Today’s business has been severely disrupted by the advent of cloud-based infrastructure along with the advent of Robotics, AI, and M/C learning. There has never been a better time for finance to lead this transformation at the frontlines. Customers and partners do not want to buy the product or services in isolation and then stitch the myriad offerings while incurring high CapEx spending. It's time to purchase outcomes with utmost ease and flexibility. With this approach companies must come with a new operating model, remove the friction points in the current business, and enable commerce with a differentiated experience. The key consideration of the new business model remains the same a) Process b) Policies c) System/Capabilities d) Data.
- How the large-scale Hi-tech business models is being disrupted
- Key challenges in terms of process, systems and capabilities
- What the next gen operating model looks like
Good morning, good afternoon and Good evening, wherever you are. My name is Raj Shahin. And I lead the finance transformation office at Cisco Systems. Today in this webinar, I’m here to talk about how the business model is changing in Cisco and in general in the industry, and what kind of challenges it presents to us? And what are we doing about it? And how finance is playing the leading role in the transformation of that new business model? With that, let’s take a look at the Cisco core business models. And what are the next generation of the business model that we have today, our core business model that we say is classic network infrastructure, products, you may have heard of routers, switches, data center, all those, you know, that is the backbone of the network infrastructure of any enterprise. Along with the core, we also sell software, and attached services. And the nature of the software are, most of them are on prem, those kind of software, this core business, still farms 70% of our business. And I’ll talk about that word means, you know, in terms of how do we do business, later on, the biggest shift that is taking place in our business is towards the next generation of the business model. What it means what the next generation business model means is a with the advent and pace with which the cloud has dominated the industry. So the first we call it cloud, the third hardware means, you know, the hardware is controlled by a software somewhere in the cloud. Next, Software as a Service, no difference. I think everybody understands this, what kind of software is services that we provide cloud based business applications, which are some examples, everybody in all the business applications are like that. no exception to Cisco. Then the third is hardware or infrastructure as a service with the flexible consumption model. So hardware as a service, or networking as an infrastructure based on the consumption, and we call it next generation of the consumption model. And finally, is the component of Cisco’s business model has evolved, we are with our new and latest acquisitions, we are becoming the third tier components, suppliers, to our customers, partners for the web scale companies. So those are the five distinct business models we have today. But this five business models that we have, what is the difference?
As I mentioned earlier, that 70% of our business still comes from revenue still comes from core. As I mentioned earlier, the industry is moving towards as a service model. Which means my favorite term is we call it over position of the
enterprise business pay as you go model. So more and more customers and partners today want us to provide the solution at a very flexible way of doing business, and we call it the frictionless commerce, and we’ll talk about that. So on the one hand side, our traditional business very much in a classic supply chain, design the product builds the product, ship the product, and then you know, invoice, Leverett and we continue to provide the support. Whereas in today’s model, the next generation of the business model customer lifecycle is At the center, which means we can provide products and services anywhere where on prem or cloud infrastructure at any point in time, no disruptions, at any turn the flexibility in the billing, you know, even try and buy those kind of things that the customer is demanding as of today. And then we have a variety of ways you can package the product. So different flavors of the ice cream, that I call it, you know, whether hardware software security, cross function, all these kinds of things. So, the point here is customer is at the center customer, we need to meet, not only meet or exceed the expectations of customer by providing the end to end solution in the most flexible way, at the end of frictionless commerce, for the customer. That’s the today’s business model for us. And as as as, as you can see, the industry is moving with the fast pace in this. And before we had all these consumer companies. Netflix is the best example, that providing pay as you go model services and things like that. But the biggest shift that is taking place in the industry today is larger scale, enterprise companies, companies like Cisco, we are more and more our customers more and more wanting us to provide the infrastructure with the services, network, data services, software services, cloud based all those things. So that’s the biggest shift that is taking place in the industry today. So with that, what are the main challenges for a company like $50 billion company like Cisco, I still say our majority of our business is still being driven to our core business model. So, so the number one as as we move our shift towards the new business model, the number one challenge that we have today is our entire commerce and the backend infrastructure, which means the process systems capabilities are designed to transact the core business model as we make a shift towards the almost have to think from the perspective that if have to start from the Greenfield approach, how would I do this business, because many times what is happening for us is we are trying to force fit the new business models in the old process and systems and capabilities, we are still trying to transact the business in the old ways. So, that is our biggest challenges that we have today. And before we go and start building the systems and capabilities, the most important thing for us as a company is to come up and define the new operating model, which means keeping customers at the center, how we are going to take the customer to the journey of frictionless journey, which means customers should be able to find what it wants to buy as a solution. What are the easy to navigate through all the offers
easy for our customer and partners to understand the pricing then, easy to place the code, easy to place the order, get the fulfillment, whether it is a hardware fulfillment, whether software fulfillment and the most flexible, you know, billing and invoicing experience for our partners today. For example, if I if I if I take the example today for the without challenges with our existing business model and many times the partner has to get the dealer road, it takes 45 days. Whereas some of our competitors if you want to go and buy, you know partner services from them, you know, it could be done in five days or when it comes to direct customer consumer business. It’s just a fraction of a minute or so our cost of doing business is high. Right? The experience, as I mentioned earlier, experience is not the superlative experience. I want Easy, easy to navigate for customers and partners, easy to understand what I’m buying, and very easy and flexible payment plan. Right? Those are the things that we have the biggest challenges that we have today. And along with that, we continue to acquire companies, and we continue to acquire new generations of the companies that continue to integrate their product and services into our tech stack. So fitting and acquisitions is also one of our core challenges. So what do we do about it, that’s the biggest challenge that we have. So we are on the journey to embark on, as I said earlier, that let’s define the operating model, which means that RV for the as our business continues to shift. All the you know, the the highly successful product of ours is Meraki offerings that we have, which is what it does, we basically tap into our customers and partners through various sorts of webinars, we send them product, just just for them to try, you know, we call it see try and buy model. So it doesn’t just start with your classic sales cycle with the distributors and partners, it just reach out to the customers directly ship the product to them. And then the the installation of that product, whether it is you know, router, there is camera or access point, or any of these things so easy. And one person in it can install the whole product. And then it is totally controlled by the software based in the cloud. And you don’t flexible billing plan, the renewal has to be flexible. So that business model that we want to take it to the large enterprise, customers and partners. So what we need to do here, there are three or four fundamental tenets that we have for our next generation operating model, keep the customer in the center, software led go to market strategy, which means more and more our boxes will be action oriented through our software, always our experience. So whether you are looking at the performance of the devices, whether you are measuring the performance of the network, you know whether you have experience with our support, every time it’s all about experience easy, simple, faster, then simplistic hardware portfolio, you know, we need to simplify our entire tech stack of the hardware product. How do we make it simplify? How do our customers and partners understand it easily, and what makes more sense for them. And then finally, you know, the flexible monetization, which means customer and partner can choose Hey, what kind of billing I want, I want your periodic billing, you want quarterly you want annual you want uses based model you want fixed versus flexible
consumption model. So the variety of the flexibility in terms of whether you’re buying first time, or whether it’s a renewal of modern software, which is just a renewal should be very easy for a customer. If I’m dealing with a smaller and medium scale of the enterprise customer, customer can come on the website, give their credit card number, renew the subscription, make it easy. So these are some of the core tenets of our next generation operating model. We want to make the commerce as easy as possible for enterprise customer, which is primarily our partners and distill and model and second to the direct customer in the SME sector. So with that What are the some of the considerations that we have for this operating model? So definitely, we need to define, you need to ensure that what the value experience provided through product services, simplistic portfolio, easy to buy, easy to understand, you know, who and then to our customers and partners, the new ones or the old ones, and that that’s the what is our route to market? What’s our sales motions, all those things? We need to take a look at that. And finally, how, which is, you know, what is our the monetization approach? What are the various sorts of buying program that we can offer? What are the billing and invoicing model we have? And what are the flexible payment considerations that now if it’s all easier said than done? So what are the some of the key considerations that we have? So the number one is just we are not going to be a division alized company. So at the end, how we are going to measure the performance of a business. So let’s say we are going with the hardware software, the third hardware, which means we have a physical supply chain, there is still shipping the box, but the box is controlled to the hardware. And so how do we add for a customer or partner? Let’s have one flexible one pricing. This could be you know, like on a on a quarterly or monthly or an annual basis? So the number one consideration that we have, we need to come up with an end to end process, which just starts from the opportunity management. What kind of coating do we want? What is the SLA for the codes? When I’m dealing with the enterprise customer? How can I make it easier for our partners to buy those products and services? And then the rest of the backend? Which means the shipping the product? The invoicing billing? How do I how do I make this frictionless at every step, but the biggest consideration in that is, at the end, finance needs to measure the performance of the business. So today, the as the one company that entire transactions fits into one of our data arrays. And from there we generate all of our analytics. So one way to find the process, how do I learn to measure the performance? How do I integrate? And how do I generate the analytics. So that’s the very important aspect for us. The second is the capabilities. Now, this is one of the biggest debates that is going on within our countries today. that in order for us, we streamline the process, we made the process, frictionless, we took out all the joints, where there are frictions that were getting created, what kind of systems and capabilities that we need? Do we still leverage our core global platform for the court to cash process? Or do we start with the Greenfield approach, where we are a cloud based business application be completely independent of the global platform, we start our entire process execute the process on the cloud based business application could be or it could be SAP could be anything and then we finally integrate with the mothership to measure the performance of the business
that is capabilities and systems that consideration that we are we are having a discussion right now. And also then, as I mentioned earlier, what are the analytics and and how do we how do we ensure that the transactional data at the end provide the intelligent analytics for the decision making? Now with all those things, you know, even though the policies are listed at number five, but in my mind, policy is number one, that how do we go and simplify our deal approval cycle time, things like that, how do we ensure our international compliance are being met Are there any additional policy consideration over there? So those are some of the things that we have to consider. And we are in the process of defining our next generation operating model as Continue to move towards as a service model, for lack of a better word is continuous to give you the predictability for the future and it fits the best for the customer. So, with that, I am going to stop there are any questions I would love to answer or discuss that. Thank you very much for your time. I understand that at first. Now this could be overwhelming, but I will as you yourself might be going through your transformation, you can have better idea. Thank you very much for your time and have a great rest of the day.
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