It was an interesting year for the world’s largest networking vendor.
Cisco Systems Inc. put up record revenue and earnings despite a highly volatile macro environment affected by wars, social issues, inflation, rising interest rates and the like. The company also made the biggest acquisition in its history in September when it announced the purchase of Splunk.
And all this is while Cisco is going through the biggest retooling of its products ever. Despite all the changes, because of its cautionary outlook, Cisco stock exited the year only slightly higher than it entered.
Given all the product changes in 2023, this upcoming year should be one where the company sees an acceleration in revenue. Many macro-level uncertainties remain, but the product work is done in many areas. These are five themes I’m expecting to see from Cisco in 2024:
Security gets rolling
The revamping of the security business began when Cisco appointed Executive Vice President Jeetu Patel to run the business unit. He began the transformation of Cisco Security when he hired Raj Chopra to be the chief product officer for security and then added Ambika Kapur, Jeff Schaeffer and Tom Gillis.
Since then, the team has been busy revamping the entire security portfolio. Gone is the seemingly random collection of products, replaced by a Cisco Security Cloud comprising three security suites – Breach, User and Cloud protection. Earlier in the year, Cisco introduced its XDR solution, powered by its next-generation firewall.
This approach greatly simplifies the deployment and purchasing of Cisco technology and creates a “1+1=3” effect. Recently, I talked with Chris Konrad, vice president of global cyber at World Wide Technology, Cisco’s largest reseller, and I asked him about the shift from products to platforms. “Cisco has always had excellent products,” he said. “Duo, Umbrella and others are fine products, but there seemed to be no strategy around how they fit together. Now, with the suites, it’s much easier to articulate the Cisco value versus competing on a product-by-product basis.”
Given the fragmented nature of cybersecurity and the market’s overall size, this is the biggest needle-moving opportunity for Cisco. The product work is done, and good sales execution should lead to a meaningful, organic uptick in revenue.
All in on Webex Contact Center
Cloud contact center is another area where Cisco fumbled the ball in the past. Under previous leadership regimes, Cisco pushed private cloud stacks and Broadsoft as a “cloud.” Although this is definitionally correct, they were not true software-as-a-service-based offerings like those from all the companies in the leadership quadrant of Gartner’s CCaaS Magic Quadrant. Cisco could have acquired one of the many pure plays to jump into the market, but instead it spent the time to leverage the rebuilt cloud-native Webex platform and, in 2023, took the covers off Webex Contact Center.
Although this created a longer journey, it was the right approach, as now Cisco can bring all Webex’s advanced capabilities and AI features to contact center agents. Features such as background noise removal enable agents to work from home without worrying that customers can hear TVs, kids, dogs barking or other distractions.
Like security, the past few years have been about building the product, but now it’s ready to go, and, according to Cisco leadership, the company has seen many early wins. 2024 should be a year of momentum building as Cisco goes from a relatively new entrant to a mainstream vendor.
More ThousandEyes
During the pandemic, Cisco acquired internet monitoring company ThousandEyes. At the time of acquisition, ThousandEyes was considered the best internet monitoring company in the industry, but measuring and monitoring internet performance was primarily linked to SaaS apps.
Previous leadership was slow to leverage the product, but the current ELT has done a nice job integrating ThousandEyes into other Cisco products.
As an example, ThousandEyes is now natively supported on Meraki MX devices. It’s also one of the pillars of Cisco Full Stack Observability, or FSO. Another integration is with Webex, where ThousandEyes helps information technology pros better troubleshoot users and contact center agents working from home.
In the past, IT pros were only concerned with the private, corporate network and treated the internet as a black box. Now that companies have extended work from home indefinitely, ThousandEyes has become a critical troubleshooting tool for digital experience monitoring. I expect Cisco to continue expanding ThousandEyes integration’s footprint to include internet of things endpoints and perhaps some traditional competitors. More ThousandEyes in more places is good for customers, and I’m expecting Cisco to accelerate the reach of the product.
Get onto my networking cloud
If ever there was a product area that Cisco was successful in despite itself, it has been networking over the past decade. The company makes great products but puts so much burden on its customers to manage the various products through different dashboards. Meraki, Catalyst, Viptela and others all had their own management tools. Some were on-premises, and others were cloud-based. If you were a customer and wanted to know how the network was performing, you had to gather data from the various management centers, aggregate it and try to correlate it manually.
That strategy changed when Cisco appointed Jonathan Davidson as executive vice president of all networking products in August 2022. In one of my first meetings with him in this role, he promised the days of “swivel chair management” for Cisco customers were ending.
In 2023, the company announced the Cisco Networking Cloud, where, from a single cloud, customers can access Catalyst Switching, Wi-Fi, software-defined wide-area network, sustainability, AI and network assurance information. I’ve talked to many customers about the Networking Cloud, and they’re looking forward to having a single dashboard. Given the size of Cisco’s networking business, this was badly needed to shift from products to platforms.
One more note: If the strategy looks similar to the transition security went through, it’s because the two leaders, Davidson and Patel, worked closely to ensure Cisco Security and Networking can leverage each other to raise the Cisco value. Although there is minimal integration between the two clouds, this is an area of focus for 2024.
Sustainability takes center stage
Although ESG initiatives for all companies have been big for several years, particularly since the pandemic began, a switch flipped in 2023, where sustainability became a much bigger component of IT procurement. I conduct a chief information officer roundtable monthly, and early in the year, sustainability kept popping up as a top topic to care about, even in the U.S., where it has typically been further down the priority list. As the year went on, I realized the importance of sustainability had shifted and taken on a more important role in IT purchasing, with one CIO telling me it’s now 20% of his company’s request-for-proposal decision-making.
This was echoed by Cisco Global Innovation Officer Guy Diedrich. “If you asked me two years ago how many government leaders cared about sustainability, I would have told you zero,” he said in a conversation at the recent Climate Meetings in New York. “Today, it’s all of them.”
Cisco has a massive amount of data on sustainability that spans all its products. The data can help companies design networks with sustainability in mind, build eco-friendly hybrid workspaces, and understand the impact of data center refreshes. Most important, Cisco’s data can help customers measure their progress toward their sustainability goals, something few customers can do today.
Given the importance of sustainability, combined with the breadth of Cisco’s internal and customer-facing initiatives, it should be able to use this shift to separate itself from its smaller competitors.
What about Splunk?
I’m sure many readers will wonder why I didn’t list Splunk as a top theme for Cisco in 2024. The primary reason is the deal won’t officially close until October, so the impact will be minimal.
One question I can speculate on is what group Splunk will report to. There’s an obvious tie-in to security, but there is also one with networking. Splunk also bolsters Cisco FSO and plays a key role in service engagements. The most likely scenario is that Splunk will report directly to Chief Executive Chuck Robbins, and the data will be used across every part of the Cisco portfolio.
2023 was an interesting year for Cisco in that it put up impressive numbers but finished the year with a negative tone, given its guidance. Product innovation can’t fix macro issues or buyers putting a hold on projects, but the current portfolio is in the best shape in a long time. Security, networking and collaboration have all had major shakeups, and the company is using adjacent products such as ThousandEyes and AppDynamics better. In 2024, particularly the back half, we should see an acceleration of growth for Cisco and networking.
