Editor’s note: Tech investors will be watching Cisco, which reports its latest earnings this week. But whether a recent reorganization will deliver a quick positive return on investment remains unknown. Analysts Andrew Smith and Patrick Filkins at Technology Business Research break down what’s happening inside Cisco.

HAMPTON, N.H. – Cisco (Nasdaq: CSCO has embarked on a holistic transformation that is both necessary and pivotal to its ICT road map. 

The recent wave of large-scale restructuring, wholesale company splits and historic M&A among information and communications technology (ICT) suppliers is partly due to rising cloud adoption. This presents an opportunity for legacy ICT vendors such as Cisco, Hewlett Packard Enterprise (HPE), IBM, Ericsson and Huawei to carve out and establish leading roles as customers demand cloud-oriented solutions for service agility, scalability and remote delivery. However, the cloud vendor market is becoming increasingly complex, driven by suppliers adopting unclear and overlapping positions for hybrid cloud solutions.

Over the next two to three years, legacy vendors will be challenged to compete for and win new engagements while also managing the migration of existing customers to cloud environments. In this piece, TBR explores the evolution of Cisco’s role as a traditional network vendor to that of a cloud-centric ICT solutions provider.

We believe Cisco’s recently announced restructuring and portfolio introductions will position it to win hybrid cloud infrastructure engagements among enterprise and service provider customers alike. With the moves, Cisco joins an expanding list of competitors spending considerable time and resources developing their hybrid cloud solutions.

For example, Hewlett-Packard Co. exited the public cloud space and split into two separate entities (HP Inc. and HPE) in a move designed to better position its enterprise solutions to embrace cloud-enabling market trends for software-defined architectures and hyperconverged infrastructure solutions.

Similarly, IBM reorganized its reporting structure in 1Q16, reassembling its legacy middleware brands and technology services into a more cohesive reporting segment. This comes on the heels of additional restructuring done in early 2015 to better align IBM internally to customer demands for cloud and analytics solutions. Further evidence of consolidation can be seen in the service provider market. In early 2016 Verizon announced its exit from the public cloud infrastructure space and intent to pursue hybrid cloud integration and managed services for its customers.

Cisco expands its cloud networking portfolio to campus networks and launches a hyperconverged solution

An ongoing shift to cloud consumption and the competitive differentiation offered by cloud services requires vendors to put a stake in the ground and define a cloud strategy, and Cisco is no exception. To date, Cisco supplies cloud components not only in the data center but also inside the core, edge and endpoints of a customer’s network. Cisco will leverage its networking incumbency and growing set of cloud computing tools to differentiate itself as the most capable ICT cloud enabler.

TBR believes Cisco’s networking heritage uniquely positions it to deliver an end-to-end networking architecture to support cloud services. Recent announcements include Digital Networking Architecture (DNA), Cisco’s enterprise-focused campus architecture. DNA consists of virtualized infrastructure, network management, security and analytics and provides a branch-focused solution for enterprises to deliver cloud services. Whereas most of Cisco’s competitors approach cloud services from the data center, Cisco builds competencies at the network edge to make good on the promises of cloud. Complementing its advances in the campus environment, Cisco supports software-defined networking (SDN) and virtualization through its Application Centric Infrastructure (ACI), which provides the data center networking portion of its portfolio.

In addition to building more cloud-oriented networking solutions, complementary shifts in Cisco’s IT portfolio allow the vendor to extend its reach within the storage and management layers underlying cloud. The acquisition of cloud management capabilities and the introduction of Cisco’s own hyperconverged solution will play increasingly important roles in Cisco’s cloud strategy as it looks to build the most comprehensive set of cloud solutions available under one roof.

Next: Launching Intercloud established Cisco’s cloud footprint, but a new engineering structure will drive hybrid cloud innovation

(C) TBR