Robots, not routers, are the future of the new Cisco

Cisco’s new CEO is doubling down on the Internet of things and making software the star of the show

Robots, not routers, are the future of the new Cisco
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Routers? They're so 2014. So how about robots? In 2015 and beyond, that's the ticket. At least at Cisco Systems, whose new CEO, Charles Robbins, is doubling down on the Internet of things. This week, his company announced a deployment of IoT technology that will let a customer keep track of hundreds of shop floor robots at the same time.

Cisco is moving away from heavy reliance on its traditional networking business, and it's pushing hard into software designed to connect and secure the 500 billion devices it believes will be connected to the Internet by 2030.

The company's business model is changing too. Deferred revenue from software and subscription-based products was up 21 percent in the company's most recent quarter.

Although Robbins got the corner office in July when John Chambers stepped down after a 20-year run, Cisco staged something of a coming-out party for the new boss only this week, bringing reporters to the company's San Jose headquarters to hear from many of the company's top executives. Strikingly absent from the hours of presentations and discussions was talk of Cisco's longtime bread and butter: routers.

"Companies do not want to be in the business of putting things together," Robbins says. "A massively distributed network is where we are headed." As a result, Cisco is moving away from selling individual switches and routers.

That's not to say Cisco is getting out of the hardware business -- it won't. Hardware still generates three times as much revenue as software and services. But software, particularly analytics, is going to be front and center.

Furthermore, Cisco is working to strengthen its ties with developers. "The coder is a major customer," says Susie Wee, a Cisco vice president who is running the company's developer program. "We want to help them become entrepreneurs."

The new Cisco monitors the robots

Although the Internet of things can seem a little silly at times -- who needs a connected lightbulb? -- Cisco now has a set of IoT packages aimed at manufacturing, transportation, utilities, and the oil and gas businesses.

This week, Cisco and Fanuc America unveiled a system that lets workers watch every robot on the factory floor and monitor its health. If a device appears likely to fail, a service technician can fix or replace it before a failure slows or stops production.

The system is running on 1,800 manufacturing robots, with the aim of expanding that number to 2,500 by 2016. It has already saved General Motors $38 million in downtime, says Andy Denny, Fanuc America's vice president for robot operations.

Last week, Cisco and General Electric announced a similar partnership; the companies will deploy IoT technology to monitor the production equipment in 100 GE factories.

Robbins believes that IoT will be "bigger than the first wave of the Internet. It has to be: There will be 30 times the number of devices connect compared to what's connected [to the Internet] today."

Cisco is also partnering with Schneider Electric to deploy a pipeline-monitoring system using IoT technology. The sensors and other devices will let technicians keep tabs on the structural integrity of pipelines to avoid catastrophic failures.

After a bumpy past, Cisco now values developers

Cisco has a history of bumpy relationships with the developer community, admits former CEO Chambers. In an effort to repair the damage 18 months ago, Cisco founded DevNet, which has about 315,000 members. Although only about 10 percent of those members are active, DevNet has already spun off 52 product sets, says Wee.

This week, Cisco announced DevNet Labs, a portal and community for developers that will be "a place for developers to share their innovations and co-create with other DevNet developers," she says. The portal includes a sandbox for developers to test applications and a tool to help that write IoT apps.

"Everything we will build will be programmable," says Robbins. To help enable that, Cisco is stepping up development of application-specific integrated circuits (ASICs); by next year, the company expects to have rolled out five new ASICs and is spending significantly more on ASIC R&D, says Soni Jiandani, the senior vice president for application infrastructure.

The acquisition strategy will continue

One part of Cisco's strategy isn't about to change: acquisitions. In the last 20 years or so, the company has used its enormous stash of cash to purchase 182 companies. It also invested $2 billion in 100 startups. Most recently, Cisco said it intends to purchase Portcullis, a cyber security consultancy.

Over the years, acquisitions have, on average, added a point or two to the company's growth and have been an entry into new markets, says Hilton Romanski, Cisco's chief strategy officer. And more major partnerships on the heels of last month's vague deal with Apple may follow. "Watch this space," he says.

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