How Chuck Robbins is Turning Cisco Around

After Treading Water For The Better Part Of A Decade, Cisco's Fortunes Have Turned Around Because Of The Decisions CEO Chuck Robbins Made Over Two Years Ago.

Cisco CEO, Chuck Robbins, is a busy man. I never see him talking to a customer, partner, employee, analyst or any other person in the company's ecosystem. I hope that during the holiday season he took the time to put up his feet, light a cigar and think about what happened to the company he has been managing for the past two years.

If we go back to January 1, 2016, the stock was at $ 23.79, the lowest since April 2014, and many Cisco investors were skeptical about Cisco's outlook.

Much of my business comes from my interactions with Wall Street, and only a very few wanted to talk about Cisco two years ago. There were far more bears than bulls, and the feeling was that the cloud, software-defined networking (SDN) and other trends at Cisco would slowly eat away and it would go the way of Lucent, Nortel and so many other companies to change their business models.

Today, the stock is close to $ 39 / share, which is an all-time high, except for the one-year period in 1999/2000, when each stock was significantly overvalued. The turnaround in Cisco's fortune was remarkably fast. I understand that the company has been talking about market transformation for about a decade, but it has done nothing but step on the water. Cisco has been in transition mode for the past few years.

The other notable feature of this achievement is that it did so without becoming private, as so many other vendors had to do (Dell, for example). Changing a company under the watchful eyes of your investors is a bit like changing the wings of an airplane while it's flying.

Strong Leadership Was The Key

So how did Robbins pull that rabbit out of his hat? That was not some sort of Criss Angel magic. It was rather a good, old-fashioned leadership and the right decisions in the following areas:

• Do What Is Right For Customers Rather Than Being The Best For Cisco. 

This is perhaps the hardest thing for tech companies. Markets change all the time and not always in favor of the seller. Cisco is known to capture market transitions by opening up new markets (VoIP, video, wireless) and participating from established operators rather than bothering themselves. When Cisco was confronted with this task because of SDN, it became defensive and tried to convince customers not to. I remember talking about that in my first meeting with Robbins after he became CEO, and he said that something under the influence of Cisco under his supervision would never do that again.

If there is industry change for the customer, especially in the area of ​​networking, Cisco's role should be to help and not hold them back. Since then, Cisco has not only supported SDN with its ACI solution, but is also working to extend the definition through the Network Intuitive campaign to include task-based networks.

• Acquisitions, Acquisitions And More Acquisitions.

Buying other vendors has been a key to Cisco's growth, but the company has been in full shopaholic fashion over the past two years, buying 16 companies. Almost all of these were in the areas of cloud, machine learning or security, with a few important vendors, as Viptela and SpringPath, sprinkled in to improve Cisco's competitive positioning. Acquisitions add new technology, open up market opportunities and add some significant talent to the company.

• Embracing The Cloud.

It's fair to say that Cisco's growth two years ago was not tied to the growth of the cloud. The cloud is driving a lot of bandwidth, which could stimulate network upgrades, but that's not a very exciting story. Since then, Cisco has developed a complete 180 solution with the cloud, and many of the next-generation solutions are cloud-ready. Spark, Talos, Umbrella, Broadsoft, Viptela, Jasper and others were born in the cloud and helped Cisco capitalize on the current cloud gold rush.

Cisco has also extended many of its products, such as ACI, to public clouds. Over the next few years, it is expected that Cisco will continue to invest heavily in the cloud.

• Goin All In On Artificial Intelligence (AI).

I'm convinced that in the future, the most successful providers will be those who have the best data and AI algorithms to interpret the information to gain new insights. It's undeniable that no vendor has more data about what's happening in a company than Cisco. We live in a world where everything is connected at breakneck speed, and Cisco can monitor traffic to and from all these endpoints, including Internet of Things (IoT) devices.

Cisco has made a number of acquisitions in AI, including MindMeld, Saggezza, and AppDynamics, which complement its own internal efforts in this area. The results of these investments are now coming to fruition. For example, Cisco ran a media event late last year to show how AI can improve meetings. The tetration and intent-based network offering will use AI to fundamentally change the way networks are operated. Another example is Encrypted Traffic Analytics (ETA), which uses AI to find malware in encrypted traffic, something that was not possible in the past.

• Easy, Peasy, Lemon Squeezy.

Cisco technology has always been hard to deploy and manage. Another promise from Robbins was that Cisco would do the work to mask the complexity from its customers. The company has held true to his words, and products such as Meraki, Spark and ACI do a great job of letting its customers focus on innovation instead of having to sit at a command line making updates.

Cisco Isn't Totally Out Of The Woods

Despite the recent success, the turnaround of Cisco is still ongoing. Two of the company's biggest sources of revenue, campus switching and routing, are both declining businesses and holding the company back. If they were set in motion, this would create a further growth function.

Intent-based networking on the new Catalyst 9000 looks like it has potential. At the last profit sharing Cisco said that about 1,100 customers have taken over the new switching platform. Conversion of these clients to intentional clients gives them the opportunity to drive business forward.

Routing seems more problematic. In fact, the acquisition of Viptela is likely to take advantage of part of the massive installation base of Cisco ISR routers. The purchase of Viptela is a good example of Cisco being more customer-focused. A few years ago, I do not think Cisco would have acquired a company that would threaten the ISR base, but the new Cisco will help its customers move to SD-WAN and tailor the business as they go. Regardless, the heyday of ISR seems to be coming to an end, and Cisco needs to figure out what the future of routing is and how it can boost that business.

Services And Security Will Play An Increasingly Important Role In Cisco Growth

Two of Cisco's business units that could be at the forefront of a $ 50 billion company are services and security. One fact that most people do not realize is that the service group is now Cisco's second-largest revenue. The more dependent the technology is and the faster it has to move, the greater the opportunity to bring services into the mix. Cisco has recently announced new Business Critical Services to help customers make the transition to digital transformation. I expect these to be strong and that the Services business unit will lead Cisco into its next era.

Security offers Cisco a tremendous opportunity. With sales of approximately $ 2.5 billion, Cisco is the largest provider of enterprise security solutions, but that's only about 5 percent of the total security market. When Cisco implements its plans to make the network a sensor and enforcer and associates it with Talos' threat intelligence, it could fulfill the vision of a self-defending network. It will not take much to double or even triple security revenues as it should be able to do things that few others, especially startups, can not do.

In retrospect, I'm sure it's nice for Robbins that the hard work pays off, but I doubt he'll spend a lot of time thinking about the past. The world is changing faster than ever, and its job is to accelerate and make sure that Cisco's transformation process continues.