Cisco Puts $1B to Partner-Centric Enterprise Cloud Services Push

Cisco Systems (CSCO) will plunk down upwards of $1 billion over the next two years in a partner collaboration to build out what it called the “largest global intercloud,” positioning itself as a suitable rival to Amazon's (AMZN) Web Services, the de facto public cloud kingpin.

The Wall Street Journal reported the news ahead of Cisco’s public statement on Monday.

Cisco intends to devote the lion’s share of the money to build data centers for a new operation called Cisco Cloud Services, in a move away from its longstanding reliance on hardware. The Cloud Services business includes an expansion of Cisco’s Powered program in which it will sell services through channel partners and direct to customers.

Cisco has built its $49 billion annual revenue fortress largely on selling hardware but the new blueprint is proof-positive that the cloud’s pervasive influence has prompted the networking giant to rethink its business model. The vendor’s sales have been victimized by competitors offering cheaper equipment, steadily contracting for the past six months with another dip forecast for the current quarter.

The intercloud idea is to supply enterprise clients with cloud services through a distributed computing “network of clouds,” equipped with the necessary security architecture to handle critical application workloads and real-time analytics, while supporting near limitless scalability, Cisco said.

Cisco’s so-called InterCloud will feature a set of APIs for application development and an enterprise-level portfolio of cloud IT services for businesses, service providers and resellers. For example, Cisco said it will offer its cloud services to telecoms to package together with other online services they already sell. The vendor expects its partner-centric business model will spark further investments, a wider breadth of services and a broader reach for the InterCloud initiative.

So far, Cisco has enlisted commitments from nine organizations to deliver Cisco Cloud Services either with the vendor or on their own. The list of endorsers includes: Telstra, an Australian service provider; Allstream, a Canadian business communications provider; Canopy, a European cloud company; distributor Ingram Micro (IM); Logicalis, a global IT and MSP; MicroStrategy, an enterprise BI, networking and mobile platform provider; OnX Managed Services, an enterprise data center IT solutions provider; SunGard Availability Services, an IT services provider; and Wipro, a consulting and outsourcing company.

Rob Lloyd, Cisco Development and Sales president, in promoting the collaborative initiative, said the “timing is right.”

“Customers, providers and channel partners alike are turning to Cisco to create open and highly secure hybrid cloud environments, and they want to rapidly deploy valuable enterprise-class cloud experiences for key customers, all while mitigating the risk of capital investment,” he said.

“Together, we have the capability to enable a seamless world of many clouds in which our customers have the choice to enable the right, highly secure cloud for the right workload, while creating strategic advantages for rapid innovation, and ultimately, business growth,” he said.

Perhaps wanting to tread lightly in the endeavor's first steps, Lloyd denied to the Journal that Cisco is jockeying to compete head-to-head with Amazon’s Web Services business. "It does not mean that we're embarking on a strategy to go head-to-head with Amazon," he said. The Journal reported that Cisco will dovetail its cloud services to Microsoft’s (MSFT), VMware’s (VMW) and SAP’s (SAP) cloud technology platforms.