Cisco Systems, long synonymous with routers and switches, is executing a multi-year strategic pivot away from its hardware roots toward a future built on software, services, and recurring revenue. The company, which reported that 49% of its quarterly revenue now comes from subscriptions and contracts, is aiming to become a central orchestrator of cloud, security, and AI-driven networking.

The Shift to Software

For decades, Cisco dominated the networking hardware market, selling physical boxes to enterprises, service providers, and data centers. But as cloud computing and software-defined networking reshaped the industry, the company recognized the need to evolve. Under the leadership of CEO Chuck Robbins, Cisco has aggressively pursued acquisitions and internal development to build a software portfolio that can generate predictable recurring income.

Analyst Jack Gold of J.Gold Associates notes that Cisco wants to become something more than a hardware vendor. What they are trying to do is get to a place where rather than just sell you a server or network switch and I’m done, is make themselves into basically a cloud service provider, he said. This shift mirrors broader industry trends, where hardware margins have compressed and customers increasingly prefer subscription-based consumption models.

Security and the AI Agent Opportunity

A key pillar of Cisco’s software strategy is security, particularly identity management for artificial intelligence agents. While traditional identity tools have existed for human users, the rise of AI agents—autonomous programs that perform tasks across networks—creates a greenfield market. In May, Cisco announced plans to acquire Astrix Security, a startup specializing in securing AI agents and non-human identities such as machine-to-machine connections. The deal underscores Cisco’s bet that managing AI identities will be a critical need as enterprises deploy more automated systems.

Gold describes this as a largely untapped market. Many organizations are still uncertain how to approach the issue, he said. Cisco’s existing network visibility gives it a unique vantage point: its equipment sits at the core of enterprise and telecom networks, providing deep insight into traffic patterns. This allows the company to detect anomalous behavior by AI agents and enforce security policies more effectively than competitors that lack similar network presence.

Platformization with Cloud Control

Cisco is also working to unify its sprawling product lines under a single management framework. In June, the company launched Cloud Control, an overarching management platform that spans networking, security, compute, observability, and collaboration. The goal is to provide customers with a single pane of glass for managing their entire Cisco environment.

However, integration remains a challenge. Gold points out that Cisco still has many components that are not fully integrated at their customer sites. Enterprises that have accumulated Cisco gear over years—often alongside products from other vendors—may find it difficult to switch to a fully unified system. Cloud Control aims to address that by abstracting individual products, but its success will depend on how well it works with legacy installations and multi-vendor networks.

Competitive Landscape

Cisco faces stiff competition from rivals pursuing similar platformization strategies. Hewlett Packard Enterprise, through its Aruba networking division, offers a unified edge-to-cloud platform, while Palo Alto Networks leads in cloud-delivered security. Meanwhile, cloud hyperscalers like Amazon Web Services, Microsoft, and Google provide integrated security and identity solutions tied to their own infrastructures.

Despite these challenges, Cisco retains significant advantages. Its installed base is among the largest in the industry, with deep relationships in enterprise IT, telecom, and government. The company also partners extensively with hyperscalers and semiconductor firms, giving it reach that few competitors can match. They’re the 800-pound gorilla in this space, Gold said.

Beyond Hardware: The Network Fabric Vision

Looking ahead, Cisco’s ambition extends beyond selling products. The company wants to become the fabric that connects and secures all data flows across complex environments, including those driven by AI. This means acting as a comprehensive network operator—monitoring traffic, enforcing policies, and optimizing performance across hybrid and multi-cloud deployments.

To realize this vision, Cisco is investing in AI operations (AIOps), intent-based networking, and programmable infrastructure. It is also expanding its observability capabilities to give customers a real-time view of application performance, security threats, and network health. These capabilities are designed to help IT teams move from reactive troubleshooting to proactive management.

The shift to software is not without risks. Cisco must continue to innovate rapidly, especially in areas like AI security where new players emerge regularly. It also must ensure that its platform story resonates with customers who may be wary of vendor lock-in. But if execution holds, Cisco’s transformation from hardware giant to software monster could define the next era of enterprise networking.

Source: Network World News