Cloud products have a very different kind of buyer than traditional hardware gear.  Sure, there's some overlap between these two constituents but for Cisco, who has long been a trusted supplier of the IT organization we have a new group of people we're getting to know: Developers in line of business teams.  You can see our efforts there with our amazing Devnet team and in the acquisitions we've made like CloudLock, App Dynamics, and CliQr that all appeal to this same audience whose power and influence have grown.

I used to get beat up at my 1982 junior high for tracking my basketball team scoring averages with a program I wrote in BASIC on my TRS-80 and now developers influence major buying decisions for billion dollar multi-nationals. How has this happened?

Understanding this shift is important for anyone in this industry and it fundamentally comes down to how different parts of a company organizational structure work.

Org Structures Shape Cloud Buying

Think about how a company is typically organized and you'll come up with a picture that looks like something this:

But not all organizations within this structure are created equal.  On the left, functions like the product teams, sales, and marketing are profit and loss centers.  They are responsible for bringing in revenue to the company and, by extension, they can spend money to make money.  Their driving force is innovation so that they can capture market away from competitors and the easiest way to do that in the modern economy is with software.

Why?  Because it's soft.

Meaning, you can change software more quickly and easily than you can some physical thing.  Speed of innovation is everything to the left side of this diagram and, increasingly, they do it through software.

But what about the right side? Those are all cost centers who can only spend money.  Unfortunately for them, they don't make any and typically are funded through fixed budgets that are part of a corporate tax.  As such they optimize for efficiency, typically by controlling access to capitalized assets.  So that original diagram turns into this:

The example I like to give here to show the difference in a concrete way has to do with expense reports.  I worked in HP IT for 17 years and once I took 70 people to dinner at the Cheesecake Factory on University Avenue in Palo Alto.  Despite having pre-approval to do so, my VP hauled me in for a tongue lashing when I submitted that$1400 receipt.

When I tell that story in front of an audience of Cisco or partner sales people, I poll the audience for what the largest meal expense they ever submitted was and usually somebody has done it for around$4000 or so.  Then I ask them how much sales revenue that led to and whether or not anybody cared.  The answers are always "millions" and "no."

2006: A Dividing Line in Time

Before about 2006, whenever the people on the left side of this diagram needed something, say a change to the Customer Relationship Management (CRM) software so that sales could try something different, they only had one place they could go to get it: IT.  And that meant putting in a change request that could take anywhere from 6 to 18 months to implement.

But after around 2006, and I choose that date somewhat arbitrarily but because it is when the AWS beta began, if someone in sales wanted a better CRM they could go use Salesforce.com or the people in Marketing could go use Marketo, and the line of business developers could go spin up virtual machines on public clouds.

And that's why developers have the influence they do today.  In 2017, every company is a software company and by virtue of working in a line of business team where they can spend money to make money, developers can go outside their traditional IT structures to go get IT services, quickly.

The New Normal

What has surfaced is a new normal that if you want to be a technology company you have to appeal to developers. But that doesn't mean that our friends in IT disappear or that their needs are somehow less valuable.  The Internet isn't going anywhere and neither are the complexities of the internal networking required to get users access to it from a branch office or a data center or guests on Wi-Fi.  Some IT departments are now offering pay-as-you-go services to their constituents so they can get funded through those profit and loss organizations instead of as a corporate tax with static budgets.

So, to be a modern technology company, you need both.  You need to appeal to those influential developers, but also provide the products and services to that traditional IT buyer.  That includes IT buyer ones trying to make the switch to the as-a-Service model as well as those who are content to be the bastions of cost controls. And if you look at our strategic announcements for about the last year plus, appealing to these different buyers, cloud and traditional IT alike, is exactly what Cisco is doing.