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Cisco Unveils $1B Cloud Plan

Stocks in this article: CSCO AMZN SAP IM

NEW YORK (TheStreet) -- Networking giant Cisco (CSCO) says it's expanding its cloud computing services with a heavy application-development focus at a scale that will send ripples through the cloud sector.

"We absolutely intend to disrupt the cloud marketplace with this play," Mike Riegel, Cisco Cloud's vice president of marketing told TheStreet. "The market for cloud has really shifted and that's why we're making the investment. The first phase of cloud was all about infrastructure, but it's not about that anymore. It's all about the apps, and how applications perform in the cloud."

"We're absolutely not competing with AWS [Amazon Web Services] (AMZN)," he added.

On Monday, Cisco unveiled an investment worth more than $1 billion to launch the world's largest global Intercloud over the next two years. This open network of clouds will be hosted across a global network of Cisco and partner data centers featuring application process interfaces (APIs) for rapid application development, built out as part of an expanded suite of value-added application- and network-centric cloud services. Cisco says the services will accelerate the opportunities created by the Internet of Everything for businesses, service providers and resellers of all sizes, who will now begin to be able to go to this network of clouds to choose from an expansive variety of offerings while still maintaining a single set of capabilities.

The global partners Cisco expects to work with for the build-out of the expanded cloud business include Australian service provider Telstra, wholesale technology distributor Ingram Micro (IM) and SAP (SAP), among other dozens of the world's largest companies.

"That's very, very distinct from what other companies are doing, where they're all investing to create their own individual large cloud," Riegal continued. "Between Cisco and our partners, we'll have a very rich set of capabilities because the reality is no single cloud can meet every customer's needs."

"And so another the reason why we're going to disrupt the cloud market with this play is that with the way the cloud is evolving right now, by bringing together a very broad network of partners, which is what Intercloud technically is, we're going to have unmatched capabilities to offer our clients."

Riegel said the global Intercloud differentiates itself from Amazon Web Services in five ways. First, its focus will be on apps, not the infrastructure. Secondly, he explained, Cisco is the only company that can provide quality of service from the network all the way up to the application. Cisco has also designed the Intercloud for local data sovereignty in the post Eric Snowden era, where customers increasingly request that their data stay in their own home countries or the particular countries where they do business.

The fourth big difference is the Intercloud is firmly based on an open model, or open source innovation based on OpenStack. The last difference is the Cisco network will incorporate real-time analytics.

Zeus Kerravala, the principal analyst at ZK Research, said he views Monday's Cisco announcement as the most significant announcement from the company in years. The billion dollar commitment shows the company is "putting its money where its mouth is" in leading the bold vision of Cisco becoming the number one IT vendor, as the cloud can now be used as a strategic platform.

"The world of clouds is comprised of a number of point solutions," Kerravala said. "Cisco is attempting to create a world where the cloud is a set of interconnected, federated cloud services that allow customers to move applications and data between them easily while maintaining security policies. Metcalfe's Law states that a network's value is proportional to the square of the number of connected nodes. Today's clouds are a set of disconnected nodes. Cisco's Intercloud vision is to create a world of connected clouds, creating more value for all."

-- Written by Andrea Tse in New York

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