One such large market transition in the networking space has been the move to Software Defined Networking (SDN), a market that some had said would negatively impact Cisco. With SDN and with NFV (Network Function Virtualization), the general premise is that networking functions are abstracted from the underlying hardware. The risk is that hardware then becomes commoditized, which would negatively impact a company like Cisco.
Chambers emphasized that Cisco’s view is that having a virtual network that is separate from a physical network is often too costly and difficult to manage. Instead, Cisco’s approach is about Application Centric Infrastructure (ACI), which focuses on policy and intelligence.
“We are able to put to rest, in most people’s opinion, the concern of whether SDN will have an impact on our margins,” Chamber said. “Clearly [SDN] didn’t. Our switching margins have been remarkably steady for the last six quarters.”
There will still be challenges and battles in the months ahead in the space. Overall, Chambers noted that Cisco is moving from a boxes approach, with routers and switches, to an outcome-based approach.