Cisco throws $1bn at hybrid cloud services for large enterprises

Here comes Cisco with a $1 billion gamble that large enterprises can be tempted to run hybrid cloud service on third party cloud services that the company will be providing.

The company plans to spend that much over the next two years on building out new datacentres on which to run the service. If it is to be build, rather than buy, this decision could do wonders for the flagging sales of the servers and related equipment. If it is buy, then it could create something of a global hole in the supply of service resources. The fact that the company states it is planning a standardised infrastructure based on OpenStack suggests it will be built rather than bought.

This would, of course, depend on whether the gamble is a success or not, a question that will be geared as much on the share of the $1 billion that is set to fund marketing efforts from this time on as it will on the excellence or otherwise of the service provided.

Unlike existing rivals in the large-scale cloud service provision business, Cisco is not aiming at the vast armies of smaller businesses looking to move into the cloud fairly quickly and, generally speaking, fairly easily. Instead the company is targeting large enterprises with existing large and business critical IT infrastructures.

There is no doubt that the long term future for such businesses is to move sections of their IT requirements out into the cloud, fully integrated with the existing on premise applications and services – the classic hybrid environment. Between there and the here-and-now, however, is a huge amount of conservative resistance to any changes that are not considered totally necessary. There are still many fears about security – and while it is possible to suggest they are largely misguided, that does not reduce their potency for large corporate IT departments.

More importantly, such companies face daily issues about governance, compliance and data sovereignty that could easily cause Cisco’s management of this project many significant headaches. The constant need for micro-management of large numbers of multi-layered issues from such a client base could easily negate even the high charges that might easily be expected for such a service as this.

Many of those tasks will no doubt become automated, but then such processes will have to be rigourously tested before most of those businesses will accept them.

It is fair to say that what Cisco is planning is well-suited to the needs of large enterprises: but whether they will think this is so, or whether it is the right time to be even thinking about it, may prove to be a different matter altogether.

If the gamble wins then Cisco stands to win big. History suggests, however, that it may be the company to demonstrate what not to do to win over the hearts and minds of enterprise users.