Noticed our share price recently? Want to know what’s making investors so confident?
As we look toward 2018 one of the key things occupying us here at Cisco is how to help our customers adopt more of the technology they buy. And we’ll be most successful at this if we work with our partners to do so.
Why is this important? Well, for me, there are two main reasons.
Firstly, It’s all about you. We want you to get more value.
It might seem obvious to say this, but if you make greater use of the technology that you’ve invested in, they you are inevitably going to derive more value from it. One of the barriers to this has always been that many of the technologies, features and/or capabilities that we provide have seemed simply too complex, both to access and to make use of.
For example, in the world of networking, statistics tell us that most organisations spend 3 times more operating a network than they spent on procuring it in the first place1. It is also estimated that 80 to 95% of network operations are carried out manually1. The result of this is that most IT departments spend a huge amount of time, resources and money simply “keeping the lights on”.
So, whilst I don’t think it is either desirable, or perhaps even possible to remove complexity completely from the network, we absolutely can make access to the complex features and capabilities much easier. In doing so, we will enable our customers to significantly reduce the amount of resources you expend on day to day operations, which will in turn free up more resources to deliver more value to your business.
Secondly, it’s about keeping Cisco relevant, and profitable.
And that’s as important to our customers as it is to us, because if we succeed, you continue to get value from our innovation and expertise. If we fail, you lose that. So, as Cisco continues to evolve, more and more of our business will transition to a software licencing model, which is where you will derive most of the value from our solutions.
Together this will help us to help you. A largely CapEx based business, as Cisco have historically been, tends not to worry too much whether the customer actually uses its products to their full potential. We’re not proud of that. So, by shifting our business to become more annuity based, it becomes MUCH more important that we drive adoption of the technology, which means you will be getting the most out of the solutions you have paid for. And if you are getting more value, you are more likely to be loyal in the future.
Which is exactly the same for our partners. If your partner enables you to get more value out of the technology you’ve purchased from them, you will be more loyal to them. By working with our partners to help you adopt more of the technology, we help you derive more value. And if you get that value you will be more inclined to renew. We’re all winners.
How are we doing this?
We can’t and shouldn’t try to do this alone. This is where true partnership comes into play. We need the support of our partners, and in turn we need to support our partners. Some of our partners do not have existing adoption practices, so we need to support them to build one, we’re doing that. Others have already built successful adoption practices working with other vendors, we need to support them to transfer this expertise to their Cisco practice. This is where we can scale to this new model the fastest.
What’s all this got to do with the stock market?
Returning to that question I opened with. The question of the nice upward trajectory of the Cisco share price. That reflects the positive reaction of the market. Confidence that our stated ambition to shift to a recurring revenue model is the right approach for us, and our customers, and that we are delivering on it.
So, let’s make 2018 the year of technology adoption and software-defined networking, and then we will all have a very happy new year.
Reference
1 McKinsey Study of Network Operations for Cisco – 2016
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