Cisco, Google hook up to boost cloud services

SAN FRANCISCO: Google and Cisco Systems Inc, two trendsetters in different eras of the internet, are joining forces as the growth of cloud computing puts new pressure on big tech companies and leads to strange corporate bedfellows.

The Silicon Valley giants on Wednesday announced a collaboration to help companies manage software and technology services that may run in their own data centers or in facilities operated by external cloud services.

Google, the largest unit of its parent, Alphabet Inc, hopes to benefit from Cisco’s close ties to corporate customers as the search engine giant tries to catch up to Amazon.com Inc, the market leader in cloud services, and Microsoft Corp.

Cisco could also use some help. The tech giant, which in 2000 briefly became the world’s most valuable publicly traded company when its computer networking equipment was used to build the internet, faces a serious threat from cloud services.

Companies that once spent heavily on new hardware from Cisco and other suppliers increasingly rent cloud services instead, with companies like Amazon doing most of the heavy lifting in the background.

“Every company that built an empire on selling equipment to companies to put in their data centers is feeling incredible pressure,” said Dave Bartoletti, a vice president and principal analyst at Forrester Research, a market research firm.

Cisco has also faced stiffening competition from rivals like the software maker VMware Inc, which announced a partnership with Amazon last year.

Cisco and Google executives vowed to offer something different. They said companies have been struggling with the fact that they need separate tools to manage software on their own premises and those running in the cloud, a situation that sometimes causes security problems.

By combining Google programming technology and Cisco networking and security software, they said, tech managers can create and manage software that can run securely in or outside their companies’ data centres.

The idea, said Urs Hölzle, Google’s senior vice president for technical infrastructure, is to close those “security gaps.”

Cloud computing has been roiling the strategies of older tech companies for much of the past decade. The concept, besides letting customers sidestep the costs of buying hardware and software, can let companies deploy computing resources more quickly and flexibly.

Amazon Web Services pioneered the concept. Synergy Research Group, a market research firm, said in July that AWS accounted for 34% of the roughly $11 billion spent on such cloud services in the second quarter, compared with 11% for Microsoft, 8% for IBM Corp and 5% for Google.

Google has moved aggressively to catch up. In late 2015, the company gave the job of running its cloud business to Diane Greene, a widely respected Silicon Valley entrepreneur who helped make VMware’s technology a mainstay at many corporations.

She made a series of organisational changes, recruited new talent and introduced new technology features. In one important move, Google in September 2016 purchased the startup Apigee Corp for $625 million, adding capabilities to help customers connect their operations with online services operated by others.

More mature technology companies have taken different tacks to try to hold on to customers. Some, like IBM and Oracle Corp, offer their own cloud services. Others, like Hewlett Packard Enterprise and Dell Technologies Inc, have shied away from engaging in a spending war in data centers against deep-pocketed internet giants.

So has Cisco. The company, based in San Jose, California, promoted a concept called “intercloud” that amounted to coordinating a federation of cloud services operated by partners.

But Cisco dropped that approach last year, choosing instead to help customers manage “hybrid” cloud arrangements — industry parlance for using a blend of operations in a company’s own data centers and those operated by a growing number of cloud services.

“We think we are one of the few companies that can navigate this multicloud world,” said David Goeckeler, executive vice president and general manager of Cisco’s networking and security business.

The company has broadly signaled plans to rely more on software and services than on sales of networking hardware, aided frequently by acquisitions. On Monday, for example, Cisco said it would pay $1.9 billion for BroadSoft Inc, which sells online communications services.