Cisco Bets a Billion on the Cloud

MARCH 24, 2014, 3:59 PM  Comment

Cisco Bets a Billion on the Cloud

By QUENTIN HARDY

Even for the world of globe-spanning computer systems, Cisco is going big.

On Monday Cisco Systems announced it would spend $1 billion on creation of an “Intercloud,” which promises to bridge multiple cloud-computing systems open to the public — like those offered by Amazon Web Services and Google Compute Engine — the private clouds of big companies and specialty cloud services for business.

Cisco, the networking giant, is building out its own data centers for the system and says it will offer Intercloud clients a high level of security and reliability. It also hopes to enlist a dozen or so large telecommunications companies and services consulting companies as partners. Other money will go toward new technology and a specialized sales organization.

The idea is to let companies run their software applications both internally and on public clouds, with close management, security and geographic control. What remains to be seen is whether there is really much demand for such a service.

The goal is a “Star Alliance” of technology companies, said Nick Earle, senior vice president for cloud sales at Cisco. Star Alliance is a global network of 28 major airlines. So far, Cisco has announced only one partner, Australia’s Telstra, but it will announce other partners in coming weeks, Mr. Earle said. They will include “market makers, big ecosystems,” like IBM in business applications, Accenture in services or Verizon in telecommunications. None of these companies were part of Monday’s announcement.

One reason for the move, Mr. Earle said, was the revelations of how much the National Security Agency was spying on just about everyone. Companies have said the N.S.A. news is changing policies around the movement of data over external networks.

“Thanks to the N.S.A., there are lots of countries that won’t let their data out,” he said. “Thirty to 40 percent of the workloads on an A.W.S. are on personal credit cards that bypass the information technology department. With the N.S.A., this has to change.”

Another reason was the realization that companies like Amazon and Google were essentially running their own systems, while there was room for more interoperability and open standards. Cisco is building its Intercloud on OpenStack software, an open-source, cloud-computing standard.

There are two ways to look at this. On the one hand, Cisco is trying to meet a real need, in the face of both growing public clouds and an anxiety inside information technology departments that companies are losing control of their own computer networks, either through N.S.A. types or unauthorized employees.

On the other, Cisco and the other big incumbents it hopes to bring into its Intercloud may be making a play for relevance in a world that has evolved beyond the systems they built. What a Cisco (or for that matter, an Oracle, SAP, Verizon and others) has to offer in this future is primarily a strong relationship with the past. That is no small matter to companies that have to manage decades of data and applications.

Whether this move is a rear-guard action or a forward-looking play, however, it’s clear that cloud computing has become a very big money game.