Cisco 2011 Annual Report Download - page 11

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We continue to seek to capitalize on market transitions. Market transitions on which we are primarily focused
include those related to the increased role of virtualization/the cloud, video, collaboration, networked mobility
technologies and the transition from Internet Protocol Version 4 to Internet Protocol Version 6. For example, a
market in which a significant market transition is under way is the enterprise data center market, where a
transition to virtualization / the cloud is rapidly evolving. There is a continued growing awareness that intelligent
networks are becoming the platform for productivity improvement and global competitiveness. We believe that
disruption in the enterprise data center market is accelerating, due to changing technology trends such as the
increasing adoption of virtualization, the rise in scalable processing, and the advent of cloud computing and
cloud-based IT resource deployments and business models. These key terms are defined as follows:
Virtualization: refers to the process of aggregating the current siloed data center resources into unified,
shared resource pools that can be dynamically delivered to applications on demand thus enabling the ability
to move content and applications between devices and the network.
The cloud: refers to an information technology hosting and delivery system in which resources, such as
servers or software applications, are no longer tethered to a user’s physical infrastructure but instead are
delivered to and consumed by the user “on demand” as an Internet-based service, whether singularly or with
multiple other users simultaneously.
This virtualization and cloud-driven market transition in the enterprise data center market is being brought about
through the convergence of networking, computing, storage, and software technologies. We are seeking to take
advantage of this market transition through, among other things, our Cisco Unified Computing System platform
and Cisco Nexus product families, which are designed to integrate the previously siloed technologies in the
enterprise data center with a unified architecture. We are also seeking to capitalize on this market transition
through the development of other cloud-based product and service offerings through which we intend to enable
customers to develop and deploy their own cloud-based IT solutions, including software-as-a-service (SaaS) and
other-as-a-service (XaaS) solutions.
The competitive landscape in the enterprise data center market is changing. Very large, well-financed, and
aggressive competitors are each bringing their own new class of products to address this new market. We expect
this competitive market trend to continue. With respect to this market, we believe the network will be the
intersection of innovation through an open ecosystem and standards. We expect to see acquisitions, further
industry consolidation, and new alliances among companies as they seek to serve the enterprise data center
market. As we enter this next market phase, we expect that we will strengthen certain strategic alliances, compete
more with certain strategic alliances and partners, and perhaps also encounter new competitors in our attempt to
deliver the best solutions for our customers.
Other market transitions on which we are focusing particular attention include those related to the increased role
of video, collaboration, and networked mobility technologies. The key market transitions relative to the
convergence of video, collaboration, and networked mobility technologies, which we believe will drive
productivity and growth in network loads, appear to be evolving even more quickly and more significantly than
we had previously anticipated. Cisco TelePresence systems are one example of product offerings that have
incorporated video, collaboration, and networked mobility technologies, as customers evolve their
communications and business models. We are focused on simplifying and expanding the creation, distribution,
and use of end-to-end video solutions for businesses and consumers.
We believe that the architectural approach that has served us well in the past in addressing market opportunities
in the communications and IT industry will be adaptable to other markets. An example of a market where we aim
to apply this approach is mobility, where growth of IP traffic on handheld devices is driving the need for more
robust architectures, equipment and services in order to accommodate not only an increasing number of
worldwide mobile device users, but also increased user demand for broadband-quality business network and
consumer web applications to be delivered on such devices.
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