Cisco’s increased cloud, software focus to drive future growth

Cisco sign (flikr)
Cisco's bet on becoming a software-centric vendor could eventually pay off with new revenue streams. (Image: Cisco)

Cisco’s ongoing transition from being a hardware to software-centric vendor could be just what the routing giant needs to steer the ship back toward growth.

Analysts have forecast that the San Jose, California-based company will report revenue of $11.8 billion, up 2% from the same period a year ago. Cisco will report fiscal second-quarter revenue after the market closes today.

To set its software networking path—one that will enable Cisco to offset declines in its core routing and switching business lines—Cisco has been acquiring various cloud and software vendors over the past year.

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One of its largest acquisitions came in October when Cisco purchased BroadSoft—a provider of cloud PBX, unified communications, team collaboration and contact center software—for $1.9 billion. By acquiring Broadsoft, Cisco can help business customers transition from TDM-based voice to IP-based cloud solutions via its service provider and other technology channels.

Other notable cloud acquisitions include India-based, also known as 47Line Technologies, a deal that enhances its presence with large scale cloud provider Amazon Web Services.

Cisco has also gained traction with other cloud service giants such as Microsoft and Google. Jeffrey Kvaal, an analyst for Nomura Instinet, said in a recent report that “Cisco has small wins, but wins nonetheless” at a few of the largest U.S.-based cloud providers.

In tandem with enhancing its cloud capabilities, Cisco has been actively building out its SD-WAN arsenal. The vendor previously acquired Viptela, an SD-WAN vendor which had a large presence in Verizon.

Ittai Kidron, an analyst with Oppenheimer & Co., wrote in a recent report he is “positive long term on Cisco’s software/recurring revenue strategy” as well as its focus on its subscription business.

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