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Cisco ONE Software Strategy Progress Report

Cisco's Gallo & Lohmeyer

Cisco’s Jason Gallo & Dan Lohmeyer

Nearly a year after Cisco Systems Inc. launched Cisco ONE Software, the licensing strategy continues to hit new milestones. Chief among them: More than 6,500 customers — including 45 Fortune 100 companies — have signed up for Cisco ONE. But that’s not all. A major distributor push also is under way.

During a ChannelE2E briefing today, Cisco’s Jason Gallo and Dan Lohmeyer described the past, present and future of Cisco ONE. Gallo is global director of partner software business development. And Lohmeyer is senior director of product management, Cisco ONE.

Cisco ONE, launched in January 2015, involves software designed for Cisco’s network, compute and storage systems. It’s not to be confused with Cisco’s various applications for collaboration, security, analytics/automation and specific service provider offerings.

Much in the way that Microsoft created the Office suite bundle in the 1990s, Cisco ONE involves bundles of network, compute and storage software. But the effort is “more than a bundle,” says Lohmeyer. Customers gain license portability and access to ongoing innovation.

In other words, Cisco’s infrastructure software can be moved from one hardware device to another as customers continue to refresh their infrastructure.

Cisco ONE Partners

Channel partners that embrace Cisco ONE are “starting to see higher deal sizes” and are eligible for higher rebate incentives, adds Gallo. He also expects partners to see more pull-through.

The reason: As Cisco continues to deliver more and more advanced software, customers could be extra motivated to upgrade the underlying hardware to take advantage of the latest code features, Gallo asserts.

While traditional resellers remain important to Cisco’s business, the company also sees growing opportunity for partners that offer “adoption consulting services.” Basically, those partners help customers to understand which Cisco ONE software components they should consume, and why.

Source: Cisco Systems

Source: Cisco Systems

To help partners understand the value of Cisco ONE, the company is “making a huge push this year” to work with distributors, says Gallo. In fact, Cisco will leverage distributor training hubs to help educate VARs and IT service providers on the software model.

Cisco ONE Pricing Models

Cisco also is preparing to offer more flexibility in its software pricing models. Cisco ONE currently involves perpetual licensing — customers that buy the software own it indefinitely and can run it forever. In addition, Cisco ONE will gain a subscription-based option sometime in mid-2016. The subscription model offers customers usage-based rights for a set period of time.

If I had to guess, Cisco ONE subscription-based licensing will arrive when the company kicks off its next fiscal year in August 2016. The approach, in theory, will give partners even more flexibility in terms of how they compensation sales people — perhaps all up front (as part of the perpetual license) or maybe over time (as part of the subscription billing).

Shifting Networking Market

Cisco ONE approaches its first birthday in January 2016 amid several continued shifts in the networking market. Chief among them is software-defined networking (SDN), which increasingly decouples software from hardware to ease the overall deployment and management of network services.

Also of note, more and more IT service providers offer network-based business connectivity services in the cloud. If a customer’s on-premises network fails or gets wiped out by a storm, the customer workloads can be activated in the service provider cloud.

The third big trend involves DevOps — where customers strive to deliver sustained innovation through ongoing software enhancements across their networks.

Those shifts and others increasingly involve pay-as-you-go service providers and customers.

Balancing Act

While making progress, Cisco must also carefully manage its licensing strategy. Amid its strong reputation as a hardware company, Cisco must also show customers that its software licensing models truly deliver new innovations at regular intervals. The company can’t, for instance, simply issue support packs while charging a premium for ongoing software licensing.

So far, the situation looks promising. Cisco ONE is marching toward 7,000 customers — including nearly half of the Fortune 100. That’s a promising start. With more distributor moves coming… along with that subscription approach expected to debut somewhere in mid-2016.

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