Cisco Executives Present Plan to Increase Subscriptions – Networking
Cisco Systems announced plans to become a software-focused company in 2017 and on its final investor day this week, the tech giant kept its promises.
Cisco ended its 2021 fiscal year (July 31) with 31% of software and subscription revenue accounting for 79% of software revenue, exceeding Cisco’s goal of generating two-thirds of its revenue from subscriptions.
Software and services revenue also exceeded Cisco’s target of 50 percent of total revenue, reaching 53 percent at the end of its most recent fiscal year. These figures prove that Cisco is now one of the largest software providers in the world, the company’s management team announced on Investor Day 2021.
But subscriptions are just as important as software – the two go hand in hand, according to Cisco. In fact, Cisco is now aiming for subscription sales to be half of its revenue by fiscal 2025, and partners are an important part of the equation to achieve that goal.
Cisco CEO Chuck Robbins and CFO Scott Herren took to the virtual stage this week, along with their peers from the executive team, to talk about the importance of subscriptions and what Cisco is doing to move its business forward. strategy. Here’s what the leaders had to say.
âThis journey we took to continue growing our subscription software within our company – when I took over, we had $ 3.4 billion in subscription software. We came out last year to almost $ 12 billion. So the team did an incredible job. 81% of our software is now sold as a subscription, up from 40%, I think, in 2015, âRobbins said.
“I think it is [about] stick to this multi-year technology strategy and continue to push for the transformation of the business we were pushing. “
Herren added, âI think what’s impressive isâ¦ the amount of [Ciscoâs] subscription-based software revenue. He more than tripled [since FY 2015]. It went from around 40% of our software revenue based on subscriptions to 79% in the [fiscal] year we just closed. A significant amount of progress, not only to generate more software revenue, but also to generate more from subscriptions. “
“[I plan to] pursue the disciplined financial management and operational efficiency for which Cisco is known. We have built this skill set. It’s not going to change. I want to maximize the value we create during this transformation by building the amount of subscription and recurring revenue we have, which you can then renew next year, and [stack] new sales on top of that, which not only creates greater revenue growth and greater cash flow growth, it [also] gives us greater visibility and there is less volatility in our results.
Liz Centoni, Chief Strategy Officer and General Manager of Cisco Applications, said, âCustomers want to deliver a cloud experience in a hybrid and multicloud world. [They want to] simplify and automate operations, reduce complexity and have it delivered as a service and managed as a subscription … As devices, applications and user data continue to be increasingly distributed, customers are looking for to deal with a variety of tradeoffs regarding cost latency, performance, data, sovereignty, globalization and availability. And they are looking to do all of this with a flexible consumption model and to offer solutions as a service and as a subscription.
âWe are a large software company. Our subscription business continues to grow, and therefore our predictable revenues as well, and every part of the wallet – not just the software – is available and will be available as a service as long as our customers want to consume it that way.
Executive Vice President and Director of Clients and Partners Gerri Elliott said, âWhile growth is the primary focus, how we develop is just as important. We need to continue the transformation process we’re in, we need to accelerate our recurring software business, we need to offer flexibility and choice in our offerings and meet buyers where they are.
âEvery customer, no matter where they are in the organization, has three things to do when considering a new technology: quality, of course, is the number one job. But they also want an easy and flexible way to buy and consume. And they want to realize the most value in the least amount of time. “
Executive Vice President and General Manager of Enterprise Networks and Cloud Todd Nightingale said, âAll of these [technology and buying] transitions give Cisco momentum and we feel it in our networking business. We have experienced double-digit growth [in fiscal Q4 2021] in our core business networking space, and that’s a truly remarkable result for Cisco.
âThe core business of corporate networks is increasingly turning into a software business. We saw 29% of [networking] the company has turned into software and two-thirds of that software is now in the form of subscriptions. We don’t just see it in our collaboration or security activity, we see it in our core networking activity. We have huge momentum that propels us and will continue to propel us in the future with one million customers as well as 330 million network devices. It’s a huge installed base and this represents a huge opportunity for us.