Cisco has unveiled a single Enterprise License Agreement that covers all of its software. The new Cisco ELA lets customers exceed contract limits without penalty. Cisco has brought its product licensing in line with the company's ongoing transformation into a mostly software business, a shift that has yet to reverse the vendor's declining top-line revenue.The company introduced last week a single Enterprise License Agreement (ELA) that covers the vendor's entire software portfolio, which includes security, network infrastructure, computing and storage, and collaboration and video conferencing.\
New Cisco ELA terms
Under the new agreement, customers would sign a three- or five-year contract for any of Cisco's software and have the option of purchasing other products and adding them to the same license.
The Cisco ELA covers all deployment models -- on premises or in the cloud -- and customers can move software from one platform to another anytime. Cisco has introduced a license management portal that lets companies monitor the number of users, servers or other consumption metrics covered by the agreement.
Cisco includes what it calls a 20% "growth allowance" in every license. A customer, for example, could exceed the number of users up to the allotment without having to change the agreement. Companies that exceed the allocation can modify the license without having to pay a retroactive charge.
"The 20% allowance is a nice gimmick that might benefit some companies that are truly in growth mode," said Shamus McGillicuddy, an analyst at Enterprise Management Associates Inc., based in Boulder, Colo. "I can see that being a welcome benefit to companies that are used to enterprise software vendors hitting them with cash penalties for exceeding their licenses."
The contract covers the security, analytics and infrastructure software the company is currently using and plans to use over the next several years, said Westfield CIO Denise Taylor. As a result, the mall builder has an IT budget that's unlikely to change over the life of the contract.
The shift was not problem-free. Westfield had to overhaul how it accounted for the consumption of Cisco products. Financial systems that tracked the separate IT agreements for each mall now had to monitor each center's use of technology and charge it accordingly.
"There is a heavy amount of collaboration that needs to happen with finance to make sure that everybody is on the same page," Taylor said. Working out those problems led to a new accounting system that was simpler and more efficient than tracking a couple hundred separate contracts that expired at different times.
The recurring revenue that accompanies software sales is key to lessening Cisco's dependence on hardware -- particularly the routers and switches that remain the company's largest business. Sales of the products are declining, as customers move more software to cloud providers.
Not long ago, a network outage of one sort or another was an annoying but relatively minor problem at many businesses. If you lost your connection to the net, you just worked locally until the IT folks got it fixed.
This doesn't work anymore. The network fails and the point-of-sale terminal, formerly known as a cash register, is useless. The corporate data in a Web app on your screen is frozen. Your computer itself may suddenly become useless because it is really an image of a virtual machine running on a server somewhere in the cloud. Even a brief service outage can lead to serious losses of productivity, sales, and output. "Customers are more dependent on networks than ever before," says Christopher Kimm, vice-president for global network field operations at Verizon Communications. "We often see stark realization after a fault. Their exposure was greater than they realized."
This means the traditional model of network maintenance, waiting for something to break and then fixing it, is no longer adequate for many businesses, nor is the brute force approach of just building in more redundancy. Instead, a new breed of smart, proactive services is being employed to look after network health. In a report called "Smart" Services for Network Management Will Be Critical for Business Success in a Connected World," Forrester Research says: "Through continual monitoring of the network and devices connected to it, these technologies can identify stresses and potential points of failure and predict where problems could surface. In short, they allow firms to understand the usage, demands, and potential weak spots, which can be used to anticipate and prepare for future strains as new services and activities are added to the network."
Continuous monitoring of networks, generally relying on extensive automation through software, is not a task for which most enterprises are particularly well equipped. So it's not surprising that growing demand for these full-time network health checks is being met by third parties, including Cisco, offering network smart services.
Verizon notes that smart services work best when a high degree of reliability and resilience is built into the network. "We put a lot of energy into the design portion," says Kimm. "With enterprise customers, this is a relatively easy conversation to have. We think first and foremost that the network, in the broadest possible sense, has to be designed with a resilience level appropriate to the risk of the business, the economic opportunity, and what the customer can afford."
Another key element of the smart services offering is a service level agreement (SLA) that creates the right incentives. "With customers with whom we get very engaged, we have to deliver very tailored SLAs," says Kimm. "We can offer very high SLA levels because we can deliver. We have confidence in the tools and their ability to help us."
Cisco's smart services offering, delivered direct or through partners such as IBM Global Services, has similar goals and, just as Verizon's support encompasses much more than the wide-area networking links and internet backbone it supplies, Cisco's management goes beyond its routers, switches, and other gear. "Most of the internet is stuff we know about," says Nick Earle, senior vice president for worldwide services sales .
Cisco's goal is to use smart software to reduce network management costs while improving performance and reliability. "Our customers have to increase the value of their networks, but they are looking for a 20% or more reduction in cost. Most services are based on people and the cost of people goes up every year. We need a different approach – one that leverages automated software capabilities."
In addition to monitoring, Earle sees getting the network right in the first place as a key to success. Cisco smart services are based on the Information Technology Infrastructure Library, the industry gold standard for configuration management.
Like Kimm, Earle sees the increasing software intelligence built into networks as the facilitator of more efficient and reliable management, especially by identifying the small number of problems that produce the majority of faults. "Software can sense all the patterns of configuration in your network. We can go one step further and show a correlation between configuration patterns and network incidents. It's always a Pareto*. Individuals can't do that."
In the end, says Verizon's Kimm, networking is becoming a vital utility, but one that people who are not primarily in the networking business don't want to much think about: "People think of it as being like electricity and they think they don't have to know how it works. We take it for granted."
*-The Pareto principle, named for the Italian economist Vilfredo Pareto, holds that for many activities, a small proportion of causes is responsible for a large proportion of outcomes. In engineering, Pareto analysis seeks to find and correct those few conditions that are responsible for a large percentage of faults.
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Nick Earle, Senior Vice President of Worldwide Services Sales and Channels at Cisco, specializes in developing innovative services-led strategies to help customers solve their toughest business challenges and enable partners to improve their profitability with Cisco technologies and solutions. In this video he shares insight on innovation and the significance of smart services.