair of Stanford academics who commercialized routers, Cisco Systems (‘Cisco<\/strong>‘) has for years been synonymous with networking equipment.\u00a0 The company leveraged the growth of IT to become one of the largest publicly-traded Silicon Valley tech companies.\u00a0 However, in the past few years, Cisco\u2019s overall revenue growth went to zero as its legacy networking business became increasingly commoditized.\u00a0 Like other longstanding U.S. tech giants such as IBM and HP, Cisco is busy making diversifying bets.\u00a0 Cisco currently has a market cap[1]<\/a> of $170 billion.<\/p>\n

Via R&D spend, venture investments and numerous acquisitions, Cisco is fighting to pivot away from its declining network switching businesses towards 3 newer IT markets that it believes will grow by double-digit percentage rates for years to come: cloud, security and IoT. \u00a0However, in all of them Cisco is mainly viewed as a peripheral player instead of a pioneer (this is despite the fact that Cisco coined the term IoT).\u00a0 To change this perception and push itself into a \u2018value-add\u2019 IoT segment, in July of this year Cisco acquired Jasper Technologies (\u2018Jasper<\/strong>\u2019) for $1.4 billion; Jasper is a software platform that enables businesses to see, manage and analyze their IoT devices in real time. \u00a0Jasper has over 3,000 customers worldwide in a multiple industries. \u00a0The business has a few hundred employees and run-rate revenues of $125 million (growing by double-digits[2]<\/a>).\u00a0 Jasper has a SaaS revenue model, selling access to its cloud-based Control Center software and billing clients on a monthly per-device basis. A high-profile use case of the Jasper platform is the Amazon Kindle[3]<\/a>, where Jasper helped Amazon seamlessly enable e-book data transmission over 3G GSM to Kindle devices across a matrix of 30+ countries and dozens of telecom network providers.<\/p>\n

In the brief video below, Cisco\u2019s CEO Chuck Robbins talks about Cisco\u2019s IoT strategy and how Jasper fits in it.<\/p>\n

https:\/\/youtu.be\/Q8unAocCdU4<\/a><\/p>\n

In a second video, Jasper\u2019s product is showcased.<\/p>\n

https:\/\/youtu.be\/a8uFOqWC-tQ<\/a><\/p>\n

 <\/p>\n

Future<\/strong><\/p>\n

In mid-2015, in the first leadership handover for many years, company veteran Chuck Robbins succeeded John Chambers as Cisco\u2019s CEO. \u00a0So far, Gartner assigns Robbins\u2019 current strategic direction a \u2018strong positive\u2019 grade[4]<\/a>.\u00a0 Robbins doubled-down on Cisco\u2019s new focus on cloud\/security\/IoT, and the Jasper acquisition was one of his first major moves. \u00a0More controversially, Robbins also laid off\u00a014,000 (20%) out of Cisco\u2019s 70,000 employees globally[5]<\/a>, mainly in Cisco\u2019s legacy businesses.<\/p>\n

Today, Cisco still generates only 1\/4th<\/sup> of its revenues from software & services (and the majority of service revenue relates to servicing the switching and routing hardware). \u00a0Cisco\u2019s legacy architectural choices and ingrained perception by CIOs as a provider of hardware (vs ‘value-add software) create formidable challenges. \u00a0Even the Jasper acquisition – whilst it appears to make strategic sense\u00a0and has garnered analyst praise – is unlikely to yield conclusive\u00a0results until years into the future.<\/p>\n

Just as Cisco\u2019s lucrative legacy business became increasingly competitive and challenged, it is likely that in its attempt to shift to a different S-curve, Cisco will run into new competition. \u00a0Many other major IT vendors name IoT as a priority area, and some industrial majors (e.g. GE) do too.\u00a0 No analyst has yet been able to make credible, widely-accepted predictions about which player will emerge as a massive IoT winner, how large the space will be, or what it will look like.<\/p>\n

On paper, Cisco has a number of strategic & financial options on how to\u00a0proceed in this dynamic, competitive environment.<\/p>\n