Cisco on Wednesday said that it plans to eliminate 5,500 positions -- about 7% of its workforce -- in a restructuring designed to drive the company's continued evolution into a software and services company.
The networking giant announced the restructuring plan in its fiscal fourth-quarter and year-end results. The company said it will invest the money saved into key growth areas such as security, the Internet of Things, collaboration, next-generation data center and cloud. Cisco did not say what areas it will cut jobs.
While substantial, the cuts are much smaller than the 14,000 jobs CRN reported on Tuesday that Cisco planned to slash, nearly 20% of its workforce.
Cisco has been shifting its focus away from traditional networking hardware equipment towards software and services for a while now. Under CEO Chuck Robbins, who succeeded longtime Cisco CEO John Chambers a little over a year ago, the transition seems to have accelerated.
Many high-profile executives have left Cisco since Robbins took over as CEO last summer. Most notably in June, Mario Mazzola, Prem Jain, Luca Cafiero, and Soni Jiandani left. Known as MPLS, they were instrumental in Cisco's "spin-in" strategy. One of those spin-ins, Insieme, produced Cisco's ACI SDN technology.
Robbins also has overseen major acquisitions, including Cisco's $1.4 billion acquisition of IoT cloud platform company Jasper Technologies.
"Cisco has been very aggressive in transforming itself over the last few years. Since Chuck Robbins took over, we’ve seen an exodus of old-guard leadership and a rise of new leaders brought in from the outside or promoted from within," Shamus McGillicuddy, senior analyst at Enterprise Management Associations, told me in an email interview. "We’ve seen billions spent on acquisitions. We’ve seen some interesting internally developed new products emerge, too -- Tetration, for example."
Cisco announced Tetration, a data center monitoring platform, in June.
"Cisco is retooling for a future when it competes more on cloud, software, and analytics. It still positions hardware/ASICs as one of its core competencies, but it’s no longer THE core competency," McGillicuddy added. "It wants to be a leader in those other areas, too, which means it needs to adjust the balance of skills in its workforce. Some talent from Cisco’s days as a hardware-centric business may be on its way out. Meanwhile, more software, cloud, and analytics talent will be brought in to fill some of those empty seats,"
He noted that nearly every incumbent IT vendor in the world is pivoting due to macro-trends like the cloud. "Such pivots require new skills and knowledge, not all of which will come from within. Layoffs are inevitable," he said.