Cisco's Cloud Connector

The hardware giant is trying to find a place between the clouds

Cisco Systems became one of the tech industry’s largest companies by selling truckloads of networking equipment to almost every business with a website. Many of its customers now need less of that—they rent computing capacity from IBM, Microsoft, and Amazon.com. That’s put Cisco in a tight spot. The company considered going into the cloud business itself but decided against it because it might have riled longtime customers such as phone companies that are doing the same thing. Then last December, at an annual gathering of Cisco executives, “the lightbulb went off,” says Nick Earle, a senior vice president for worldwide services sales and channels. “Let’s be the great connector.”

What came out of that meeting is an ambitious initiative that Cisco has dubbed Intercloud. In March the company unveiled a set of software tools that businesses can use to easily shift their IT workload among their own data centers and various cloud services. If Microsoft lowers its prices, a company, with a few clicks, could move jobs out of Amazon’s cloud or its own data centers.

Cisco is also setting up an online marketplace for Intercloud-compatible software designed by other vendors—similar to Apple’s App Store. The company would take a small cut from the sales of software available on its site, whether it’s an inventory management tool for auto dealers or a service allowing retailers to rent additional computing power during the busy holiday months. “There’s a potential toll booth business here,” Earle says.

With Intercloud, Cisco is reprising the strategy that brought it success in hardware. In the 1990s its routers were in demand because they let various proprietary technologies work together—an IBM network could communicate with an Apple one.

More than 3,700 people have been pulled from all corners of Cisco to work on Intercloud. The company has set aside $1 billion to develop or acquire technology and to persuade cloud providers to join the Intercloud ecosystem. So far 40 partners, including Deutsche Telekom, have signed up, and a handful of organizations, among them Johns Hopkins University and real estate investment trust Boston Properties, are using Intercloud. It remains to be seen whether others will play along. “Nobody sees Cisco as an innovator in cloud technology, so why would cloud providers invite them in to take a piece of the business they’ve built?” says R. Scott Raynovich, an independent IT industry analyst. “I don’t really see how Cisco is going to get this done.”

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