Cisco Enhances Internet Of Everything Capabilities With New Security Products

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Cisco (NASDAQ:CSCO) has launched new offerings to improve security throughout its extended network for better threat detection and control. This is likely to benefit enterprises and service providers in tackling threat-related security problems, which can potentially impede growth opportunities in the rapidly expanding Internet of Everything domain. The new offerings include AnyConnect featuring Cisco Advanced Malware Protection (AMP) for VPN-enabled endpoints, FirePOWER Services Solutions for networks where dedicated security appliances are not feasible, and NetFlow for greater threat intelligence and visibility into network traffic flow patterns. For service providers, Cisco launched the Security Identity Services and pxGrid Ecosystem for better threat detection, mitigation and overall security operations. Cisco estimates that the Internet of Everything market will be worth $19 trillion over the next decade, representing a $1.7 trillion market for service providers. However, it is also a lucrative opportunity for cyber criminals, valued at an estimated $450 billion to $1 trillion. [1]

In a bid to enhance its cyber-security capabilities, Cisco announced its intent to acquire Chicago-based security advisory firm Neohapsis in December and New York-based security firm ThreatGRID in May last year. [2] These acquisitions helped the company enhance its Advanced Malware Protection (AMP) portfolio of security solutions and improve its network security services, including risk management and compliance advice, both on-premise and in the cloud. Cisco’s AMP products and solutions were originally developed by Sourcefire, which the networking giant acquired in a $2.7 billion deal in 2013.

We have a price estimate of $27 price estimate for Cisco, which is slightly below the current market price.

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Security Key To Cisco’s Product Bundling

Security is an important component of all networking products and services, and as Cisco transitions from a hardware manufacturer into a software solutions company, it is changing the way it provides security. The company is trying to build an architecture in every business division where hardware, software and service collaborate to make it convenient for the customer. This architecture will essentially integrate Cisco’s Internet Of Everything concept with the cloud, data centers, mobility as well as security. This will absolve the customer of the responsibility of integrating various systems and enabling better and more secure delivery of services.

Overall, the company is looking at a business model where an architecture will integrate all products and services, and software licensing will be the main revenue driver. However, this will allow customers licensing Cisco’s software to use cheaper, white-label products, commoditizing hardware and impacting Cisco’s product margins. Also, customers using white-label products might opt for software providers other than Cisco. Therefore, losing customers remains a threat for Cisco in its plans to dissociate software from hardware. If Cisco can develop an architecture with efficient integration, product bundling and security, it should be able to incentivize existing clients to stick with the company and also compete with white label products. Its strategy to bundle individual products into tiers of suites is a case in point. This has helped the company ward off threats from white label competitors thus far, with revenue consistently showing an upward trend.

Instead of selling a number of individual products, Cisco bundles them into four different tiers of suites and market them as Cisco ONE Essentials, Cisco ONE Foundational Elements, Cisco ONE Advanced Application Services and Cisco ONE Advanced Security Services. Although aligned under the same Cisco Open Networking Environment (ONE) developer platform for SDN, each of the packages serves distinct purposes and can be licensed out on a suite-by-suite basis. Cisco continues to sell products on an individual basis to customers who prefer it, but the products themselves will assume less importance over time as it promotes bundled licenses instead.

Included in each of these bundles and central to the revamped branding strategy is the Application Policy Infrastructure Controller (APIC), Cisco’s new software-based controller, which was unveiled in 2013 as a key component of its Application Centric Infrastructure (ACI) SDN offering acquired from Insieme Networks. Apart from simplifying pricing and branding, the new marketing approach should help Cisco better promote its SDN platform. The global SDN market is expected to grow from less than $1 billion last year to over $8 billion by 2018. [3]

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Notes:
  1. Press release, Cisco, June 8 2015 []
  2. Cisco Announces Intent to Acquire Neohapsis, Cisco, Dec 10 2014 []
  3. IDC Software-Defined Networking Market Report, 2014 []