During the past 12 months, Cisco has worked hard at refining and relaunching their IoT strategy. Initial overall impressions of the progress are good with strong alignment with both Cisco and their customer needs. Launching IoT to three different audiences at Cisco Live Barcelona, Hanover Messe and Cisco Live San Diego was critical as it enabled Cisco to talk to network, industry and enterprise audiences in a focused and personalised manner. However, there are other market dynamics at play that will challenge Cisco’s IoT Edge strategy and ecosystem play. Both the progress and challenges are discussed in this review.
Overall Rating B+
Much of the 2018-2019 efforts may be collated under three main categories.
- Hardware. Establish a hardware foundation from which any IoT device or customer can reap the benefits of Cisco’s larger corporate strategy built around initiatives such as Cisco DNA Center, Intent Based Networking, ACI and Security. With the acquisition of Sentryo and the refresh and launch of their routers, Cisco is now well placed to have legitimate discussions with Industrial IoT or IIoT customers and prospects. Bringing IBN functions to the edge of the network will enable Cisco’s customers to begin to develop richer business outcomes from the network. Rating: A-
- Developers: Raise the availability of IoT-based applications through Cisco’s DevNet developer community. Cisco has a significant advantage over their competitors by having over 500,000 developers who understand how to write apps for Cisco’s product line and who now have access to new types of data that can enrich traditional network outcomes. Over time this advantage will become more and more valuable as data becomes utilised across markets as well as within markets thus creating wealth in a much larger ecosystem. Rating: B+
- Partners: Transform their partner management through the Customer Experience (CX) program. Much of Cisco’s business is conducted through partners. It is a critical success factor for Cisco to enable the partners to be IoT-data savy. IoT will enable Cisco to accelerate the transition from product sales to higher value subscription services. However, based on discussions with customers, partners and Cisco management, we believe that there is much more work to integrate an IoT strategy in to CX. Rating: B-
The Industrial IoT (IIoT) and Cisco
Cisco identified the IIoT market as one where Cisco’s strengths in hardware, software and partner ecosystem will play well with their customers and prospects. While having a strong foothold in the industrial space, we believe that Cisco’s success will be much dependent on the customer’s workloads and what they want to achieve with their data as it is reducing the complexity between IT and OT (Operations Technology) issues. Cisco has addressed the IoT connectivity and network security at the edge of the network through its ruggedized routers while their competitors are building distributed computing environments. Competitors who are adopting a full IT stack at the edge of the network aim to offer up more OT-based industrial services as well as emerging innovation services such as digital twin, augmented reality and robotic process automation. One key consequence of a customer choosing either approach will result in differing partner ecosystems to form and support the customer. These ecosystems will also be different in how they are managed and by who manages them.
Our recent IoT study shows that while security (a sweet spot for Cisco’s strategy) remains extremely important to an organisation’s solution, technology integration is equally important. When vendors are considering implementing an industrial solution, they need to be able to provide an end-to-end solution that encompasses both the IoT Edge and the IoT Enterprise while smoothly bringing together the OT and IT procedures.
This all starts with an easy on-boarding of any IoT device that is secured and managed with confidence and reliability. The good news for Cisco is that these challenges are also a natural opportunity for Cisco’s partner organisation and systems integrators by creating a new styled IoT ecosystem. However, despite which hardware path an end-user takes, we believe that Cisco and others do not have all of the necessary components of the full ‘IoT’ stack to fulfil a complete solution. To that end, everything will pivot to the vendor who either has the better systems integrations partnership, or, plays in the strongest ecosystem.
IoT Services
Most of Cisco’s business is driven through partners and therefore any success for Cisco’s IoT strategy is dependent on how well they execute it. IoT will accelerate the shift from product based solutions to subscription/as a Service deliverables as more information is generated from the connected devices. and as such the Cisco partner community should be trained/incentivised to offer up IoT. Cisco partners are already undergoing their own business transformation as Cisco’s Customer Experience (CX) strategy is introduced to them. Having the IoT hardware align with the broader Cisco vision was critical to enabling any CX IoT strategy. However, partners may be in ‘transformation’ overload as they embrace the traditional Cisco customer needs and requirements and may be slower to take up the IoT opportunities.
Our IoT study shows that customers believe that the transition from products to services innovation is the highest scoring benefit from an IoT implementation.
However, this is a difficult but critical part of any company aspiring to become a digitally driven business. An IoT strategy is a corner stone of this vision as it will provide the data to be able to run a services or subscription-based business model
Cisco is well positioned here but there is a maturity and readiness gap between Cisco and their customers. Patience will be a key asset as Cisco and their partners close technology gaps for their customers (e.g. adopting and implementing widespread analytics as part of the corporate digital strategy. Most customers are not ready to take advantage of IoT-based analytics outcomes and therefore the RoI case has not been fully articulated).
Finally, Cisco needs to address the mid-tier market with solutions that are compatible with budgets. While it is important to have an ecosystem of high calibre partners within systems integrators, we feel that there will be many customers who cannot afford Cisco’s end-to-end solution. As a result of this Cisco partners are still not ready to address the mid-tier market. Cisco will need to promote offerings across all markets by participating in high-, mid-, and low-end ecosystems. This may mean acknowledging non-5G licensed spectrum/ non WiFi solutions for the most cost sensitive customers for the sake of broader market and industry share.
Recommendations For Cisco IoT
The following are our recommended actions for Cisco IoT based on C-Scape and the prior 12 months of strategy rollout:
- Create stronger value proposition for network based IoT business outcomes. Customers are asking for end-to-end validation which means that Cisco needs to articulate a role with the likes of Salesforce, SAP and Microsoft to enhance customer’s enterprise management systems. This is where Cisco’s CX and partner organisation will also be challenged but can open up a lot of opportunity. Move the message up the value chain. More work has to be done with CX. More has to be done with developers.
- Articulate a stronger comprehensive Industry 4.0 solution that gives customers all of the application qualifiers to run on Cisco’s hardware. Cisco will be challenged by the IT-lead distributed IoT compute stack over its industrial strength routers. More marketing has to be invested in the IoT Edge campaigns.
- Segment the IoT market by customer maturity/readiness/size and their IoT connected assets. Based on asset churn and customer size will dictate the type of new IoT ecosystem that Cisco will either build, manage or participate. For example, an IoT solution of Capex intensive assets with longevity is very different for agriculture supply chain management. Segmentation is critical for Cisco to be successful.
Two things happened recently that 99% of the ICT world would normally miss. After all microprocessor and chip interconnect technology is quite the geek area where we generally don’t venture into. So why would I want to bring this to your attention?
We are excited about the innovation that analytics, machine learning (ML) and all things real time processing will bring to our lives and the way we run our business. The data center, be it on an enterprise premise or truly on a cloud service provider’s infrastructure is being pressured to provide compute, memory, input/output (I/O) and storage requirements to take advantage of the hardware engineers would call ‘accelerators’. In its most simple form, an accelerator microprocessor does the specialty work for ML and analytics algorithms while the main microprocessor is trying to hold everything else together to ensure that all of the silicon parts are in sync. If we have a ML accelerator that is too fast with its answers, it will sit and wait for everyone else as its outcomes squeezed down a narrow, slow pipe or interconnect – in other words, the servers that are in the data center are not optimized for these workloads. The connection between the accelerators and the main components becomes the slowest and weakest link…. So now back to the news of the day.
A new high speed CPU-to-device interconnect standard, the Common Express Link (CXL) 1.0 was announced by Intel and a consortium of leading technology companies (Huawei and Cisco in the network infrastructure space, HPE and Dell EMC in the server hardware market, and Alibaba, Facebook, Google and Microsoft for the cloud services provider markets). CXL joins a crowded field of other standards already in the server link market including CAPI, NVLINK, GEN-Z and CCIX. CXL is being positioned to improve the performance of the links between FPGA and GPUs, the most common accelerators to be involved in ML-like workloads.
Of course there were some names that were absent from the launch – Arm, AMD, Nvidia, IBM, Amazon and Baidu. Each of them are members of the other standards bodies and probably are playing the waiting game.
Now let’s pause for a moment and look at the other announcement that happened at the same time. Nvidia and Mellanox announced that the two companies had reached a definitive agreement under which Nvidia will acquire Mellanox for $6.9 billion. Nvidia puts the acquisition reasons as “The data and compute intensity of modern workloads in AI, scientific computing and data analytics is growing exponentially and has put enormous performance demands on hyperscale and enterprise datacenters. While computing demand is surging, CPU performance advances are slowing as Moore’s law has ended. This has led to the adoption of accelerated computing with Nvidia GPUs and Mellanox’s intelligent networking solutions.”
So to me it seems that despite Intel working on CXL for four years, it looks like they might have been outbid by Nvidia for Mellanox. Mellanox has been around for 20 years and was the major supplier of Infiniband, a high speed interconnect that is common in high performance workloads and very well accepted by the HPC industry. (Note: Intel was also one of the founders of the Infiniband Trade Association, IBTA, before they opted to refocus on the PCI bus). With the growing need for fast links between the accelerators and the microprocessors, it would seem like Mellanox persistence had paid off and now has the market coming to it. One can’t help but think that as soon as Intel knew that Nvidia was getting Mellanox, it pushed forward with the CXL announcement – rumors that have had no response from any of the parties.
Advice for Tech Suppliers:
The two announcements are great for any vendor who is entering the AI, intense computing world using graphics and floating point arithmetic functions. We know that more digital-oriented solutions are asking for analytics based outcomes so there will be a growing demand for broader commoditized server platforms to support them. Tech suppliers should avoid backing or picking one of either the CXL or Infiniband at the moment until we see how the CXL standard evolves and how nVidia integrates Mellanox.
Advice for Tech Users:
These two announcements reflect innovation that is generally so far away from the end user, that it can go unnoticed. However, think about how USB (Universal Serial Bus) has changed the way we connect devices to our laptops, servers and other mobile devices. The same will true for this connection as more and more data is both read and outcomes generated by the ‘accelerators’ for the way we drive our cars, digitize our factories, run our hospitals, and search the Internet. Innovation in this space just got a shot in the arm from these two announcements.
Rightly so, the first day of the Mobile World Conference was taken up by more and more air time on the ever coming 5G networks. Was 2019 going to be the year when operators around the world would finally deploy 5G in volume? The booths in the halls at the Fira Grand would indicate that ‘if you build it, they will come’. Indeed the speculation that 5G is the next big game changer is over – it is the game changer for this next turn of the technology dial.
However, let’s assume that the 5G hype is in the rear view mirror and we look to see what could be ahead of us in the mobile and telecom industry. At the end of the first day of this year’s MWC, I may have seen the future opportunity – and it is awesome! Pat Gelsinger asked the question “why can’t we build the telco networks like the clouds have been built for with scalability, flexibility, efficiency, and agility”? It’s a very fair question. After all, we do have Network Function Virtualization (NFV), and we will have new 5G services, so why not a new telco cloud?
I spent time with two companies that may show us a glimpse of the future network and cloud infrastructure. The first is the Israeli software startup, DriveNets with its solution “Network Cloud”. DriveNets is focused on helping service providers disaggregate proprietary routers from their networks as they move to 5G. DRiveNet’s Network Cloud solution aims to disrupt the current network business model by separating network costs (e.g. proprietary hardware functions) to create network functions from its software stack and two ‘white label’ hardware building blocks. The entire network infrastructure is software-centric allowing for agility, scalability, and normalizing costs with business growth.
However, Network DriveNets is an unusual startup in that it came out of stealth mode with $110 million in its first round of funding. The company was founded in 2015 by Ido Susan who should be familiar to Cisco watchers as he sold his first startup, Intucell (self-optimising network technology), to them for $475 million in 2013. DriveNets other co-founder, Hillel Kobrinsky founded Interwise (web conferencing) which was snapped up by AT&T for $121 million. To that end, the company is well funded and has the ability to sustain itself long enough to potentially disrupt the $50 billion network hardware business.
The second is Rakuten Mobile, a well-known name in Japan, but the first mobile virtual network operator (MVNO) to launch there in over 10 years. MNOs are not new so what makes Rakuten different? The company’s CTO, Tareq Amen explained to me that they are building the world’s first end-to-end fully virtualized cloud-native network running all of its workloads in the cloud. Being a fully virtualized network enables Network Function Virtualization to take advantage of cloud computing basis assets where a service delivery platform can be implemented, customized and scaled at speed. Finally, all of Rakuten’s core technology including its Radio Access Network (RAN – a topic that has been highly discussed at this year’s MWC) on 5G thus delivering immediate and actual 5G services. This compares to most of the rest of the industry who will have to build an uncomfortable transformation roadmap from 2/3G and LTE to 5G. While Amen’s strategy is compelling, there are a few technical hurdles to overcome. For example, enterprise-grade 5G indoor coverage isn’t fully there yet so Amen will have to rely on the operators that he is competing against who have that real estate.
So why highlight DriveNet and Rakuten in the same blog? In Rakuten’s case the CAPEX and OPEX business models for operators may be turned on their heads by the fact that its network is taking all of the competitive advantages of 5G while offering customers as disruptive pricing models and services. In a country such as Japan where traditional operators have struggled to modernize their networks, this could be a competitive threat. Equally, there could be a global rise in copy-cat pure 5G/cloud-based MVNOs spring up and fiercely compete against the incumbent local operators as well as give other MVNOs a tough time. As for DriveNets – it’s simple…it’s software and virtualization of the switch and router market which is very appealing to the service providers. It will commoditize the hardware, lowering their costs while allowing them to continue to focus on new 5G services.