- Cisco is driven by the growth potential of selling services directly to corporate customers
- Cisco is moving into IP services to compete with Microsoft's move in IP TV etc.
Emerging Markets Demand Pay-as-you-go:
Another way of thinking about the Huawei impact is to think about the fact that consumers (individuals and corporate) are not always willing to spend millions of dollar up front to build out networks and realize the value over time. It is much easier to sell pay-as-you-go services in emerging markets where capital is often limited. In fact, if Cisco succeeds in this strategy, it may inspire other high-tech vendors to move to subscription pricing and SaaS model for emerging markets.
Services not Servers:
The WebEx acquisiton could also be seen as the begining of the move to selling "IP services" rather than do it yourself IP boxes to telcos and corporates. You can call this a Solutions strategy, an IP Services or SaaS strategy, or pehaps even hardware externalization or hardware-as-a-service . In the sense that rather than a corporate or telco buying Cisco hardware to build out a new Voip, web conferencing or video conferencing servic, it would now just buy a service. Nicholas Carr questions eloquently "Is the server industry doomed?" in this blog post where he talk about compute servers. I would extend the same argument to "IP-Services Servers" from Cisco.
What do you think about the China/Emerging Markets angle to Cisco's move? How will Telcos like Verizon and BT respond to this?
(As with all posts, these are my personal opinions.)