CISCO: IoT PLATFORMS AND SOLUTIONS

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1 COMPANY PROFILE CISCO: IoT PLATFORMS AND SOLUTIONS AHMED ALI analysysmason.com

2 Company summary Cisco is a global IT and telecoms hardware and software solution provider. The company is well known for its IP networking equipment such as routers and switches. It is also one of the main vendors in the security, data centres and cloud markets. Cisco provides its products and services to enterprises, operators and public sector customers. The company has research and development (R&D) employees as of FY2017, which amounts to about 29% of its total workforce. Cisco s spend on R&D was equivalent to 12.6% of its total revenue in The acquisition of Jasper in 2016 granted Cisco a stronger position in the IoT market, specifically in IoT connectivity management. Jasper complemented Cisco s IoT network connectivity and cloud capabilities. With Jasper, Cisco supports service providers and enterprises of different sizes throughout their IoT projects. In July 2017, Cisco launched its Kinetic IoT operation platform, which provides device and data management capabilities and complements its fog computing network solutions. The platform is offered to enterprise customers and runs on both the cloud and Cisco s fog-enabled routers and gateways. Figure 1: Cisco company facts Founded 1984 Offices Headquarters in San Jose and offices worldwide Employees (July 2017) Regional focus Revenue Selected IoT customers Selected IoT partners Global USD48 billion (FY2017) ABB, BC Hydro, BMW, CSL, Daimler Trucks, DHL, Ford, GM, Hallmark, Heineken, JCDecaux, Konica Minolta, Lordan, Nissan, Rio Grande Pacific Corporation, Schneider Electric, Siemens, Stanley Black & Decker, Starbucks Operators: AT&T, Bell, Claro, EE, Etisalat, KPN, KT, NTT Docomo, Reliance, Rogers, Singtel, Softbank, Tele2, Telefonica, Telenor, Telstra, Telus, TIM Technology providers: Accenture, Cumulocity, Gemalto, IBM, Microsoft, Salesforce, SAP, Telit, ThingWorx, Xively 2

3 Revenue (USD billion) Cisco: IoT platforms and solutions Company summary: financials Cisco groups its products into eight categories: Switching (39% of FY17 product revenue), NGN Routing (22%), Collaboration (12%), Data Center (9%), Wireless (8%), Security (6%), Service Provider Video (3%) and Other (including IoT) (2%). The company generated USD48 billion in revenue and a net income of USD9.6 billion in the fiscal year 2017 (figure 2). Both revenue and net income decreased by 3% YoY due to several factors including the decline in product sales to service providers and public sectors across different regions and countries including the USA and the UK. Product sales mainly dropped in the Service Provider Video, Data Center and Collaboration businesses. Because of the recurring software and subscription offers, Cisco's contracts can run for periods of up to 3 years. Revenues from such contracts come from advanced payments but are divided across the contract periods and are realised as deferred revenues. The total deferred revenue from products and services grew by 12% YoY to reach 18.5 billion in FY2017. Product revenue decreased across all regions in However, service revenues grew in all regions, mainly due to increased demand for technical support and advanced professional services. In Cisco s largest regional segment, the Americas, product sales declined by 5% YoY to USD20.5 billion while product revenues in EMEA and APJC dropped by 3% and 1% YoY, respectively. Figure 2: Cisco s revenue and net income, worldwide, FY2013 FY FY13 FY14 FY15 FY16 FY17 Revenue Net income Figure 3: Cisco s revenue by region, worldwide, FY % 16% Total revenue: USD48.0 billion 59% Source: Cisco Americas EMEA APJC Source: Cisco 3

4 Revenue (USD million) Chipset Module Gateway Connectivity infrastructure Platform Application Integration & Services Cisco: IoT platforms and solutions IoT business overview Cisco plays different roles in the value chain (figure 4) and has built its IoT solution around its network connectivity capabilities. The company offers a range of network nodes such as servers, switches, routers, gateways and access points for fixed, WLAN and LPWANs like LoRaWAN and NB-IoT. The nodes also come in various form factors to support different requirements in IoT verticals such as industrial or outdoor applications. Figure 4: Cisco s position in the IoT value chain In addition to network infrastructure elements, Cisco supports cloud management through two main platforms: Cisco Jasper for managing SIM connections and monitoring data usage. The platform is sold through mobile operators on a revenue share model. Cisco Jasper has more than 50 operator partners, including AT&T, China Unicom, NTT Docomo, Tele2 and Telefónica. Cisco Kinetic which provides data and device management features for enterprises and public sector customers. Cisco Kinetic is the foundation of Cisco s smart city end-to-end solutions such as smart lighting and smart parking. Cisco s IoT platforms and solutions are part of its Other product category. This category includes the revenues from the company s acquisitions of Jasper (since 2016) and AppDynamics (since 2017) which both have contributed to its growth (figure 5). However, at USD554 million in FY17, this segment only generated 1.2% of total revenue. Figure 5: Cisco s Other revenue, worldwide, FY2015 FY Internal capability 233 Key Partner s capability FY15 FY16 FY17 Source: Analysys Mason Source: Cisco 4

5 Strategic direction Cisco s growth strategy relies on a combination of internal development, acquisition, partnership and investments in emerging providers. Through these, the company is strengthening its IoT in three key areas which are edge & fog processing, data control and security. Cisco promotes a distributed management approach to IoT, as opposed to core cloud management. This is backed by its background in the enterprise and indoor networking market. The approach also builds on Cisco s fog computing including IOx and Kinetic Platform capabilities. With this combination, aggregation nodes such as switches and routers are enhanced with computing resources and hosting capabilities that enable executing applications within or closer to the IoT device. Cisco s expertise in infrastructure security in addition to its acquired cloud security solutions from companies like CloudLock allow Cisco to promote proficiency from edge-to-cloud. In May 2017, the company launched its IoT Threat Defence programme which highlights the security capabilities such as network segmentation and remote access as well as managed and professional security services. Cisco complements its solution with partnerships on the data analytics layer. The company has been collaborating with a number of significant analytics providers, most notably IBM and SAS. In addition to analytics partnerships, Cisco is also building its data control capabilities through acquisitions (ParStream, AppDynamics and the analytics division team from Saggezza). Cisco is involved in a number of verticals markets including manufacturing, energy, retail, cities and transportation. Smart cities are an area of particular attention, through its Smart+Connected Communities programme. It has been involved in major smart city projects like Manchester s CityVerve and Bristol is Open in the UK. The programme provides cities with end-to-end solution and services based on the Kinetic for Cities platform combined with sensors and applications from Cisco s partners. To accelerate adoption, Cisco introduced a financing initiative for cities in November 2017, which provides leasing and purchasing options. Cisco also continues to build a strong presence in the automotive sector. This is supported by Cisco Jasper s extended base of partnerships in the automotive OEM space. More than 50 automotive brands - including Audi, BMW, Honda, Ford, GM, Renault Nissan, Toyota use the Cisco Jasper Control Center platform for the Connected Car initiatives. 5

6 Key acquisitions and mergers Figure 6: Cisco s key acquisitions and mergers, Date Company Description Oct 2017 Perspica Founded in 2014 in the USA, Perspica offers artificial intelligence (AI) and predictive analytics solutions for enterprises. The company operates as a Cisco subsidiary. May 2017 MindMeld Founded in 2011 in the USA, MindMeld provides a conversational AI platform to power chat and voice assistant apps and services. The company was acquired for USD125 million and operates as a Cisco subsidiary. May 2017 Talent acquisition from Saggezza Founded in 2003 in the USA, Saggezza offers big data and analytics solutions to enterprises. Cisco acquired the Advanced Analytics team and associated intellectual property from Saggezza to enhance its cloud and SaaS analytics offering. Jan 2017 AppDynamics Founded in 2008 in the USA, offers a real-time performance monitoring platform to manage applications, end-users and business processes. The company was acquired for USD3.7 billion and operates as a Cisco subsidiary. Feb 2016 Jasper Founded in 2004 in the USA, Jasper developed a SIM connectivity management platform and managed to build a large customer base of operators and enterprises. The company was acquired for USD1.4 billion and operates as Cisco Jasper. Oct 2015 Lancope Founded in 2000 in the USA, Lancope develops an analytics-based network security solution. The company was acquired for USD452 million and is now part of Cisco s Network Visibility and Enforcement solution which supports Cisco s IoT security Oct 2015 ParStream Founded in 2011 in the USA, ParStream developed an IoT big data platform for real-time and edge analytics. The company was acquired to support Cisco s Data and Analytics offering. Oct 2015 Portcullis Founded in 1986 in the UK, Portcullis offered security consultancy services for enterprises and governments. The company was acquired for cc to support Cisco s security services. 6

7 Product summary [1] Figure 7: Cisco s IoT components Product Function Description Cisco Jasper Connectivity management Cisco Jasper Control Center is a cloud-based network connectivity management platform that allows operators and enterprise to manage SIM-based IoT connections. Cisco Jasper offers the platform to enterprises through local operator partners. The operators are able to manage and monitor their subscribers access and usage of the network resources so they can bill customers accordingly and monetise services. Enterprises can also use the platform to track and configure their assets and manage connectivity according to business needs and data consumption allowance. Cisco Kinetic Device and data management Kinetic is an IoT device and data management platform that allows enterprises and device manufacturers to connect and extract data from devices. The platform includes multiple protocol connectors to support data acquisitions from different devices in addition to translation and normalisation data to common formats. It also enables routing data between the IoT elements. The platform enables enterprises to define and control data flow policies to execute computing at different stages between the edge and the cloud as well as sharing data with different applications and users. Cisco IOx Fog computing Cisco IOx is a networking operating system that runs on gateways, routers and switches. It enables fog computing and hosts fog applications. IOx SDK and development tools allow developers to build and execute applications in IOx-supported network infrastructure. The Fog Director component allows for remote management and configuration of the IOx environment including infrastructure and applications. Cisco IOx and Fog Director are licensed on a per-device basis. Network Connectivity Products Aggregation nodes and networking infrastructure A range of network nodes that aggregate and route data traffic from sensors. They exist in different form factors to support different use cases, deployment environment and data requirements. The products include industrial switches, IoT gateways, industrial routers, LoRaWAN gateways, industrial and outdoor WLAN access points, industrial security appliance, and embedded service switches. 7

8 Edge Cloud IoT Threat Defence Consulting, support, utilities service Cisco: IoT platforms and solutions Product summary [2] Figure 8: Cisco s IoT components Analysys Mason s IoT platform stack Cisco s IoT platform components Security Services Applications Manufacturing Energy Transportation Cities Application enablement Advanced analytics, development environments Fog Director Device & data management Cisco Kinetic* Connectivity management Cisco Jasper Fog and edge computing Cisco IOx & Kinetic Fog Applications Key Cisco Partners Joint development * Cisco identifies Cisco Kinetic s platform layer as Data Control layer Source: Analysys Mason

9 Use cases Figure 9: Cisco s selected IoT use cases Customer Country Scope Lordan UK Lordan manufactures and supplies thermal-engineering heating and cooling systems including custom-made fins and tube heat exchanger coils for refrigeration, air conditioning and air humidifier OEMs. The company operates in the UK and its neighbouring countries. The company was looking to improve its production efficiency by reducing bottlenecks, downtime and waste. It wanted to replace the time-consuming periodical assessment with an automation system that has access to the mission critical data from the production floor and can track throughput in real time. Cisco offered Lordan its IOx solution including fog enabled industrial routers and access points as well as its fog application, LeaserMES. With the solution in place, the manufacturer was able to increase its production visibility in real-time leading to a 10% rise in productivity and a monthly saving of 600 labour hours. Cantaloupe Systems USA Cantaloupe offers a vending machine monitoring solution that helps vending operators restock their machines, check for problems and perform maintenance more efficiently. The company s solution; Seed, uses Jasper s Connect Center platform to connect more than vending machines wirelessly, gather and analyse sales and maintenance data and provide customers with valuable insights about how to optimise their operations and identify opportunities. Through Jasper s APIs, Cantaloupe can monitor data usage and adjust subscriptions automatically to avoid overage. ABB Norway ABB is one of the largest suppliers of industrial robots and modular manufacturing solutions including equipment, software and applications. The company operates in 53 countries and have installed more than robots in various industries including automotive, plastics, metal fabrications, electronics, pharmaceutical and food and beverage. ABB also offers support services such as installation, equipment monitoring and maintenance. ABB used to have a corrective maintenance approach where the company reacted to customers calls and dispatched technicians to the customers locations to identify and solve problems. ABB now uses Cisco Jasper Control Center to gain real-time visibility into performance and anticipate faults before they occur. The remote device and connection management allows ABB to optimise its maintenance resources and team. Also, the company has control over its data consumption to avoid unforeseen costs. 9

10 Analysis: strengths, weaknesses, opportunities and threats STR ENGTHS Cisco Jasper is one of the leading providers in the connectivity management platform market globally with a significant number of enterprise and operator customers and partners. Cisco s experience in indoor connectivity, system integration and network security, and its global recognition in the enterprise and venue owner community support its edge IoT and fog computing strategy. Cisco is a trusted brand and has built a strong sales strategy across multiple channels and partners. OPPOR TUNITIES Cisco already has an extended customer base, including Jasper s and IOx s customers, that can be leveraged to support Cisco Kinetic platform adoption. There is a growing interest in edge and fog computing solutions and Cisco is among the main players in this market with multiple components including the gateways and the hosting platform. WEAKNESSES Cisco relies on partners in IoT analytics and has not yet built a strong advanced analytics solution with capabilities such as predictive analytics and artificial intelligence. Cisco is always perceived as expensive. This could create challenges when the company is entering a new market where it does not have a strong track record. Cisco is still developing it s messaging for its IoT strategy which needs to come out to the market faster THR EATS Despite the large number of operators that deploy Cisco Jasper, the company might face challenges to grow or maintain its market share if it fails to offer competitive pricing and add value. Operators are looking for ways to cut their connectivity management cost by supporting multiple platforms in addition to having their own in-house platforms in some cases. Cisco Kinetic is new to the market and it tries to differentiate by adopting a distributed IoT approach. However, other big players such as HPE and Dell are active in this space and are also investing heavily. With IoT, Cisco is stepping outside its traditional IT play to target OT customers and to compete against new types of players. 10

11 About the author Ahmed Ali (Senior analyst) is the lead analyst for Analysys Mason's IoT Platforms and Technology research programme. His research covers IoT software, applications and solutions used by service providers to enable their IoT offerings. Prior to joining Analysys Mason, Ahmed worked as a senior analyst at ABI Research for more than 3 years, where he was part of the next-generation mobile network research programme, covering wireless and core mobile markets like small cells, in-building solutions, network virtualisation, unlicensed spectrum, and other 4G and 5G technologies. Ahmed holds a master's degree in Electronics Communications and Computer Engineering from the University of Nottingham and a bachelor's degree in Electrical Engineering from the University of Khartoum, Sudan. PUBLISHED BY ANALYSYS MASON LIMITED IN JANUARY 2018 Bush House North West Wing Aldwych London WC2B 4PJ UK Tel: +44 (0) research@analysysmason.com Registered in England No Analysys Mason Limited All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher. Figures and projections contained in this report are based on publicly available information only and are produced by the Research Division of Analysys Mason Limited independently of any client-specific work within Analysys Mason Limited. The opinions expressed are those of the stated authors only. Analysys Mason Limited recognises that many terms appearing in this report are proprietary; all such trademarks are acknowledged and every effort has been made to indicate them by the normal UK publishing practice of capitalisation. However, the presence of a term, in whatever form, does not affect its legal status as a trademark. Analysys Mason Limited maintains that all reasonable care and skill have been used in the compilation of this publication. However, Analysys Mason Limited shall not be under any liability for loss or damage (including consequential loss) whatsoever or howsoever arising as a result of the use of this publication by the customer, his servants, agents or any third party. 11

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15 PUBLISHED BY ANALYSYS MASON LIMITED IN JANUARY 2018 Bush House North West Wing Aldwych London WC2B 4PJ UK Tel: +44 (0) Registered in England No Analysys Mason Limited All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without the prior written permission of the publisher. Figures and projections contained in this report are based on publicly available information only and are produced by the Research Division of Analysys Mason Limited independently of any client-specific work within Analysys Mason Limited. The opinions expressed are those of the stated authors only. Analysys Mason Limited recognises that many terms appearing in this report are proprietary; all such trademarks are acknowledged and every effort has been made to indicate them by the normal UK publishing practice of capitalisation. However, the presence of a term, in whatever form, does not affect its legal status as a trademark. Analysys Mason Limited maintains that all reasonable care and skill have been used in the compilation of this publication. However, Analysys Mason Limited shall not be under any liability for loss or damage (including consequential loss) whatsoever or howsoever arising as a result of the use of this publication by the customer, his servants, agents or any third party.