 Live from Mountain View, California, it's theCUBE, covering DevNet Create 2019. Brought to you by Cisco. Okay, welcome back everyone. We're here live for day two coverage. We're winding down at DevNet Create. This is Cisco's conference as theCUBE's coverage. I'm John Furrier, your host. Two days of coverage. DevNet is their group, their developer group. DevNet creates and the never event that they bring together, we're here with Zece Caravola, Principal Analyst, ZK Research, breaking it down with me. We're going to do a debrief, break down what's happening at DevNet. Zece, great to see you. Thanks for coming on. Yeah, it's been great. So let's wrap this up. So what's going on with Cisco? Because, you know, we've been following them. I've known Suzy Wee for many, many years, over a decade. Watching what's happened is almost like, I never thought this would have been possible almost like 10 years ago. Cisco, the incumbent, bought all these companies, maybe lose grip on the networking. Boom, there's a renaissance with the cloud. They got their mojo back. Developers are up until the right. It's a whole new changing of the guard. Well, the network's certainly back. And in fact, I've been following Cisco a long time. I was a customer of Cisco's, actually, before I was an analyst. And I've been following the developer initiatives at Cisco since 2001, the first time they tried. And when Suzy took this role, I was as skeptical as they could be because I saw developer initiative fail, developer initiative fail. And I said, it's not going to work. The culture inside Cisco is not ready for it. And lo and behold, a few years later, after all our hard work, almost 600,000 members, I'd say it's working. I think one of the trends that's actually helping Cisco is that the IT in the world has kind of come to them. I think they spent a long time on the outside looking in, being the major strategic IT partner. That was more the compute vendors, the application partners. But if you look today at the trends around digital transformation, the technologies that are driving that are things like internet of things, mobility, cloud computing, artificial intelligence. And those are all network-centric paradigms. So in a way, we live in a world where everything's connected. And think about it in your own personal life, John. What can you do without the network? You can't watch movies, you can't play games, you can't read books, you can't do anything without the network. And so the network has never been more important. And Cisco has finally opened their network up to the point where developers can actually build things on top of it. So they used to talk about the network in a platform and it was really just a platform, other for Cisco stuff. But now it's truly a platform for others to create on it to add value. I mean, I think it's one of, I think you totally right on on that. I think it's great analysis because it's like, hey, they didn't really screw it up. They had such a great strategic position as a supplier to the networks. And they're like, they wake up when they, oh my God, we're in good position here. Why don't we just take advantage of the fact that everything's networked. Network effect, social networks, network constructs, you're totally right. I think this is a game changer. But then how do you explain the success now? I mean, obviously new leadership. Was it a leadership change? Was it a realization? What's your analysis of, you know, obviously Susie has a team. She was a catalyst. What was the real turning point in your mind? Well, I think leadership change was part of it. And in fact, part of the very first thing, one of the very first things Chuck Robbins ever said to me when he took over as CEO, was he promised me that Cisco would listen to customers. And if there's something that's good for customers, Cisco wanted to lead that effort. And you could argue that historically, they weren't really on board with things that might have been bad for Cisco, but good for customers. Now they are. And one of the trends that, in order for DevNet to work, one of the things they had to do was open up the network. And conceptually you might think, well, if we open up the network, now we might put ourselves in a competitively weaker position. But ultimately that's good for customers. You can build applications that add value to that network. And so I think the big culture chain with Cisco came in with Chuck Robbins, their new CEO. It's not so new anymore. But a willingness to listen to customers be open and allow others to co-create on the network. And that's really been the foundation for DevNet. And Susie's taken the ball and run with it. And she's got the chops, technical chops, MIT background, understands tech, knows research, knows how to make it real. She's done that. But it's also the wave that they're on too. They got some waves that are really in their favor that's right in great position. I mean, IoT you couldn't ask for. The edge of the network exploding in opportunity now more than ever. I mean, it's been, I mean, Cisco, you've always heard over the years, we got to move up the stack. There's now on the full stack. Got to go to the edge and push beyond the edge. Now you got power at the edge. You got tons of opportunity. OT, operational technologies. The software is kind of old, built for hardware. You got IT connected devices in an IoT with GPUs on them. I mean, come on. And then WiFi 6 over the top. But 5G. I think one of the things IoT has done is it's democratized the edge. If you think historically about the value of the network, it was commonly thought that the closer you get to the data center, the more value the network has. So out of the branch edge, the less value data center, more edge. But now you've got a user edge, a client access edge, an IoT edge, a branch edge, a wireless edge, a wired edge. There's so many edges now. And we're creating data at every one of those points. And what that means is we need to do analysis. We need to be able to do machine learning at those points. We need access to the data. We need to be able to develop in those points. And so the whole network has now been democratized, where I feel there's not one part of the network that has more value, but it's all valuable. And DevNet allows customers to be able to tap into that. Can we just give it all those IoT names and just call it the network? Well, that's essentially what it is. And I think, and that's a big shift for the industry to start thinking about. Instead of thinking about the wireless network and the wired network and the data center network, you're right, it is just one network and it needs to be treated that way. And on-prem cloud, it's still got to move packets from A to B, store stuff as well, states import, and all these things are coming back. It's not really changing what distributed computing used to be. So given that being said, Cisco has a position. I want to get your thoughts on something that we talk about here at the event. Not many people in mainstream might get this or not. If you want to get your take on it. Having the portfolio of products all have APIs is a potential game changer across the board. What's your analysis of what that could possibly turn into because, you know, having things with APIs on them, every device is only going to create more connections of data to other devices to share and compose and create data. What's the impact for the people watching that it might be in Wall Street saying, what's the impact of having APIs on every single product? Yeah, well I think it turns Cisco into a platform company and I think you're right. It is a game changer for the company. I think historically Cisco value was driven by the Cisco product, the product portfolio. It's like the routers, the switches, things like that. Now that they've opened up their APIs, you're going to start seeing small software companies, large software companies, systems integrators, ISVs, all building things to run on the Cisco network and that creates a fantastic pull through effect. In fact, I was talking with one of the Cisco execs earlier today about when they do get pulled through, their cost to sale goes way down because it's the application part of that pulls them through, so their cost to sale is really just whatever they pay out to the application vendors. It's very, very low, so their margins will go up. You'll see them being bigger deal sizes and when you're part of that application ecosystem, there's not as much tendency to pound the vendor for discounts, right? So I think it puts Cisco in a much more strategic position because now they're part of something bigger. They're part of company transformation. They're part of application transformation and that'll have a significant impact both on revenue but more importantly on margins. This company will start making more money there. That's a great point on the pull through and sales cost impact in margin but also you also factor in, first of all great analysis, but I want to get your thoughts on the ecosystem impact because the conversations I've been having with solution providers, they're like, well hey, I'm coming into retail and I'm coming into manufacturing and healthcare and I'm actually deploying solutions. I'm getting higher margins on my stuff. So you have contribution value going, value contribution going to the partners as well, not just on the pull through but Cisco. And that's important because Cisco's a resettler-led company. It's a partner-led company with 90% of their sales go through their partner channel and for them, they're always trying to drive more value into that. And I think for the resellers too, for their partners, they need to understand that if they embrace DevNet and they embrace a lot of the applications in the center, they're going to have more strategic relationships with the customers, their deal sizes will go up, they'll have better margins and it'll put them in a better position as well. So I think the loyalty that you see in Cisco's channel will continue to grow and frankly, nobody's got the size of the install base that Cisco has so it's really going to be hard to compete with. Let me get your thoughts on, as a study of the industry, the horses on the track, you've got other competitors, you've got good opportunities for TAM expansion with cloud, multi-cloud, but I'm not sure that they might see the clear visibility yet into the financial impact of multi-cloud. So the question is, at what point do they start cannibalizing and eating their own to get that pole position as the battleship of the big move happens with Cisco as they have this company transformation, they have the huge revenue streams in other markets. Helco, is that disrupting anything? Okay, multi-cloud, so when do they start cannibalizing and eating their own to bring in the new or is that on their mind, because I just see there might be some antibodies that might be inside Cisco trying to say, whoa, this cloud thing's not yet proven or let's see the revenue visibility into the cloud. Yeah, I think there's probably some of that inside Cisco and you'll have some fighting between groups but I do think it's a net additive for Cisco. I think you wind up, what the cloud does is it makes you want network services in more places. I need a network, I certainly can't get rid of my network if I'm connecting to the cloud, right? I need to connect to it. But then I'm going to want to have the Cisco portfolio and network services available on Amazon or Google or Microsoft Azure and they have relationships with those companies. So in a way what it does is it takes what Cisco started on the company premise and it extends it out to the cloud and so ultimately what customers want almost every large enterprise they want wants some kind of hybrid environment but the environment has to look the same on-prem and in the cloud and I think Cisco's in a good position to be able to bridge that gap and so you could look at it as cannibalizing, I don't really think it does, I think it's a net additive to Cisco. I think internally they may need to restructure things in order to get some of the business units that might be affected on board with that but ultimately it's good to do that. Some tweaks basically, not hardcore wholesale changes. No, I mean they've already done a lot of tweaking. If you look at the leadership team that's in place now, it's completely different than five years ago so they've done a lot of realignment and a lot of tweaking and I think they're ready for this. Horses on the track, competition, Cisco's in good place, multi-cloud seems like a great play, multi-cloud, internet working was a big, coax cables, head hubs, you had subnets, sounds like multi-cloud might be a great similar trajectory of what internet working was as a segment, multi-cloud might seem like a perfect fit for Cisco. Yeah, well multi-cloud extends the current network out to multiple clouds and I think what's important to understand there is it does raise the bar in complexity. A multi-cloud network is going to be more complicated to run than a plain, simple on-premise network but Cisco, this is where Cisco's software business is important, DNA center, they've done a lot of work in that area to mask a lot of the complexity so if customers that use DNA center, they're going to be able to use that software interface as a way to manage it and so now instead of having to configure every box one by one and I was a network engineer, I had to do that. Now you do it from one central location to push it out everywhere, if they had had that I would have had a lot more free time so. I mean, since you're a network engineer I used to do those wide area networks myself back in the day, command line in, telling that into boxes, all that good stuff. One at a time. When you look at the vision of programmability of networks, which I love that term by the way, I've always loved, even when Juniper had Juno so originally that overlay, I love software mixing in and I love this notion of programmability. Not yet fully understood but it makes sense. How do you think that's going to play out? Looking back and we're going to look back in time saying hey, you know 2019, this was a seminal moment or was it an unscentable moment? Is how important is this programmability going to be for Cisco in the industry? Well, it's extremely important as a way to be able to automate network functions and I talked to a lot of the DevNet people here. I think they're starting to warm up the automation. I think there's a little bit of trepidation at first that's hey it's going to take my job but I think what's happening to IT people today is there's so much to do that they simply don't have time to do a lot of what they did before. You know what it's like if I'm running a legacy network I'm literally configuring every box one by one. So if I get a thousand branches, I'm going to make a change, I'm going to hit a thousand boxes. That's not very efficient. So now I can do it in one place and push it out across and so I think what programmability does is it lets me automate and orchestrate things better to the point where the network should be able to run itself and now as an IT person I can go focus on more strategic initiatives. I'll give you an anecdote from a CEO I talked to a little while ago. This is a few months ago. He said my IT department is becoming less and less relevant to me and I need them to become more relevant. I need them to help me innovate but they can't because they're busy running the day to day. I need them to find a way to offload that and that's what programmability does it lets you offload the things that aren't strategic. My advice to IT people is if you're doing things today that aren't strategic to your resume or your company don't do them find a way to automate them and that's where programmability helps. Given good cost structure in line but driving revenue is a great resume boost. Oh yeah. Well doing anything strategic. No one's going to hire you because you can configure that ACL through that command line faster than the next guy. That's not a strategic way to drive your career. I'm going to see you obviously at Cisco Live as well. I'll be at Cisco Live. Great. Love to get your perspective. In summary put a bow around DevNet. DevNet Korea obviously I'm a big fan of Susie and her team. I've seen it from day one you as well. What do they got to do next? Obviously they got a good successful woman here. How do they scale it? How do you see them taking this inside Cisco and continuing to explode it internally as well as externally? What's your view on what they should be doing? Well I think this reached critical mass and I think there was a couple of things they had to do to get to this point. One was obviously build a user base but also get DevNet relevant across the portfolio and it is that everything from cloud to data center security. I think looking ahead what's next is they got to find a way to get the general Cisco sales person to be able to sell this to understand the value which I'm not so sure it's there and also they have a massive partner community to talk about all the resellers. This has to now become part of that partner sale. The partners need to understand if I sell the concept of some of these advanced applications that run on top of it I'm going to have better feel for myself and so I think now it's about the structures in place now it's about executing to be able to get the kind of exponential value out of this. This is really operationalizing to the next level. They get on a startup budget. They did great success. Thanks for sharing that great commentary. They're breaking it down here. End of the game. The game's over. End of DevNet, DevNet Create. Third year we've been covered at the beginning of following Susie's journey. Following Cisco as developers become more important in the modern era of new applications where network programmability will be an advantage. This is the future they're betting on. Cloud computing, AI, GPUs and all devices. APIs everywhere. This is the Cisco strategy. Secube coverage, signing off from Mountain View. Thanks for watching.