Cisco CEO Chuck Robbins On The Channel's Role In Navigating The Multi-Cloud World

In an interview with CRN after reporting record revenue for the fourth quarter, Robbins says the channel can play just as large a role in the transition to a new multi-cloud, software-focused business model as it has in Cisco's traditional business.

Robbins On The Record

It's a multi-cloud world, and Cisco CEO Chuck Robbins is feeling good about the way he's positioned his company in it.

Cisco's transition to a business model that stresses recurring revenue and software subscriptions is beginning to bear fruit as partners balance the networking giant's core enterprise portfolio with next-generation Software-as-a-Service offerings and multi-cloud initiatives, Robbins told CRN in an interview.

The San Jose, Calif., company reported record revenue of $12.8 billion in its fiscal fourth quarter Wednesday, and Robbins said partners have played a significant role in positioning Cisco for success in a broad-based digital transformation taking hold among customers across the globe.

"We work so closely with our partners that they actually help us define the programs we need to actually make this work," Robbins said. "We don’t go off in rooms and come out and unveil something that hasn't been vetted pretty deeply with a strategic set of partners to make sure we get it right. We won't always get it right. When we don't, we fix it."

Robbins said Cisco, which only recently brought its public cloud relationship with Google into production, is likely to forge similar relationships with other public cloud power players, and he expects partners to find a wealth of opportunity in customers' drive to the multi-cloud and hybrid cloud world.

"As our customers broadly adopt this multi-cloud environment, they're rearchitecting how they build IT infrastructure," Robbins said. "That's a combination of automation, orchestration, SD-WAN, analytics, deep security, hybrid cloud enablement. The end state is very attractive. The road from where we are today to the end state is a tremendous opportunity for our partners."

What follows is an edited excerpt of Robbins conversation with CRN.

About of third of your total revenue is now recurring revenue. What percentage of that is coming through the channel?
It's the same percentage of our total business that's going through the channel, 85 percent. There's no difference between that and the rest of our business. One of the things we talk to our teams about is that as we make this transition to more SaaS and software subscription offers, I've told them I don't know how you're going to do it, but you're going to do it with our partners. As we've opened up this whole new model and the API structure on top of our networking platforms, it really gives our partner community an opportunity for entirely new profit streams and, frankly, new opportunities to drive their own intellectual property on top of the platforms, which is another way they'll maintain sustained profitability for the long term.

What does that say about the strength of the channel and its ability to drive growth in a new selling model?
I've been in this space with the partners for a long time. What they've shown is that there's clearly an understanding that as the market changes, they have to evolve their business models. What we've seen historically is more an evolution around converged technology offers and how it brings together different buying centers. The business model and the offer type of transition is something new, but they've shown the same level of resilience in making that transition. We work so closely with our partners that they actually help us define the programs we need to actually make this work. We don’t go off in rooms and come out and unveil something that hasn't been vetted pretty deeply with a strategic set of partners to make sure we get it right. We won't always get it right. When we don't, we fix it.

You've got a public cloud partnership with Google. What's your vision for the growth and expansion of partnerships with other hyper-scale providers, and how will you evolve your partner programs as a result?
One of the core drivers of our overall strategy is the multi-cloud transition. By definition, that means we're going to build solutions that allow our customers to apply security and policy and traffic management to whatever cloud service they choose. We'll continue to evolve our offers and expand partnerships where it makes sense. You can assume that we will want to offer the most robust set of capabilities that we can. With the cloud providers, many of them have channel programs today that we can integrate with, and they can integrate with ours and it's pretty natural. Others are in the early days of figuring it out, and in that case we can help them think through how they're going to do it. There won't be one answer, but there is a recognition even by them that this is a partner play in the future, which is good because that plays to a historical strength for us.

Where do you expect partners to find the greatest opportunity in the multi-cloud space? How should they be thinking about how they're going to make money there?

The reality is that as our customers broadly adopt this multi-cloud environment, they're rearchitecting how they build IT infrastructure. That's a combination of automation, orchestration, SD-WAN, analytics, deep security, hybrid cloud enablement. The end state is very attractive. The road from where we are today to the end state is a tremendous opportunity for our partners. Helping our customers think about how they do that; writing applications on top of the infrastructure that help customers do that on top of platforms that are out there; understanding the different cloud services and helping customers make decisions -- there's a broad-based set of opportunities out there for our partners.

Cisco is seeing a return to growth, and you've done that while shifting to a new way to approach the market. What's your message to partners about how you're making that move and how they should be making that shift with you?
The great opportunity for us and our partners is that we've created innovation in our core enterprise networking franchise. We're bringing out next-generation access points, we've got the Catalyst 9000, we have an automation platform, we've got analytics coming out of the network. That's a large-scale franchise. At the same time, we're offering more subscription offers, more SaaS offers. What we've done is we've created a good combination of these next-generation software offers, but also some volume innovation so you can balance. You're still getting the growth while we're making the transition.

The Catalyst 9000 has almost 9,600 customers, almost all through the channel. What's driving the market for that particular product?
If you look at our U.S. business, we have 500 customers in what we call our ‘enterprise segment’ so when you're looking at 9,600 globally, it's clearly broad-based. We see it in public sector. We see it in commercial, we see it in service providers who are adopting some of the technology, we see it in large enterprises. Midway through the last fiscal year they had been evaluating it and we expected the uptake in the last half of the year, which we saw. Anytime you have a product like this, which is the fastest-ramping we've ever had, that by definition says it's being broadly embraced across segments and geographies.

Partners say they're either seeing, or expect to see strong, rapid growth in subscription and recurring revenue with Cisco. How can they make that growth sustainable?
We feel like we're in the early innings of this transition. We've got more innovation coming. We've got more in the intent-based networking portfolio. There's always risk, and we have to continue to execute. The strategy we've laid out I believe gives both us and our partners a solid opportunity as we go through these transitions with our customers.

You announced your intent to acquire Duo Security a couple of weeks ago. Do you feel like Cisco has come into its own in security? How much growth do you think you can generate in that space over the next couple of years?
We're excited about Duo. When it closes, it will certainly help us extend our intent-based networking. It gives us the identity piece, which is going to be critical. If you look at how customers are going to architect their IT infrastructure for the future, you have to have an identity play. That's going to be a strategic point of reference for how you do security in the future. We think that the security architecture over the next few years is going to transition, and we feel like we're pretty well positioned. There are customers at different phases of that transition, but over time this broad-based architecture that's anchored in the cloud is going to be the right play. Having an aggregated architecture where all of the threats from any place -- whether it's endpoint, network, cloud, email -- when you can aggregate all those threats into the cloud and do a very rapid correlation and then dynamically defend for your customers, that's the right play and that's where we're headed.