Cisco workforce reduction hints at the software future of the data center

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Posted on Wednesday, August 17, 2016

News has broken today that Cisco is to lay off nearly 14,000 employees, with affected workers receiving notice in the coming weeks. This represents a reduction of nearly 20% of the 70,000 workers employed by Cisco across the world.

According to the announcement, changing marketplace circumstances mean that Cisco is being forced to adapt their business strategy. Increasingly networking and storage is driven by software, rather than the underlying hardware. Which means that Cisco needs to move away from complete reliance on volume sales of hardware.

Cisco’s new strategy can be seen in the way they have been investing in the development of data analytics and cloud-based tools for data centers. The future is software for the world’s best-known networking brand.

Commoditized hardware is killing OEM sales

The on-demand, commoditized nature of cloud computing is changing the way that CTOs approach their own on-site data center provisions. Rather than allowing their agenda to be driven by OEM upgrade cycles, many are choosing to build best-of-breed platforms using hardware from a range of vendors.

The advent of software defined storage (SDS) and networking is further changing the way that data centers are built. The ability to abstract storage from the underlying hardware layer allows for true commoditization of computing resources. Which means that CTOs are free to choose components from any vendor, or even to redeploy post-warranty equipment, into a vendor agnostic resource pool.

The latest in a long line of downsizing programs

This much-needed flexibility is exactly what businesses need – unfortunately for workers from Cisco, it is they who must bear the brunt of the fall-out. But it’s not just Cisco that is having to dramatically downsize in the face of changing customer preferences. Microsoft, HP and Intel have all reduced headcount in the past two years – HP have planned 33,000 redundancies over the next three years for instance.

As adoption of SDS and other abstraction layer technologies gather pace, these headcount reduction programs will become more common.