Cisco Embraces Machine Learning to Maintain Its Dominance

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Networking hardware giant Cisco Systems (NASDAQ: CSCO) has managed to maintain its dominance in the switching and routing markets despite significant shifts in the networking landscape. Software-defined networking and cloud computing have both threatened Cisco's business model of selling expensive, proprietary boxes in recent years. Even with these challenges, Cisco controlled 55.6% of the Ethernet switching market and 45% of the combined service provider and enterprise router market during the fourth quarter of 2016.

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This dominance doesn't mean that Cisco can sit on its hands. The company has been growing its software and services businesses, aiming to become a seller of solutions, not just hardware. Cisco launched its Nexus line of hardware along with its take on SDN, Application Centric Infrastructure, back in 2013.

About a week ago, Cisco unveiled the Catalyst 9000 switches, its latest line of hardware. This is part of what Cisco is calling "intent-based networking." These switches, in conjunction with machine learning and analytics software, promise the ability to manage millions of devices, automate routine tasks, and provide improved security. Machine learning is the buzzword of the moment in the IT industry, and Cisco is jumping on the bandwagon.

Machine learning and security

Machine learning allows a computer to "learn" as it's fed data. Object detection in images is one example of how machine learning is being used today. Images tagged with the objects present are fed into the system, and the result is software that can detect those objects in new images. The more initial data, the greater the accuracy.

A massive quantity of data flows through Cisco devices, with "the vast majority" of global internet traffic running on Cisco networks, according to the company. This data is the fuel for Cisco's intent-based networking. Seventy-five large organizations are testing the new suite of hardware and software, and the results so far have been positive. Cisco cites a 67% reduction in network provisioning time, an 80% improvement in issue resolution, a 48% reduction in impact from security breaches, and operating expense savings of 61% for those participants.

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Security will be a big selling point of the new suite of products, especially with multiple high-profile global cyberattacks making headlines in recent months. Cisco's Encrypted Traffic Analytics product promises to detect known threats without decrypting data, preserving data privacy. The company touted an accuracy rate of up to 99%, with a false positive rate of less than 0.01%.

Security is one of Cisco's most important growth businesses. The security segment has produced about $1.6 billion of revenue over the first nine months of Cisco's fiscal year, up 12% year over year. This product announcement comes less than a month after Cisco and IBM announced a cybersecurity partnership that will see IBM's global services business support Cisco products.

While Cisco is calling its new intent-based solution "one of the most significant breakthroughs in enterprise networking," only time will tell how much of this is marketing fluff, and how much is genuine innovation. Cisco investors should expect an update from management during the company's next earnings conference call, which is scheduled for August 16. Orders for the new Catalyst hardware can be placed in June and July, and these initial orders will give some indication of how Cisco's customers are viewing the new products.

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Timothy Green owns shares of Cisco Systems and IBM. The Motley Fool recommends Cisco Systems. The Motley Fool has a disclosure policy.