“We don’t move into a market unless we think we have a realistic chance of gaining 40% market share with sustainable differentiation,” Chambers said at the Cisco Live conference when asked if the company needs to acquire an established cloud provider like Rackspace to succeed in cloud services. “And we try not to move into markets that don’t have really good gross margins, unless they’re unusually strategic for us. That’s a market that is very, very price sensitive; that’s taking on the big giants in Google, Facebook, Amazon, Microsoft, etc. So those are the types of scenarios we look at as a partnership opportunity (rather) than we do acquisitions. I’m not going to comment on if we looked at them or not. It doesn’t fit into our normal sweet spot and core competency area.”
That’s a pretty clear criteria and close to what many large tech companies would want.
Cisco not looking at Rackspace, doesn’t fit M&A criteria
In the context of covering Cisco’s “InterCloud” announcement, the following is quoted:
The Cisco Intercloud will be built upon industry-leading Cisco cloud technologies and leverage OpenStack for its open standards-based global infrastructure. We’ll support any workload, on any hypervisor and interoperate with any cloud.
You see that notion frequently now-a-days, the idea of OpenStack being part of a cloud. As I recall, Oracle said they had (would have?) OpenStack compatibility. One would expect that IBM SoftLayer (built on CloudStack) will have something in this realm of “based on” and “plays nicely with.” Of course, there are plenty of others that are “100% OpenStack” (or as close as one can get) as well.
Buried in this piece on Cisco doing some public cloud stuff is this little description about how the shift to public cloud creates a strategic threat to incumbent vendors:
Cloud computing represented an interesting opportunity to equipment companies like Cisco, as it aggregated the market down to fewer buyers. There are approximately 1,500 to 2,000 infrastructure providers worldwide verses millions of businesses; reducing the buyers to a handful would lower the cost of sales. And, as cloud sales picked up, reducing on-premises equipment spending, those providers would represent an increasing share of sales and revenue.
The problem with this strategy, as companies like Cisco Systems and Juniper Networks discovered, is the exchange of on-premises buyers to cloud buyers is not one to one. Cloud providers can scale investments further than any individual enterprise or business buyer, resulting in a lower need for continually adding equipment. This phenomenon is seen in server sales, which saw unit shipments fall 6 percent last year and value fall nearly twice as fast.
This re-arranging of one of Porter’s forces (the buyers get more power because there are fewer of them) is one of the reasons I go on about “IT – SaaS = what?”; namely, selling to SaaS/cloud companies is not going to be as fat as selling to the more numerous and inefficient (read: spends more money) on-premises market.
A nice illustration of the problem shifting your customer base from on-premises to public cloud
Stacey Higginbotham takes a crack at explaining why Cisco’s announcement this week is a big deal for SDN, and Cisco:
> Cisco saw all of that play out and doesn’t want to find itself in Dell’s or HP’s shoes. So it is focusing on becoming a control point in the emerging virtualized stack and putting greater emphasis on software.
And, explaining what Cisco’s, well, ethos here may be:
> The networking world of old said it cared what the application wanted, but the application had to speak network’s language. So the application had to figure out if it needed more bandwidth or was experiencing latency issues or whatnot.
> But when the application comes first, this means you offer the application (and developers) a way to see how the network affects your application. So if something breaks, the developer doesn’t have to go looking for the networking code book to describe the problem because the networking infrastructure and software does the work.
What’s the big deal with Cisco’s Insieme?
Cisco on Tuesday said it will acquire Whiptail, a solid state memory system company, for $415 million. Cisco plans to integrate Whiptail’s solid state memory technology into its unified computing system (UCS) products.
The end result is to deliver optimized performance on top of UCS for emerging and business critical applications, such as virtualized, Big Data, database, High Performance Computing and transcoding workloads.
People love the solid-state. Notice that there’s software involved.
These SSD companies are going like hot-cakes!
Summary from Ann Bednarz’s piece on the topic:
- Microsoft: $77B
- Google: $16.16B
- Cisco: $50.6B
- Apple: $42.6B (plus $104B in long term investments)
- Oracle: $32.2B
The above are cash and short-term investments and such.
There’s ~$245B sloshing around for tech world M&A