
Cisco CEO Predicts ‘Brutal’ IT Consolidation - ForHackernews
http://www.enterprisetech.com/2014/05/22/cisco-ceo-predicts-brutal-brutal-consolidation/
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droopyEyelids
Ah, just imagine the Cisco sales rep. He's with your CIO in a skybox at the
big game. Salmon fillets sizzle in olive oil as he pulls down his sleeve...
He's done talking to your CIO about their Rolex watches, and now it's time for
business.

"You see," he says "Thats exactly how an Open Source solution on white label
hardware will end up costing your company AT LEAST 25% more! Once you've got a
few UCS chassis installed, you start to see how things work because you don't
even install servers or switches anymore! There's not even a choice. It's just
blades and fabric interconnects. Imagine all the time you'll save worrying
about compatibility, proof of concepts, the support costs, training..."

~~~
enraged_camel
I didn't understand half the terminology you used, which means I'm well on my
way to become a CIO and buy lots of Cisco products!

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incision
The traditional enterprise IT ship is about to slip beneath the waves and
Cisco wants everyone to know they have a sizable piece of wreckage to cling
to.

Not a bad strategy.

I find it funny that Cisco loves to paint itself as prescient when they're
actually pretty erratic and consistently late. They're just huge, yet nimble
enough to consistently make the podium in some sense.

Cisco bought Tandberg as the world was moving on with Skype, Hangouts and
Facetime. Cisco brought forth converged infrastructure as the world was
shifting out of the datacenter. Cisco started making sizable investments in
private/hybrid cloud in the last year when it would have meant a lot more in
2010. You've probably never heard of Cius, Quad or SDN (in relation to Cisco)
but they were keynotes 4, 3 and 2 years ago respectively.

 _> 'And if you look at three years ago, Huawei, Avaya, and Juniper were the
worries, and they were going to eat our lunch.'_

Cisco didn't fend off Huawei so much as the government blocked them from
competing on the premise that China would do exactly what it turned out the
NSA was already doing.

~~~
RockyMcNuts
Unlike Wintel, even mobile/cloud still needs network equipment LOL.

It's a pretty amazing business, when you think about how much you pay per
Ethernet port to run your business, and how much goes to Cisco, and what it
costs to make that equipment. Think about what you pay for a firewall, router,
switch vs. a server.

But software-defined networking seems like a paradigm shift that will be
rather disruptive. Just makes no sense to buy all those firewall, router, and
switch boxes, when they could all be virtualized and integrated (like VMware
did to servers, and they want to do to networks with the Nicira SDN
acquisition).

Meanwhile, Cisco makes a lot of acquisitions, many of which seem pretty
stupid: Scientific-Atlanta and NDS, just when cable TV is about to get its
lunch eaten by over-the-top; Flip video camera (Pure Digital) just when it's
about to become an iPhone feature (and I guess they couldn't turn it into
GoPro)

Then they bought back $70b worth of stock since the dot-com crash, distributed
a rather hefty chunk of that to management. Enterprise value down to $96b.

So...could be a great business but not sure it's a great strategy or great
management.

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nrao123
This is a must read article for anybody Trying to understand what's going on
in the hardware / server side for enterprise IT.

Cisco's bet seems to be that they can't do anything about hyper scale data
centers (AWS, google, Azure, Facebook etc) since they will have the scale to
design their own hardware.

So- they are going after large enterprises that want to still have their own
servers. In this market they seem to be growing.

But - their strategy reminds of me Of trying to provide the most efficient
newspaper printing machine just before the printed newspaper itself gets
killed.

Two points supporting the newspaper analogy:

1) If the applications themselves (SalesForce, workday, Successfactors etc)
are moving to the cloud & delivered from their own servers or AWS, Then won't
the overall demand for enterprise hardware Itself reduce?

2) Even if companies want their own custom Computing resources (e.g.
Analytics) - won't These sub-scale enterprises themselves go with The hyper
scale data centers (AWS, azure etc) ? What on earth makes these enterprise
companies believe That they can take Cisco hardware & believe that they Can be
more cost efficient than AWS/Azure.

~~~
opendais
Given a significant number of companies are most cost effective than
AWS/Azure/Google/Etc with relatively stable workloads, I think you are
completely nuts.

AWS's calculator and the assumptions the threw into it pretty much proves they
aren't cost effective except compared to other cloud providers. They basically
'made up' the self hosted numbers. At $DAY_JOB, our self-hosting costs at a
colo facility are something like 33% the cost of using AWS.

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AJ007
I was discussing just this with my friend yesterday. AWS remains many
multiples more expensive than managing their own hardware; additionally their
main office's internet connection remains less than perfect (which is a whole
other wildcard.)

The question is, what happens when the cloud is cheaper than doing it
yourself?

~~~
Spooky23
It saves money by eliminating expensive infrastructure engineers. Enterprise
IT spends more money on PMs than tech.

~~~
emn13
However, running on the cloud also requires cloud-specific adaptation and
engineering, it's not free.

The cost comparison is usually skewed in the cloud's favor because people tend
to compare "server-quality" local hardware with cheaper-than-basic-PC level
hardware in the cloud. The real win here is that _you don 't need super fancy
hardware to run fairly reliably_. It's not just the hardware costs, it's that
when you run "unusual" hardware, you're going to have to do more
administration/training. Beyond that, the cloud's advantages are trickier.

I think commoditization of computing - which is what the cloud is all about -
is a valuable trend. But the benefits of specific clouds are often vastly
oversold, suggesting that it's somehow magic pixie dust that avoids all
sysadmin duties; or that it's the only or best way to limit those costs. Also,
there's this idea that you really, really need multiple redundant servers for
ever menial website out there, because that three-hour outage of your cats
pics is going to be terrible. And that presumption makes the cloud more
attractive, since presumably outages there simply mean you spin up a new
instance (even though that is also not always so simple).

~~~
Spooky23
I agree -- no magic.

One of my duties as an IT manager in a big enterprise a few years back was
running an install group. 7-10 FTEs, two trucks and lots of budget for rental
vehicles and expenses. Most of their job was installing servers in the field
and arguing with landlords about specific requirements we had (ie, 30 amp
electric service, a/c in the closet, certain types of locks, etc)

Today? The office's admin calls whomever the preferred telco partners are and
gathers quotes for internet service. That group is gone.

Also, never underestimate the cost of bureaucratic waste. In the place I work
in now, I can probably jot down 6-10 names whose main work functions could be
replaced by pull down menus on a webpage. When you outsource parts of your
business, those functions tend to go away.

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higherpurpose
If anyone deserves to fall from the 5 it's Cisco (and Oracle, but that's more
like wishful thinking).

~~~
briandh
What does "the 5" refer to?

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JanezStupar
My guess is: Cisco, Microsoft, Intel, Hewlett Packard, Oracle (IBM?)?

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6cxs2hd6
The slide that shows them #1 share in "Cloud"... does anyone know what that
actually means?

~~~
Spooky23
They consider UCS a private cloud in the can, which was introduced at a good
time when IBM's f-up of x86 was enough to scare away even risks adverse
enterprise customers. So they've seen lots of traction.

They also consider webex and some UC stuff (Jabber, some voip, etc) "cloud".

~~~
gaius
Cloud is anything you want it to be. That is literally what the symbol means
on architecture diagrams.

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csears
The idea that big companies who fail to innovate will die off or get acquired
is hardly an earth-shattering prediction... it's just the way things have
always happened.

The more interesting long term question is how much IT infrastructure will
organizations want to own and how much they will want to push off to service
providers. I think Cisco will find it hard to maintain their margins and
growth if enterprises make a major shift to off-prem cloud infrastructure.

~~~
spydum
Cloud hosted infrastructure hurts EBITDA, most enterprises will never move, as
OPEX is a dirty word.

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ahsanup
Unless you're an insanely large company, in the long-run, you can probably
save on OPEX by switching to cloud infrastructure. You get away from
purchasing hardware for yourself, which inherently reduces OPEX.

~~~
api_or_ipa
[I'm not an accountant]

I think spydum's comment refers to the difference in the effect on the balance
sheet. If you outright buy servers, you incur a capital investment in a fixed
asset, which increases your balance sheet but doesn't hurt your EBITA. If you
instead contract out to a 3rd party cloud provider, you incur an OPEX-- which
shows up on your income statement and lowers your EBITA.

I'm not sure how investors favour this difference, but I do know that airline
companies love to move aircraft purchases off their balance sheet, probably
for cash flow reasons. They do this by leasing a/c instead of outright
purchases.

You've now gotten me curious as to why firms behave different when it comes to
buying aircraft vs servers.

~~~
mollems
Airline companies don't want to buy aircraft because their highest-probability
outcome is to declare bankruptcy (which happens about every 10 years for most
major airlines in the US, it seems). Far simpler to tear up your lease than to
dispose of large, expensive assets like aircraft as part of the bankruptcy.

~~~
supercanuck
My initial thought was your comment was bullshit, until I googled and read
this article.

[http://www.economist.com/node/21543195](http://www.economist.com/node/21543195)

~~~
Spooky23
As Richard Branson said, the easiest way to become a millionaire is to start
with a billion and buy an airline.

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general_failure
Stating the obvious stuff mostly.

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dmourati
I just took a quick diversion from reading The Functional Art to checkout this
story. The book covers information visualization and the three graphics in
this story would rate very low according to the book's guidelines, in
particular the series of pie charts.

I enjoyed the brutal comment though.

