Dark cloud: Cisco pulls the plug on Intercloud

There’s a new casualty in the cloud wars. Cisco has officially announced that it will discontinue its Cisco Intercloud Services public cloud infrastructure this month.

Intercloud was first released to the public in 2014, focused on avoiding the lock-in vendor fear by partnering with multiple cloud providers and offering the ability to move workloads among different clouds.

The workloads will now be moved to other platforms, but Cisco says, “We do not expect any material customer issues as a result of this transition” in its statement. According to VentureBeat, Cisco explained that some workloads might be moved to a public cloud, without specifying which clouds would be hosting the workloads.

Cisco explained that they have been evolving their cloud strategy for several months, making sure their service-provider partners are aware of the changes to come in order to provide the best possible transition for customers.

While the actual date of when Intercloud software will be officially discontinued is new, this change was first announced in October to give users ample time to move workloads to public clouds. Intercloud is similar to Amazon Web Services or Microsoft Azure in the fact that it included computing, storage, and networking services.

Goals unmet

Looking back at Cisco’s initial goals that didn’t quite come true, they hoped to be “the world’s largest global Intercloud” and had planned to spend about $1 billion building this service.

They believed this could be a network that would “lower the total cost of cloud services ownership and pave the way for interoperable and highly secure public, private, and hybrid clouds.”

Elaborating on the change that they’ll be making by discontinuing Intercloud, Cisco explained that as the cloud market has evolved over the last two years, so has its customers’ needs. Now, more customers need help with cloud development strategies to help form and continue their digital transformations.

In Cisco’s statement, they clarified,

“With the global availability of cloud offerings, the trend toward rapid application development with microservices, and the ability to orchestrate workloads across private and public clouds, Cisco has evolved its cloud strategy from federating clouds to helping customers build and manage hybrid IT environments.”

Still working with multiple partners, Cisco hopes to offer their users the freedom of choice, allowing them to decide on the best environments and consumption models for both traditional and new cloud-native applications.

This means that Cisco’s cloud strategy is now more focused on the development and delivery of secure hybrid-cloud infrastructure, platforms, and services. Of course, the decision to discontinue Intercloud also speaks to a loss of customers to giant cloud companies, such as Amazon Web Services.

Land of the giants

Many smaller businesses, especially hardware-makers, have had to end their hopes of being a public-cloud infrastructure because of the domination of other companies, such as AWS and Microsoft Azure. Other smaller public-cloud services, however, are still fighting to keep their spot at the table.

Similar to the public cloud that HP started but later ended, Intercloud is based on the OpenStack open-source cloud software. Cisco and HP aren’t the only hardware makers that thought launching a cloud based on OpenStack was a good idea; Dell also considered this idea but didn’t follow through with it.

Additionally, Rackspace forged a distance from OpenStack and commodity cloud services back in 2014, instead choosing to focus more on managed cloud. While there are some small cloud companies that are still competing with the giants, as mentioned before, many cannot.

There is the question that many people ask: Why did Cisco try to compete with the cloud giants in the first place? AWS, Microsoft Azure, and Google Cloud have grown almost exponentially in recent years, leaving smaller companies even less room to grow than before.

Also, corporate datacenter essentials that Cisco makes, like switches, routers, and networking gear, are now becoming less important with cloud computing. Cisco’s market analysis from May 2016 anticipates 83 percent of data-center traffic being based in the cloud.

While the market for corporate datacenter hardware is shrinking because of the emergence of the cloud, AWS and Azure aren’t staying away from this side of the business either. These companies, as well as other public-cloud services, are beginning to design or virtualize their own gear, sometimes turning the hardware into software.

The AWS juggernaut

According to Synergy Research Group, “AWS’s share of the market for infrastructure and platform as a service as of June [2016] was over 30 percent, with year-over-year revenue growth of 53 percent” and they continued to take even more of this market by the end of 2016.

Azure also had large revenue growth of 100 percent, with over 10 percent share of the market. IBM’s share was about 8 percent, followed by Google Cloud with about 5 percent, and the remainder consisted of 12 or more companies in June 2016.

While some are predicting that AWS will almost fully control the cloud market in the future, Morgan Stanley forecasts that Microsoft cloud products will be 30 percent of revenue by 2018. Synergy analyzed the market and found that the combined share of Microsoft, Google, and IBM expanded by 5 percent from the fourth quarter of 2015 to the same period in 2016.

Of course, though, AWS did not fall behind, carrying more than 40 percent market share at the end of 2016, similar to the previous year.

Spending on public cloud Infrastructure as a Service (IaaS) hardware and software keeps getting increasingly larger, forecast to reach the astounding amount of $173 billion in 2026, as reported by Forbes.

Meanwhile, Software as a Service (SaaS) and Platform as a Service (PaaS) spending on cloud hardware and infrastructure software are estimated to reach $55 billion in 2026.

While the market will certainly continue to grow, users have an eye open for their favorite cloud infrastructures, watching to see if they can compete with the major giants of the industry. Cisco, despite its cloud troubles, remains dominant in datacenter networking hardware, even with the push from other companies to sell alternatives.

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