Cisco Systems, Inc. Presents at Bank of America Merrill Lynch 2015 Global Technology Conference, Jun-02-2015 10:00 AM - SEHK:4333

SEHK:4333

Edzard J. C. Overbeek provided extensive insight into Cisco’s services strategy and its vision for the future. Here is a detailed summary of his statements:

Opening Remarks

• Cisco's Journey: He described Cisco's journey, emphasizing the pivotal decision 8 years prior to move into the compute fabric with Unified Computing System (UCS).
• Technical Services Opportunity: Before the compute fabric, Cisco had a strong technical services opportunity, including a global network of 1,100 depots for spare parts and support and maintenance services.
• Compute Fabric Impact: The introduction of the compute fabric through UCS marked a new era for Cisco, enabling the company to rethink architectural solutions for ICT delivery.

Strategic Shifts

• Integrated Systems: Cisco introduced integrated systems like Vblocks, FlexPods, and VersaStack, which were highly successful and among the fastest-growing areas of the company.
• Data Virtualization: With the acquisition of Composite, Cisco aimed to build a data virtualization layer that would enable clients to run analytics without needing to build large enterprise data warehouses.
• Analytics and Consulting: The company shifted towards offering analytics and consulting services, with a focus on measuring and monitoring enterprise capabilities to identify cost reduction opportunities and revenue outcomes.

Services Organization Changes

• Portfolio Management: Overbeek balanced the core business with new investment areas, automating services wherever possible.
• Consulting and Analytics: He expanded the services portfolio into consulting and analytics, recruiting external talent to lead these initiatives.
• Sales Approach: The company transitioned to a solutions-led sales approach, with specialized teams offering tailored solutions to customers.

Challenges and Successes

• Engagement Model: One of the main challenges was changing the engagement model, moving from a product-centric sales approach to a more solutions-focused approach.
• Training and Education: Significant efforts were made to train and educate the sales force on the new solutions-led approach.
• Growth Targets: The goal was to bring services growth in line with the overall company targets and then accelerate it further.

M&A Strategy

• Acquisition Strategy: M&A was considered part of the strategy, with a preference for small to medium-sized companies that could help Cisco achieve a leading position in key areas.
• Focus Areas: Overbeek mentioned analytics, particularly Internet of Everything (IoE) and edge analytics, as focus areas for potential acquisitions.

Big Data Participation

• Big Data as a Mega Trend: Overbeek emphasized the importance of Big Data as a mega trend that would enable the next phase of growth.
• Edge Analytics: He discussed the use of analytics engines at the edge to stream data and the role of data virtualization in signaling insights without requiring large data warehouses.

Customer-Specific Applications

• Tailored Solutions: Cisco offered tailored solutions for different industries, with a focus on capturing insights from proprietary data fields through connectivity and analytics.
• Verticals: The company operated in various verticals, including manufacturing, financial services, retail, energy, and oil and gas.

Partnership Program

• Scalable Model: Cisco used a scalable model, involving bespoke projects to learn about specific industries, packaging these into software-enabled services, and distributing them through channel partners.

Revenue Growth Trends

• Declining Growth: Overbeek addressed the decline in services revenue growth, attributing it to investments in new areas and the shift towards cloud and managed services.
• Future Outlook: He expressed confidence in reversing the trend as new initiatives gained traction.

Geographical Focus

• Global Nature: The initiatives were global in nature, initially focusing on developed countries like North America, parts of Europe, and developed nations in Asia Pacific.

China Strategy

• Strategic Focus: Despite challenges, China remained a strategic focus for Cisco, with a focus on stabilizing the political climate and pursuing opportunities in cloud and infrastructure.
• Pricing Strategy: Overbeak discussed the company's strategy to address pricing sensitivity through total cost of ownership (TCO) advantages and managed services.

Internet of Things (IoT)

• Platform for Platforms: Cisco positioned itself as the platform for platforms, leveraging its network and technologies to connect everything.
• Exponential Growth: Overbeek highlighted the exponential growth potential of IoT, driven by machine-to-machine learning and new analytics languages.
• Partnership-Driven Strategy: He emphasized the importance of partnerships to capitalize on the speed and exponential opportunity of IoT.

These insights provide a comprehensive overview of Cisco's services strategy, highlighting the company's vision for growth and innovation in the rapidly evolving technology landscape.