CISCO

CISCO RETHINKS ITS DATA CENTER SWITCHING BUSINESS

Cisco is looking to adapt in the modern software world by bringing in new changes in its software/services R&D investments and acquisitions. Mainly recognized as a leader in networking, Cisco’s push to strengthen its software business can benefit the company in the long run. Cisco continues to make profits with its switching and routing business, which accounted for 60% of the company's products (hardware and software) revenue last quarter.

But, the challenge Cisco might face is the increasing decline in the demand of switch and routers. It would be interesting to see how the IT leader plans to cope up with a new kind of business environment driven by software innovation. In a recent move reported in The Information, Cisco has decided to sell its operating system software for cheaper network switches. This might be Cisco’s first attempt to segregate its networking hardware from its networking software. Other networking leaders are also soon expected to follow the trend. More and more companies now look to invest in growing their software business, to tread their own separate path of innovation in an increasingly competitive networking industry.

Reportedly, Cisco has branded this project “Lindt.” But a Cisco spokesman today told SDxCentral, “While we are not commenting on Lindt, I will say that the vast majority of our customers see huge value from the power and efficiency of our fully integrated networking platforms. This tight integration of hardware and software will continue to be the basis of the networking solutions we offer our customers.”Cisco’s has maintained its networking legacy in the routing and switching markets for a long duration, but now needs to diversify as it is up against a new world of white-box switching and SDN technologies.

“I have not seen the evidence of Cisco disaggregating their switch OS and offering it as a software-only module that runs on third party hardware,” said IDC analyst Rohit Mehra. The change in IT spending habits and technology trends has forced networking vendors to move out from their traditional networking platforms into third-party SDN platforms such as VMware's (VMW) NSX. According to IDC, the worldwide ODM direct Ethernet switch (white box market) was $677 million in 2016 and is expected to exceed $900 million in 2017.