Google and Cisco Systems, 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, hopes to benefit from Cisco’s close ties to corporate customers as the search engine giant tries to catch up to Amazon, the market leader in cloud services, and Microsoft.
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, 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 centers.
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 A.W.S. accounted for 34 percent of the roughly $11 billion spent on such cloud services in the second quarter, compared with 11 percent for Microsoft, 8 percent for IBM and 5 percent for Google. Amazon and Microsoft are expected to highlight progress in their cloud businesses when they report quarterly earnings on Thursday.
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 organizational changes, recruited new talent and introduced new technology features. In one important move, Google in September 2016 bought the start-up Apigee Corporation 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, offer their own cloud services. Others, like Hewlett Packard Enterprise and Dell Technologies, 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, Calif., 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 multi-cloud 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, which sells online communications services.
Other companies also have embraced the hybrid cloud concept. Microsoft, for example, has longtime ties with corporate software buyers and has come up with ways to run new cloud applications in its data centers or on customers’ premises, said Al Gillen, an analyst at the research firm IDC.
“We see other vendors doing things to compete since what we have is so strong and so unique,” said Julia White, a corporate vice president with Microsoft’s Azure cloud business.
VMware, a subsidiary of Dell, was first known for software technology called virtualization that allows more efficient use of servers but now competes with Cisco with networking software. Russ Currie, a vice president of enterprise strategy at the network monitoring specialist NetScout Systems, said VMware was effectively using its cloud alliance with A.W.S. to court customers. Pat Gelsinger, VMware’s chief executive, called the announcement from Google and Cisco a “validation” of his own company’s vision.
Cisco also cooperates in various ways with A.W.S. and Microsoft in cloud computing. But Mr. Goeckeler said that the Google relationship was particularly potent because of the technological specialties of each company.
“We are both users of each other’s products,” said Mr. Hölzle of Google. But in this case, this is about working together to give their customers the technology they want, he said.
WHY CLOUD SERVICES?
- Google hopes to benefit from Cisco's close ties to corporate customers
- Cisco, which in 2000 briefly became the world's most valuable publicly traded company, now faces a serious threat from cloud services
- Companies that once spent heavily on new hardware from Cisco increasingly rent cloud services instead
- By combining Google programming technology and Cisco networking and security software, managers can create software that can run securely
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