Canalys Channels Forum: "We're under attack"

Canalys Channels Forum: "We're under attack"

Cisco's Nick Earle hammered home his vision

“We are under attack,” claims Nick Earle, senior vice-president, worldwide Cloud and managed services sales, Cisco.

Addressing a jam-packed audience at the Canalys Channels Forum in Shanghai today, Earle hammered home his vision, and that of Cisco’s, as to how the future of the Cloud should be managed.

“When it comes to Cloud we need to look forward, not back,” he said, alluding to the Cisco partners in the audience, which make up around 86 per cent of the company’s business.

“We need to ensure we keep these percentages around the same mark. But the truth is we’re under attack.”

Who’s attacking the market? “Coffee drinking, chocolate robots.”

Pointing behind to an enlarged image of an Android KitKat figure located on the shores of Lake Geneva, where chocolate giant Nestle is based, Earle’s point was precise.

“Nestle has a $US400bn business yet all of the company’s marketing, Big Data and Cloud business is done through brands such as Google,” he explained. “Free of charge.”

Google’s share of the big chocolate pie, Earle asked? Information.

“No public Cloud company is making money,” he added, explaining how partners can align business models and strategy for Cloud acceleration. “And many of them have no intention of making money, in fact they have a strategy for never making money.

“And if they’re not making money then what chance do you stand?”

Alluding to comments made by Steve Brazier, vice-president, Canalys, in a previous Channel Forum event earlier this year, Earle warned that selling public Cloud services is a dangerous strategy for the channel.

While hundreds of millions of dollars is being spent within the public Cloud market, Earle, along with Brazier, insists no company is profitable.

“Amazon Web Services [AWS] is reporting losses of $410 million to 810 million in the last year, with the rising levels of competition resulting in price and revenue reductions,” Earle said.

“The level of competition has gone up resulting in price reductions, so revenues are reducing.”

With Rackspace also looking to get out of this business, does public IaaS look more like a pyramid scheme at the moment you launch the product?

“The customers come, you make promises, you get more customers, build more datacentres and get more staff,” said Earle, again referring back to Brazier’s comments. “But you can only keep building your business if you keep getting more customers faster than the prices reduce.”

Delving deeper into the issue, Earle asked whether Cloud really is being adopted in business.

“Because if you talk to the CIO, which we typically do as an audience, what have they approved?,” he questioned.

Claiming that “shadow Cloud is everywhere”, Earle said the average enterprise uses 738 Cloud services, with 3816 unique Cloud services identified.

Yet only 11 per cent encrypt data, only 16 per cent provide multi-factor authentication and only 4 per cent are ISO 27001 certified. As a result, there is 12 times more Shadow Cloud than IT approved.

“It looks like an interesting scenario is happening," Earle observed, "almost like when Harry met Sally."

The fact is, explained Earle, Harry is in marketing and Sally is in IT and they are broken apart, which is what’s happening within the Cloud.

As a result, Earle believes service orchestration is the new role for CIOs. "If you look at the business model," he added, "Sally, who is a CIO, is a dinosaur, and Harry is spending all the money.

“In other words, Sally has to change. Sally must put herself at the centre of the hybrid Cloud, her role has to change to become a service orchestra of her own private cloud, which is where 90 per cent of the money is.

“Think of a portal with all those applications, how can Sally build this where she can guarantee security and policy - because they’re all different?”

Read more: Canalys Channels Forum: Impact of geopolitical forces underscored

Cisco strategy…

So what's Cisco’s Cloud strategy? Reverting back to basic principles.

"We’ve built a $50 billion company, with 62,000 channel partners but it’s a very profitable ecosystem," he added.

"We did it based on a principle of connectivity, connectivity builds an ecosystem in the same way railroads connected towns and cities."

Looking back 30 years ago, Earle remembered a time when networks were separate, “vendors had their own networks.”

“But could you go between them?,” he asked. “What did Cisco do? We made the products and we championed the protocols where you could join those world’s together to create an ecosystem of profit.

“It used to be called networking, then it became inter-networking and now it’s the Internet.

“When we look at the Cloud and all of it’s problems - we see vendor centric Clouds that are not designed to communicate together, with closed standards that means data gets locked in.

Read more: Brocade names former Cisco engineer as new CTO

“Financially from a customer point of view it looks the same. But what’s Cisco is trying to do through its Cloud strategy is connect the Clouds, in a trust model that is highly secure and driven by policy, software enabled, multi-vendors.

"By connecting this, we can create a profitable ecosystem which includes you as partners."

For more live updates of the Canalys Channels Forum, visit Reseller News/ARN throughout the week…

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