Cisco Systems, Inc. (NASDAQ:CSCO) is now planning to come up with a “cloud” computing service for corporate clients, and for the same it plans to invest $1 billion over the next two years to make its presence felt in the market, which presently is dominated by Amazon.com, Inc. (NASDAQ:AMZN). The networking hardware company is the latest addition to the list of growing tech firms that hope to capitalize on the needs of companies to rent computing services.
Changed strategy from Cisco
Cisco Systems, Inc. (NASDAQ:CSCO) stated that the investment will be directed towards establishing data centers to facilitate a new service called Cisco Cloud Services.
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The Silicon Valley Company said that corporate customers could use the technology for multiple tasks including keeping tabs on customer orders and allowing employees access work computers from remote locations.
Cisco Systems, Inc. (NASDAQ:CSCO) president of development and sales said, “Companies are looking for different ways to get IT done,” and added “Everybody is realizing the cloud can be a vehicle for achieving better economics [and] lower cost.”
Cisco, with revenues of $49 billion annually, primarily deals in selling equipment to facilitate networking in corporate-computing hubs. The entry in the cloud space reflects the growing trend among big tech firms to change their focus as more and more companies transfer their funds from hardware to external services.
Amazon the market leader in cloud
Amazon, which is more famous for its online retail operations, is the market leader and pioneer of the cloud segment. According to the estimates, the business, known as Amazon Web Services, earns over $3 billion in annual revenue. A report from Robert W. Baird & Co noted that each dollar spent by the companies on Amazon Web Services equals $3 to $4 on the traditional information-technology services.
For Amazon, many of its customers are Web startups that never develop their own computing operations. However, Cisco Systems, Inc. (NASDAQ:CSCO) and some other rivals are targeting big companies and government agencies, which will use cloud services for some of their operations.
Cisco’s $1 billion spending commitment comes at a time when the company is expecting a sharp drop in sales for the current quarter. For the six months ending Jan. 25, revenue for the company fell 3.1%.