Editor’s note: Faced with mounting pressure from competitors and customers alike, Cisco (Nasdaq: CSCO) is taking steps to evolve and reduce its reliance on network infrastructure sales, says analyst Patrick Filkins of Technology Business Research. He reviews Cisco’s latest earnings results announced Wednesday and discusses how acquisitions such as the $1.4 billion deal for Jasper are boosting its evolution.

HAMPTON, N.H. – Cisco notched mixed results in 4Q15, signaling volatility will be the norm short-term.

Cisco delivered revenue growth of 2% year-to-year in 4Q15 as growth from its NGN Routing, Collaboration and Security segments offset declines in Data Center and Switching.

Operating margin improved to 27.6% as Cisco continued to aggressively pare operating expenses under new leadership. Cisco is now closing transactions alongside new partner Ericsson; however, revenue is minimal at this point.

TBR expects NGN Routing revenue to benefit as the Ericsson partnership ramps up. TBR believes the 4% decline in Switching was driven by lower spending in North America and increased competition from smaller rivals, such as Juniper, a trend which will continue in 2Q16.

However, APAC Switching growth signals Cisco is gaining traction in the region. Additionally, product orders were up 64% and 23% in China and India, respectively.

Switching remains Cisco’s largest business at 29.2% of total revenue and the segment’s near-term results will be largely dictated by its ability to improve results in the enterprise campus and sustain growth in the data center.

Cisco is increasingly committed to a cloud and software-centric model

Faced with mounting pressure from competitors and customers alike, Cisco is taking steps to evolve and reduce its reliance on network infrastructure sales. Cisco has been vocal in its goal to derive a higher percentage of sales from software and services. Doing so aligns its portfolio with customer demand for SaaS and subscription offerings. To meet this goal, Cisco is offering select solutions through the cloud.

The company now offers portions of its Collaboration (WebEx), Service Provider Video (Videoscape), Security (threat defense) and Wireless (Meraki) portfolios through cloud-delivery. Meraki in particular has proven to be a leading growth driver in Cisco’s Wireless segment.

Cisco notes it will continue to offer more solutions through the cloud as customer demand dictates. Cisco has not ruled out employing a similar strategy with its network infrastructure. As the software in routers and switches is increasingly emphasized due to hardware commoditization and the threat of white-box hardware, Cisco is likely to offer its networking software via subscription in the next several years.

Acquiring Jasper for $1.4 billion expands Cisco IoT services portfolio

Aligning to its corporate strategy while expanding its IoT services reach, in February, Cisco announced it is acquiring Jasper Technologies for $1.4 billion in cash. Jasper counts 3,500 enterprise customers including Amazon Kindle, General Motors, Ford and Harley Davidson.

Jasper’s technology is delivered through a SaaS model, enabling Cisco to grow its stable of recurring revenue while adhering to its strategic objectives. IoT is a growth market for Cisco, which will combine its connectivity solutions with Jasper’s platform to address opportunities in connected devices, with an early emphasis on connected cars.

However, Cisco will leverage an integrated solution to introduce offerings in the manufacturing, oil and gas and smart city verticals, where the demand to cost-effectively connect end-points under a single platform is growing.