Cisco Systems was founded in December 1984 by Leonard Bosack and Sandy Lerner, two Stanford University computer scientists who had been instrumental in connecting computers at Stanford. Cisco is one of the largest technology companies in the world, ranking 74 on the Fortune 100, with over $51 billion in revenue and nearly 80,000 employees.
Cisco designs and sells a broad range of technologies that power the Internet. Cisco integrates its platforms across networking, security, collaboration, applications, and the cloud. These platforms are designed to help customers manage more users, devices, and things connecting to their networks.
The strategy enables Cisco to provide customers with a highly secure, intelligent platform for their digital business. As Cisco’s customers add billions of new connections to their enterprises and as more applications move to a multi-cloud environment, the network becomes even more critical.
Cisco’s customers are navigating change at an unprecedented pace. In this dynamic environment, their priorities are to reimagine applications, power hybrid work, transform infrastructure, and secure the enterprise. Cisco’s strategy is to help its customers connect, secure, and automate to accelerate their digital agility in a cloud-first world.
Emphasizing the importance of learning about Cisco, by the end of the dot-com bubble in 2000, Cisco’s market capitalization had increased to $500 billion, surpassing Microsoft as the world’s most valuable company. Even in 2023, only five companies have a market cap of more than $500 billion. That’s what makes learning about Cisco so important. In this strategy story, we will learn what does Cisco do, what is its business model and who its competitors are.
What does Cisco do? How is the business model of Cisco structured?
Customers and Markets
Cisco’s customers include businesses of all sizes, public institutions, governments, and service providers, including large webscale providers. These customers often look to Cisco as a strategic partner to help them use information technology (IT) to differentiate themselves and drive positive business outcomes.
Enterprise: Enterprise businesses are large regional, national, or global organizations with multiple locations or branch offices. Many enterprise businesses have unique IT, collaboration, and networking needs within a multi-vendor environment. Cisco offers service and support packages, financing, and managed network services, primarily through Cisco’s service provider partners.
Commercial: The commercial market represents larger or midmarket and small businesses. These customers typically require the latest advanced technologies that Cisco’s enterprise customers demand, but with less complexity. Small businesses need information technologies and communications products that are easy to configure, install, and maintain.
Service Providers: Service providers offer data, voice, video, and mobile/wireless services to businesses, governments, utilities, and consumers worldwide. The service provider market includes regional, national, and international wireline carriers, webscale operators, and Internet, cable, and wireless providers. Cisco also includes media, broadcast, and content providers within Cisco’s service provider market.
Public Sector: The public sector market includes federal, state, and local governments, as well as educational institution customers. Many public sector customers have unique IT, collaboration, and networking needs within a multi-vendor environment.
What is the business model of Cisco?
Cisco made $51.56 billion in 2022. Total revenue in fiscal 2022 increased by 3% compared with fiscal 2021. Product revenue increased by 6%, and service revenue decreased by 2%.
73.7% of Cisco’s revenue in 2022 was generated from Products.
The business model of Cisco is organized into six product categories: Secure, Agile Networks; Internet for the Future; Collaboration; End-to-End Security; Optimized Application Experiences; and Other Products.
Secure, Agile Networks
Secure, Agile Networks consist of Cisco’s core networking technologies of switching, enterprise routing, wireless, and compute products. These technologies consist of hardware and software offerings, including software licenses and SaaS, that help Cisco’s customers build networks and automate, orchestrate, integrate, and digitize data. Cisco is shifting its business to software and subscriptions across Cisco’s core networking portfolio and expanding Cisco’s software offerings.
Internet for the Future
Cisco’s Internet for the Future product category consists of Cisco’s routed optical networking, 5G, silicon, and optics solutions. Cisco is transforming connectivity to the Internet and the cloud environment by efficiently meeting the growing demand for low latency and higher speeds. These products consist primarily of hardware and software offerings, including software licenses and SaaS.
Collaboration
Cisco’s Collaboration product category consists of Cisco’s Meetings, Collaboration Devices, Calling, Contact Center, and Communication Platform as a Service (CPaaS) offerings. Cisco’s offerings within the Collaboration portfolio consist of software offerings, including perpetual licenses, subscription arrangements, and hardware.
Cisco offers end-to-end collaboration solutions that can be delivered from the cloud, on-premise, or within hybrid cloud environments allowing customers to transition their collaboration solutions from on-premise to the cloud and providing collaboration experiences that integrate people insights, relationships, and audio intelligence to help improve productivity.
End-to-End Security
The End-to-End Security product category consists of Cisco’s Network Security, Cloud Security, Security Endpoints, Unified Threat Management, and Zero Trust offerings. Cisco’s SecureX solution provides unified visibility and detection across Cisco’s entire portfolio to help Cisco’s customers connect Cisco’s integrated security portfolio and existing security infrastructure to provide simplicity, visibility, and efficiency.
Secure Access by Duo is Cisco’s core solution for identity verification and secure remote access. Cisco’s technology, the Cisco+ Secure Connect solution, combines network and security functionality in a single, cloud-native service to help secure access wherever users and applications reside.
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Optimized Application Experiences
The Optimized Application Experiences product category consists of Cisco’s full-stack observability and cloud-native platform offerings. Cisco’s full-stack observability offerings are designed to bring together and provide end-to-end visibility of Cisco’s customer’s environments across applications, networks, multi-cloud infrastructures, and the Internet to help deliver full-stack observability for modern environments and drive relevant real-time insights.
Cisco’s Intersight platform offers a foundational container platform and infrastructure as code capabilities to simplify deployment and provisioning for Cisco’s customers. Cisco’s monitoring and analytics offering, AppDynamics, monitors performance across different application-related domains.
Cisco’s network services offering, ThousandEyes, provides a 360-degree view of hybrid digital ecosystems—across cloud, SaaS, and the Internet—by combining Internet and WAN visibility, testing of web-based user experiences, end-user monitoring, and Internet Insights.
Services
In addition to its product offerings, Cisco provides a broad range of service and support options for Cisco’s customers. 26.3% of Cisco’s revenue in 2022 was generated from Services. Cisco’s overall service and support offerings are combined into one organization, Customer Experience, responsible for the end-to-end customer experience.
Cisco’s support and maintenance services help Cisco’s customers ensure their products operate efficiently, remain available, and benefit from the most up-to-date system and application software. These services help customers protect their network investments, manage risk, and minimize downtime for systems running mission-critical applications.
A key example is Cisco Smart Services, which leverages the intelligence from the installed base of Cisco’s products and customer connections to protect and optimize network investments for Cisco’s customers and partners.
Major Competitors for Cisco
Cisco’s competitors (in each case relative to only some of Cisco’s products or services) include:
- Amazon Web Services LLC;
- Arista Networks, Inc.;
- Broadcom Inc.;
- Check Point Software Technologies Ltd.;
- Ciena Corporation;
- CrowdStrike Holdings, Inc.;
- Datadog Inc.;
- Dell Technologies Inc.;
- Dynatrace Inc.;
- Fortinet, Inc.;
- Hewlett-Packard Enterprise Company;
- Huawei Technologies Co., Ltd.;
- Juniper Networks, Inc.;
- Microsoft Corporation;
- New Relic, Inc.;
- Nokia Corporation;
- Palo Alto Networks, Inc.;
- RingCentral, Inc.;
- Ubiquiti Inc.;
- VMware, Inc.;
- Zoom Video Communications, Inc.; and
- Zscaler, Inc., among others.
Some of Cisco’s competitors compete across many of Cisco’s product lines, while others focus on a specific product area. Barriers to entry are relatively low, and new ventures to create products that do or could compete with Cisco’s products are regularly formed.
Due to several factors, including the availability of highly scalable and general-purpose microprocessors, application-specific integrated circuits (ASICs) offering advanced services, standards-based protocols, cloud computing, and virtualization, the convergence of technologies within the enterprise data center is spanning multiple, previously independent, technology segments.
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Also, some of Cisco’s current and potential enterprise data center business competitors have made acquisitions or announced new strategic alliances designed to position them to provide end-to-end technology solutions for the enterprise data center. As a result of all of these developments, Cisco faces greater competition in developing and selling enterprise data center technologies.
