It appears that the advancement in technology that has brought us "the cloud" has also created new competition where it didn't exist before for many of the large techie companies. Cisco is now competing in areas with other big well-known names that it never competed with before. Let's take a look at how this developed.
Cisco Finds Businesses Love the cloud!
We have been hearing about "the cloud" for quite some time now. It has become the "in" way to do business in corporate America. Is it effective?
Cisco (CSCO) did some research to answer this question and found out that 64% of those who use cloud-based collaboration tools found it accelerated the results of business. Companies now are able to get things done faster than ever. Among executives who were experienced in using the cloud the results were even higher. Here's a sample of the findings:
- 55% of the overall sample - 87% of leaders - say that cloud-based collaboration represents a real breakthrough in effectiveness, transcending both geography and functional specializations.
- 58% of the total sample - 90% of leaders - believe cloud-based collaboration can improve almost any business process.
- 59% of respondents - 93% of leaders - say that cloud-based collaboration stimulates innovation.
I believe it is the communication/collaboration that makes it so effective. It allows things to get done faster. Using the cloud results in a lot more flexibility in getting things done because communication channels such as data management, IM, video, voice, email and other avenues can be done anytime anywhere, and when employees are able to use their own devices at any time this just increases the flexibility of getting the work done. Companies are able to unite minds through combining voice and streaming video over the cloud for multimedia meetings, allowing people to share documents and basically create a virtual team.
The cloud has become such an effective tool that many businesses are developing their own social media type platform custom designed for their specific business objectives. Team members can link together here posting documents, videos and other things vital to helping others on the team find what they need.
While it is true that the cloud has created new opportunities for productivity and also revenue streams for Cisco, it is also creating new competition between old well-known tech giants. Technology that used to create stand-alone businesses seems to be crossing over because of need and creating competition where it didn't exist before.
Servers, Networks and Software Interconnect to Create New Competition
One revenue stream that investors should keep an eye on when talking about Cisco is its Unified Computing System. These computer servers that are built into Cisco's network are quickly becoming a major source of revenue for the company. As more and more data is collected it is becoming increasingly difficult to ship information through millions of different devices without sophisticated computing built into a company's networking devices. This so-called "problem" plays right into Cisco's business. So-called "big data" can only be delivered successfully through a network and companies that specialize in data analysis and networking are consolidated for this reason.
Mr. Chambers, Cisco's CEO, laid out a plan at the end of 2012 to move the company into software and consulting services besides making network equipment. Since the trend for corporations is to put everything on the Internet, there are sensors and monitoring systems everywhere. Companies are looking for partners to help them navigate through this "new world." This bodes well for Cisco.
Since IT and networking mesh together, Cisco should be able to become one of the leading "server players" in the world because they have a knack of being able to tie things together that are very complex. Other big players that you might be familiar with like IBM have spent billions also in recognition of this trend. It has spent $16 billion on analytic technology. Another company you might have heard of - Hewlett-Packard (HPQ) is using part of Autonomy's analytics (a company it bought for $11 billion) to create its networking/security service.
This is just a natural progression of things. Security is becoming a natural part of data movement. With the cloud, everything is moving online. In simpler times, firewalls were all that we needed to protect one's information and companies that focus strictly on security and nothing more were profitable. But now since security is becoming part of the whole big data system stand alone security no longer is sufficient, we see larger companies like Intel (INTC) buying security companies like McAfee. Computing and analytics are becoming part of everyday life and this is forcing "standalone companies" dealing with analytics and/or security to also adopt networking and computing businesses. But this requires a large capital expense so the only way for this to happen is for larger companies to gobble up the smaller independent.
So companies are meshing together and stepping on each other's toes now-a-days, and there may be more of that in the future. Servers, software and networks used to stand alone. Now they appear to be very intertwined. Hewlett-Packard has servers and IBM has software, and Cisco with its networks is getting in the software and everybody is going to compete with everybody else. It will be interesting to see who has whose piece of the pie in the future.
Cisco will continue to prosper as the global economy heals, but especially because the economy here in the United States is recovering faster than anywhere else. Even though this is creating new competition between old tech comrades, I believe Cisco's network experience will keep it prosperous as it moves into new arenas of software and services. It will keep its piece of the pie and may slice off a little bit more from others.