Summary:

As the internet of things gathers steam, Cisco creates a new business unit to tackle the opportunity. It plans to do so in traditional Cisco style.

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Cisco is laying out its internet of things strategy this week with the creation of a dedicated business unit and a discussion of its strategy at an event in Barcelona. Its vision appears to have the Cisco-specific focus on software embedded into specialized hardware presumably sold for high margins, with an emphasis on partnerships with other players building out integrated offerings and service arms.

So while previously I said Cisco’s plans seemed to be about services and gear, perhaps a better statement is that it’s about services wrapped up in gear.

In a conversation with Guido Jouret, who was appointed the general manager of Cisco’s new Internet of Things business unit I learned how the network giant plans to translate its networking know how to this next iteration of connectivity.

For each customer and industry it has a solution — a special mix of connected hardware and software that works with the quirks of each industry. For example, Jouret brings up the railroad industry. Since the tracks and brakes are made of metal, there’s a lot of metal dust floating in the air near electronics, thus all electronics certified for trains must be encased in plastic so the metal dust doesn’t short a board.

Italo train

For mining implementations, boards have to be certified not to spark and potentially set off some type of underground explosion. Jouret’s team figures out these specific hardware needs and builds the products for the industry. Then in true Cisco fashion it tracks the protocol needs and combines them together a box.

That’s not too far off from what Intel, Oracle or even GE is doing with an emphasis on industry-specific offerings that have a box bridging legacy data and new connected implementations. Given that Intel estimates that 85 percent of data use by the coming internet of things is already generated inside the business, these bridging systems make sense.

Jouret said this is where Cisco excels, comparing it to the 90s when a bunch of different communications protocols also converged on IP — and Cisco built boxes to help clients manage. “Most people see this as a two-step problem with an endpoint and a gateway but you need a lot more than that,” he said. “You need switching and routing and you may need a mesh network, or a ring or star topology for the data center. It’s not, ‘Let’s just put in some Wi-Fi.'”

Oil Drilling Platform in the Santa Barbara CA Channel

For example, while connectivity might be the basic need, there are limits and expenses associated with it, that can make connectivity the sticking point of a project. For example, an oil rig can generate terabytes of data, but it’s out in the middle of the ocean and connectivity is expensive. Thus, you might optimize a mesh network that keeps data on the platform. In other businesses sending data outside the factory poses security risks.

“As much as IT is moving to the cloud, the industrial space would like to go the other way,” said Jouret. “A lot of IoT applications want to filter the computing to the edge.”

He expects customer education to take time for the to understand what is possible, what isn’t and the value of connecting. To him, one of the most powerful elements of the internet of things is the ability to turn what were once physical products into services by being able to use data and predictions to sell proactive maintenance or guarantee availability.

“Any company that makes a thing will sell it as a connected thing, and they will innovate their business models as well as their products. If you are GE would you rather sell a jet engine or sell hours of flight?”

As for Cisco’s own business model as it connects devices, Jouret was a bit more restrained in his predictions, although he did point out that Cisco recently purchased Meraki, which offered its hardware more as a service with annual renewal contracts and maintenance fees.

But so far, Cisco’s strategy around the internet of things seems like more of the same from the networking company — wrap your expertise in software and then sell it in a box.

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