 From the SiliconANGLE Media Office in Boston, Massachusetts, it's theCUBE. Now, here's your host, Dave Vellante. Hello everyone and welcome to this week's episode of theCUBE Insights, powered by ETR. This week, Cisco CEO Chuck Robbins has invited a number of analysts and press to San Francisco for an event to talk about the future of Cisco and no doubt the role of the company in the next decade and I will be there. So in this breaking analysis I thought that I'd focus on Cisco and its prospects in this era of next generation cloud. Of course last week we attended AWS re-invent and you can catch all our coverage on theCUBE.net but the key takeaways are that we're entering a new era of cloud that is heavily emphasizing getting more value out of data with machine intelligence and things like SageMaker. Now, AWS was heavily focused on this notion of transformation, putting forth a strong case that enterprises have to transform not just incrementally, it was a clear message that CEOs really have to lead and AWS is striking directly at the heart of what AWS head Andy Jassy calls the old guard namely IBM, Dell, Oracle, HPE and many others including of course Cisco saying that you can't just transform incrementally CEOs you have to transform whole house. So today I want to look at six areas and I'm showing them here on this slide but the first thing I want to do is just review the overall spending climate and then what I want to do is discuss Cisco in the context of industry leadership playing on Jassy's themes and then we'll look at the spending momentum in the latest ETR survey for those leaders. Next thing I want to do is I want to talk about the cloud and it's impacting everyone and I want to take a look specifically at how it's impacting Cisco and how Cisco is faring in the face of competition from the public cloud which we've talked about a lot across a number of vendors. We're then going to look at Cisco's business overall from a spending perspective and then I'll wrap with some comments on what I see as opportunities for Cisco like Edge, I want to talk specifically about multi-cloud and of course cloud in general. So let's start drilling into the spending climate overall. Now remember the ETR data tells us that spending on balance is reverting to pre-2018 levels but it's not falling off the cliff. Buyers remember are narrowing their experimentation on new technologies and they're placing more focused bets as part of their digital transformations. We're also seeing more replacements of redundant systems that buyers were running in parallel as a hedge on their bets and that is affecting overall spending and it's somewhat compressing spending. So with that as a backdrop, let's look at some of the latest data from ETR and focus on the leaders from the latest survey. So what I'm showing here is data from ETR's October 2019 survey of 1,336 IT buyers who responded and I've selected market share as the metric across all sectors as you can see here in number eight. Now remember market share is a measure of pervasiveness and it's calculated by dividing the total vendor mentions divided by the sector total. So now remember the ETR methodology allows for multiple responses by a vendor. So you can see in the Y axis there can be more than a hundred percent. Okay, because of those multiple responders, respondents. Now note that Microsoft, Cisco, Oracle, AWS and IBM have the highest shared ends or mentions and you can see the pervasiveness of Microsoft and its prominence, which is not surprising. But Cisco, Oracle and IBM generally have held up from again pervasiveness standpoint pretty well as you can see the steady rise as well in AWS's market share. So Cisco really the bottom line there is Cisco is a clear leader in this industry and it's maintaining its leadership position. And you can of course on that chart you can see the others who really didn't make the top five but they're prominently mentioned with the shared ends. That's VMware, Salesforce, Adobe's up there and of course Dell EMC is the 90 to $100 billion company. Now let's take a look specifically at spending momentum. You know what we're showing here in this chart is the exact same cut except we've changed the metric from market share to net score. Now remember net score is a measure of spending momentum that's calculated by essentially subtracting the percent of customers that are spending less in a given survey from those that are spending more and that's the net score. And you can see the picture changes pretty dramatically. AWS jumps up to the top spot with a 62% net score overtaking Microsoft but then look at Cisco. It's very strong with a 34% net score. You know, not nearly as high as AWS and Microsoft but very respectable and holding fairly strongly and notably ahead of IBM and Oracle which are both in the red. You see that red area which signals caution. Now what I want to do is address the question of how is the cloud affecting Cisco's business? You've seen me do this with a number of other vendors. Let's drill into what it means for Cisco. So if you've been following these breaking analysis segments, you know we've been reporting that the pace at which the cloud is eating away at traditional on-prem data center business continues. Now here's a quote from an IT pro that summarizes the situation for networking in general and then we'll come back and specifically talk about Cisco. He says, or she says, as we migrate the data centers to AWS, networking costs will decline over three years. This is a director of tech strategy for a large telco. So the question I have is does the ETR data back this up? Let's take a look. So what this chart shows is a cut of cloud spenders. There are 818 in the latest ETR survey and the net score within those accounts specifically for Cisco. So it's spenders on AWS, Azure and Google Cloud and you can see the steady decline post 2010 for Cisco. So just as I've reported for Dell EMC, HPE, Oracle and others, you can see that the clouds steady march continues to challenge the on-prem suppliers. So each of these companies is really got to figure out how to respond. Now in the case of Cisco, it's moving from owning the network market to really participating in the public cloud and interconnecting clouds. So we've seen Cisco make many acquisitions that can allow them to work with AWS, for example, AppD, which is application performance management, Viptela, which is SD-WAN, Clicker, which is orchestration, Duo in cloud security, and then you've seen bets on Kubernetes, which are going to help them span hybrid. As well, you've seen them make partnerships with the leading cloud suppliers and I'll make some comments later on when I talk about multi-cloud. So let's look at how these diversification moves have impacted Cisco overall, because they've not sat still. You can see that in this chart. What it shows is Cisco's market share across all of its businesses, including analytics, security, telephony, and of course core networking, but also servers, storage, video conferencing and virtualization. So the point is that by diversifying its business, the company has expanded its TAM, its total available market. And as I showed you before, has maintained its leadership position in the data center as measured by market share. Now here's a deeper sector analysis of Cisco's business by various sectors. And what we're showing here is Cisco's business across a number of sectors comparing the October 18 survey with July 19 and the October 19 survey. So this is net score view. And you can see across all customers that Cisco's second half net score for these sectors, which are in the green, are showing strong momentum relative to a year ago. So here you go, Meraki, which includes Cisco's wireless business, it's telephony business, parts of its security business, core Cisco networking. They're all showing strength. Now parts of its security portfolio like OpenDNS and SourceFire, which is intrusion detection, which Cisco bought about six years ago. And some of Cisco's voice and video assets are showing slower momentum, but Cisco's overall spending momentum is holding on pretty well. All right, let me talk a moment about some of Cisco's opportunities. They're trying to transform into more of a software company with assets like Duo, AppDynamics, and they want to focus less on selling boxes and ports and more on licenses and subscriptions. So it's got to use software also to unify its many platforms. So I want to talk about for a moment about multi-cloud, hot new area, right? Everybody's talking about it. Cisco recently made some organizational moves to take its separate cloud group and better align it with Cisco's core operations in a new group that they call Cloud Strategy and Compute. Now Cisco competes in multi-cloud with VMware, IBM, because Red Hat, Microsoft and Google, even though they partner with Microsoft and Google. So here's some ETR data that looks at key cloud sectors, including the three that I pulled out. Cloud computing, container orchestration and container platforms. So these are buyers spending on these three areas. So there's 937 in the latest survey. You can't see that end because I'm hiding it with the pull down, but trust me. But you can see the big players with spending momentum. And while Cisco doesn't show the momentum of an Azure or a Red Hat or even a Google, it's in that multi-cloud game. And my premise is that Cisco is coming at this opportunity from its strength in networking. And it's got more than a fighting chance. Why? Because Cisco is, in my view, in the best position to connect multiple clouds to on-prem and convince buyers that Cisco is the best partner to make networks higher performance, more secure and more cost effective than the competition. Now let me wrap with some critical comments and then I'll end up on an opportunity with some comments on edge. So the first thing I want to say is, while Cisco is dominant in a space, it's missed a number of opportunities. VMware has beaten Cisco to the punch in the initial move, of course, the virtual machines, and then the NYSERA acquisition. NSX, as I've shown before, is clearly has strong momentum in the market and is really eating into Cisco's core business. Cisco's ACI does okay, but it's definitely a sore spot for Cisco and this represents a crack in the company's armor. Containers, the move to cloud native architectures is mostly a move to public cloud. So it's a replacement or a displacement more so than a head-to-head competition that hurts Cisco here. As John Furrier says, you have cloud native and if you take the T out of cloud native, you have cloud naive. So Cisco, along with others, must not be cloud naive. Rather, it has to remain relevant in the cloud as we discussed earlier in the multi-cloud discussion. Now Cisco, they were the king of converged infrastructure if you remember with the first wave of Vblock along with FlexPod from NetApp and it changed the server game and drove UCS adoption and then guys like IBM and Pure jumped in and Cisco really became the standard. Now while hyper-converged infrastructure didn't really displace Cisco networking, Dell VMware with VxRail and Nutanix as well as HPE who's in the third position are posing a challenge. And so Cisco, they really don't play in the lucrative high-margin external storage business but there's some challenges there from a TAM standpoint, but I don't worry so much about that because despite all the rumors over the years, specifically in storage that Cisco's going to buy a storage company, I think there are better opportunities in software in the edge. And as I've said before, storage right now is kind of on the back burner. It's a very difficult market for a company like Cisco to enter. So I want to talk more about the edge because I think it's a way better opportunity for Cisco. Cisco, among all the legacy tech vendors, in my view could really compete for the edge and the reason I say this is because Cisco is the only legacy player in my opinion that has a solid developer strategy and it's because of DevNet. DevNet is the initiative to make all Cisco products programmable. We talk a lot about the API economy and infrastructure as code and what Cisco is doing is they're taking Cisco certified engineers like CCIEs and all these people that they've trained over the years, huge number of IT pros and they're retraining them and teaching them how to code on Cisco products to create new use cases, new workloads and new applications specifically at the edge. And Cisco products are designed to be programmable. So they have a developer play. And I've always said the edge is going to be won by developers. This is why frankly I was so excited last week at Reinvent about AWS Outpost and the move they're making at the edge because they're essentially bringing their stack to the edge and making it programmable. IBM failed to do this with Blumex. They couldn't attract developers. They had to go buy Red Hat for $34 billion. Dell EMC, they have VMware and they have an opportunity with Pivotal but that's got to come together. They currently have very little developer synergy in my view, specifically with Dell hardware at least that I can see. And there seems to be little or no effort to retrain storage admins and VM admins in the same way that Cisco is doing this with CCIEs. HPE, essentially I see them like Dell in a way throwing server boxes over the fence to the edge versus really attracting developers to identify sort of new workloads and new use cases. So I like Cisco's strategy in this regard and it's something that we're going to continue to watch very closely and probe this week with Chuck Robbins. Okay, this is Dave Vellante signing out from this episode of theCUBE Insights, powered by ETR. Thanks for watching everybody and we'll see you next time.