Cisco: A Very Positive Move

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 |  About: Cisco Systems, Inc. (CSCO)
by: Vivek Gupta

On 17 December, 2013, Cisco (NASDAQ:CSCO) announced a new solution/service, which is focused on DaaS (Desktop as a Service) providers.

The solution:

Cisco Systems designs, manufactures, and sells products related to the communications and information technology industry worldwide. It also provides solutions for virtual desktop infrastructure (VDI) through Cisco Desktop Virtualization Solution (CDVS) portfolio. The new solution is the extension of the company's CDVS portfolio.

CDVS already offers on-premises desktop virtualization products to the customers including enterprises, and cloud service providers. With the new solution/service, the company offers a cloud based DaaS. The company is offering the solution in collaboration with VMware's (NYSE:VMW) recently acquired Desktone, and Citrix (NASDAQ:CTXS).

(Cisco Desktop Virtualization Solution)

  • Architecture:

The solution is based on Cisco Unified Computing System and Cisco Unified Data Center architecture, which are the most advanced and industry leading cloud enabled data-center architectures. The solution allows hosting up to 252 virtual desktops on a single UCS blade server.

  • Target customers:

The solution is meant for the cloud service providers that want to offer DaaS to their customers. The solution allows the cloud service providers to offer DaaS through Cisco powered infrastructure integrated with management tools and licensing components.

In simple words the company has been creating the infrastructure to offer DaaS in collaboration with the industry leading players like VMware and Citrix.

DaaS Market:

Desktop management is the fundamental requirement for almost all the enterprises. Desktop management consumes lot of resources as it needs the constant upgrading of the infrastructure to meet the requirements of new technologies. Traditionally, a desktop is a computer (normally a desktop or laptop), which stores all documents, applications, or any other information for an individual or enterprise in a secure and personalized environment.

DaaS provides a fully functional virtual desktop, which works like a traditional desktop, but the virtual desktop typically resides on a 3rd-party server in a data-center. Virtual desktop can be accessed through the Internet from any location by the user who has the right to access the desktop. In simple words DaaS is the outsourcing of the virtual desktop infrastructure (VDI) to a 3rd-party service provider. The service provider manages the responsibilities of data backup, security, storage, and upgrades. BYOD initiatives, increase in mobile workers, better connectivity, high data transfer speed, security/IP concerns, as well as the cost-effectiveness are the key reasons behind the rising popularity of the DaaS.

Market potential:

According to The 451 Group, DaaS is set to become a $2.9 billion market by 2014 (see the chart below).

Conclusion:

  • Shifting focus:

Since the last two quarters the company has been going through some tough times due to the sluggishness in the emerging markets, and slowdown in the service-provider market. This prompts the company to shift its focus to the new growth segments. The launch of the new service is the result of the shifting focus.

  • Counter the competition:

DaaS is increasingly becoming a competitive market with the recent entry of companies like Amazon (NASDAQ:AMZN).

To counter the competition the company is making sure that it offers the best in class services by collaborating with the best players in the ecosystem. Further, to gain quick access to the end-users the company is concentrating on the cloud service-providers rather than the end-users. Every service provider that will use the company's services will bring in multiple customers, as each service provider serves multiple customers. So, by focusing on the service-providers the company will be able to market its solutions in a short time with minimal efforts. The company's expertise in network security, simplified and unified management offerings will further allow it to compete in the market more effectively.

All in all, a welcome entry of the company in DaaS market. The company holds all the ingredients that are considered necessary for a success in the market. The market is big and is growing every passing day. The company may well emerge as a key player in the industry in the future. This is a very positive move by the company in the times when the company is struggling for growth.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.