Cisco Systems, Inc. (CSCO) Earnings Call Transcript & Summary

Here we go. After about 2 years, I'll figure out how to work the mute button. The trick is if you come in muted. Sorry, folks, this is Simon Leopold, Raymond James data infrastructure analyst, participating in our technology conference brought to you virtually once again. Hopefully, we'll be in person sometime soon. So for our next session, I'm really pleased to have with us from Cisco Systems, Liz and Tony. Liz's title is Chief of Strategy, but I think Liz wears a number of hats and has worn a number of hats. So Liz, why don't we kick off our fireside with a little bit of introduction, your background and role. And I think you also want to do a little bit of fair disclosure comment so that the IR team would be happy.

Yes. Good to see you, Simon. So I will -- let me read out this. So before I begin, so everyone please note that I may be making forward-looking statements, and actual results may differ materially from these forward-looking statements and are subject to the risks and uncertainties found in our most recently filed 10-K and 10-Q. So done a good public service announce that I need to make sure. So yes, Simon, I've been at Cisco for over 20 years and pretty much all in engineering, with the exception of last year, were added the corporate strategy role to one of the responsibilities that I have as well. Prior to this I -- prior to this role, I'd say I've managed a few businesses, our SB access group, cloud and compute, our IoT business as well. And so currently, as the Chief Strategy Officer, I work closely with Chuck and the rest of the ELT in defining our 3-year strategy, which, actually, a big part of that you saw as part of -- hopefully, as part of our Investor Day; and continue to work with each one of the GMs, both on the product side as well as on the -- on our CS side, and then go to market in terms of how do we look at where we invest organically and where we add to our portfolio and drive accelerated growth through M&A and partnerships as well. I sit on our investment review board as well that looks at we -- invested in a number of start-ups and LPs out there as well. So that -- in addition to that, I also run our applications business, which includes AppD, but as part of the full-stack observability offer, includes ThousandEyes and Intersight as well. So think about these as it's not driven by organization, it's driven more in terms of the outcome that we want to offer to our customers. I also have an incubation group that looks at incubating ideas that are 2 to 3 degrees of freedom removed from our core business. And they could potentially become new businesses at Cisco, new capabilities that we could offer or package in as part of our offers and solutions. So a few things that I've been doing over the last 1.5 years or so.

So maybe let's start off talking a little bit about innovation. I think one good example of innovation that's been done organically at Cisco is Silicon One. So certainly, we can point to that. But I think investors typically argue that Cisco doesn't do as good a job innovating organically as it should. How do you think about this within the broader strategy role?

Silicon One is a good example, for sure, Simon. I also would add in what we're doing, in collaboration, when I look at 800-plus features that the collab team has delivered, how we're bringing hybrid work together as a new category that includes collaboration, it includes networking and security as well. And there's, I'm sure, many more examples that I can give around this. I think we need to talk more about our innovation. But when I think about this is, in my role as the CSO of the company, this is really stepping back and looking at kind of our 4 customer priorities, which we've codified over the last couple of years around reimagining applications, modernizing the infrastructure, end-to-end security or securing the enterprise and hybrid work, for that matter. And we look at a number of trends and transitions, whether it is everything from the move to the cloud to hybrid work to full-stack observability to more and more applications and users at the Edge to kind of what we see in 5G, WiFi 6 and 400 gig driving this huge amount of need for bandwidth and low latency-driven use cases as well and coming up with our 6 strategic pillars, right? And part of those 6 strategic pillars includes discussions around where we're going to innovate? A lot of nested incubation that you see happening within each one of those, like in secure agile networks, for example, things that we're driving around automation and assurance, all of those were homebuilt, for example. I mean we talk about simplicity should be a TAM for our customers. That's all homegrown innovation that we're driving. If I look at like Internet for the future, as you called out Silicon One, but there's more around optics and how we're driving convergence of routing and optical, for that matter, and redefining the economics in terms of building out new networks, for example. So as part of the strategy role, it's just working closely with the BU teams around defining where we invest in organically and where are the areas we want to go and drive M&A to complement that and partnerships as well. Some of the strategic alliances that you see us do with cloud providers that goes everything from how we help them build the cloud with our core portfolio as well as how do we work with them in terms of enabling customers to consume capabilities from the cloud, right, in this hybrid kind of multi-cloud environment as well. And again, a big focus of ours is really around how do we bring our portfolio together around driving those outcomes and experiences for our customers, whether that as SASE as an outcome, full-stack observability as an outcome, hybrid work as an outcome and driving that simplicity and experiences. And at the end of the day, driving recurring revenue and growth for us, right? So to your question, I think we need to do a lot more in terms of talking about innovation, in terms of everything from product set and capabilities that we build, how we continue to help our customers simplify as well as our go-to-market and then our CX in terms of where customers trust us and continue to deliver life cycle services for them as well. And another one is around the consumption models, in terms of being able to provide choice for them. So my team gets involved in a number of these things, but the actual execution at the end of the day happens within the business units, within our go-to-market teams and within our operations teams at the end of the day.

And when I think about the other dimension of how Cisco has innovated, it's really been through the investments in private companies. So I think we've historically talked about this, if you have an outsourced R&D model, where Cisco historically has invested in private companies, followed those companies, which often ended up as acquisition targets. Can you speak to where that strategy stands today? And also, how do you think about that in terms of mixing in the inorganic innovations?

So the inorganic -- so organic innovation, I think, is still pretty strong within Cisco. As I mentioned, I think we need to talk about it a lot more in terms of helping you all understand kind of how we're driving that innovation organically. We acquire companies for a number of things. It could be product. It could be just of in pure tech and talent acquisitions as well, right? If you're specifically referring, Simon, to the spin-outs and spin-ins that we've done, it -- I wouldn't say it's a no, but it's something that I would think we would consider, right? But most of our focus really has been around driving innovation within organic innovation as well as looking at M&A that complements that. Now one of the other things that we use is our investments arm as well. We invest in a number of start-ups and LPs out there. It helps us understand kind of what's around the corner that we probably haven't really thought about as well. And some of those investments become acquisitions, targets for us as well. But many of those, it's -- they don't. So we use a combination of this, including partnerships, because I think it takes multiple modes in terms of really getting out there kind of to be able to deliver what we think our customers need, what they know that they need, and to drive -- continue to drive kind of business growth for us.

And when I think about what we heard at the Analyst Day, wow, I think it was 2 months ago now. Time is kind of a blur in COVID. But at the time, you talked about a TAM of $900 billion by 2025. So that's clearly -- thinking about that next 3- to 4-year view that I imagine you're focused on, can you maybe help us unpack what are the major drivers for growth into that TAM?

Yes. So I probably needed my set of papers here, that's what you see the crinkling of the papers because it's -- I mean, that's a $900 billion TAM, right? Not -- I would love to say I would have completely at my fingertips. So here's the way we looked at it. So I talked about those 5 -- or 6 strategic pillars and services. So we looked at the kind of the opportunity within our current TAM. So this is taking a look at secure agile networks, for example, right? We're looking at this growing need for connectivity, smart infrastructure and technology shifts such as 5G, WiFi 6, 400 gig, et cetera, and Edge and cloud native as well. So within secure agile networks, right, we have a TAM of about $70 billion plus that comes everything from switching to SD branch routing to wireless networking to servers to management and orchestration. Outside of that $70 billion TAM is another almost $30 billion TAM that includes things like flexible consumption. So you have our core TAM, where we have our portfolio today; and then the expansion TAM that -- where we're actually building capabilities for. So I'll take another example. If you look at hybrid work, collab cloud, collab on-prem is about $50 billion. Then if you add CPaaS, if you add things like workplace safety and the headsets and stuff, that's another $30 billion. So within each one of our strategic pillars, whether that's secure agile networks, hybrid work, end-to-end security, Internet for the future, optimized application experiences plus our services, our current TAM is about $260 billion. We added the expansion TAM, which is about $140 billion. By the way, this expansion TAM is primarily software, growing at double digits compared to the core, growing -- core growing at -- TAM growing at single. Double digits was the expansion TAM. That made up the $400 million of where we feel like we have the investments we have, the portfolio today. We also looked at an expansion TAM of around $500 billion. And the way we came up with that is just looking at 2 areas. One was future work and the other one is automation. I mean automation for us, if you like, we're just touching the tip of the automation or what I would call the simplicity TAM, right? There's still a lot of low-value added cumbersome tasks that we can enable our customers to be able to automate them and move their teams to do more high-value work, for example. So move -- and then things like removing alert fatigue. When I think about full-stack observability, customers today talk to me about the fact that they have so many alerts and events coming their way, and they've got huge alert fatigue. As we move more and more to cloud native applications, that is just going to expand manyfold, right? So how do we automate kind of the visibility and insights to enable them to measure and focus on what matters most. And then the future of work, I think that's again the one we're beyond collaboration, right? So the broader WebEx suite, and there's things like large-scale, multi-session hybrid events. There's things like in terms of where -- today, we use DNA spaces and trusted workplace offerings for enabling workplace management, things that we can do like contact tracing, health monitoring, leveraging analytics and AI to correlate risk and just simplify the user experience. When you add those future work and automation pieces, that's the additional $500 billion. And I believe, Simon, we were pretty conservative because when IDC looks at the future of work, they look at it as a $1.1 trillion. We took a smaller portion of that plus automation to come up with the remaining $500 billion. So between the $400 billion and the $500 billion, that makes up our $900 billion TAM. And in that core $400 billion opportunity, like I said, it's the fastest-growing piece is the subscription revenue portion of that -- of the TAM. And I'd say it this way, we have plenty of opportunity out there. We're definitely not opportunity-constrained. And so we're aligned to some pretty large and growing markets out there.

So no doubt, but this sort of dovetails to where I wanted to take the question next is around this topic of complexity, which you mentioned yourself. And I guess, what I think I hear often from investors, from partners, from customers, is that Cisco is a complex company. And maybe it has to be. I think I've sort of arrived at that conclusion. But how do you deal with the fact that competitors often cite your complexity as a weakness, where they talk about the idea that Cisco is hard to do business with. We have this one simple thing for you to buy, Cisco makes you choose. How do you counter that?

So I think any large company with products that go across multiple domains and architectures is going to be looked at complex, right? And any company that has a single product or one-trick pony is going to be seen as, well, it's just one product, right? I step back and take a look at what do I hear from customers. And maybe I can give you an example of talking to a recent financial services customer just about 2 weeks ago. And they have about 6,000 applications, they are going down to 4,000 applications. And it's this combination of they're going to have their traditional applications, they probably still are going to run on mainframes, and they're not planning on refactoring it. But all of the new applications are going to be cloud native. So one of our portfolio -- they have multiple monitoring tools, for example, including one like AppD that does application performance monitoring. And looking at their portfolio, they have one of everything in terms of infrastructure monitoring, Internet monitoring, network monitoring, for that matter, a different capability for logs or different capability for traces, for example. And the question I ask is, what do you expect of a company like Cisco? Continue to do best-in-breed, continue to build the best APM that's out there? Or do you want to -- and where you would want to stitch all of these different products together? Or would you want us to do it? And the answer coming back to us, like, "No, no, we want you to think about doing that." And this is where -- so I step back and look at what do customers expect of us. Yes, we have a broad portfolio here. But one of the benefits of having that broad portfolio is when the customers want choice where they say, "I want you to stitch it together. Deliver an outcome for me. Deliver -- focus on the end user experience." It gives us the ability to do that versus throwing it back into the customers' lab. Now there are other customers who would say, "Hey, I just -- I want to pick and choose, and I'll stitch it together or somebody else will stitch it together." We allow them choice to do that as well. So that's the way I look at this in terms of going how do you take that kind of that broad portfolio that's complex and deliver simplicity and delivering outcome and experience for the customer and how do you provide them choice at the end of the day as well. One of the things that I've seen us doing, having been in the company for a long time, is we're also moving to where it's common services and common portfolios as well. Like, you can take an example of ThousandEyes. ThousandEyes is part of our full-stack observability offering because it provides deep insights into the network and the Internet. ThousandEyes is also part of our SASE offering. It's also part of our SD-WAN offering as well. So I'm looking at this in terms of where having a broad portfolio also allows us to take some of the same parts of the portfolio and make it part of different offerings. Internally, from an engineering standpoint, we're getting a whole lot better in terms of driving more of a platform approach, where more and more of our capabilities can be consumed via a more of a unified experience, where a single sign-on is built once, not multiple times. And that's the path that we're moving to, Simon. So we know there's work that we can do to simplify the experience for the customer, while providing them choice as well. It also goes into how do we simplify their buying experience from us. Our enterprise agreements are a good example of how we're doing in terms of that. And then on the -- if I can bring up another example of CX Cloud. Once the customer buys from us, it's like how do we enable them to see if cloud is a good example of how we do that in terms of where all the telemetry that we gather goes into CX Cloud. So we know that a big part of our job is also around delivering those simplified experiences. And while we're not perfect, I think we're pretty darn good in terms of how we are delivering those simple -- simplified experiences and providing choice for our customers, whether they want to consume it as a full offer or they want to consume it as a single product.

And I think you sort of alluded to kind of my next point. When you mentioned the enterprise license agreements, and I think about subscriptions, how does that affect essentially the internal operations of Cisco? So for example, if a customer has some umbrella enterprise license agreement, you don't necessarily know what they're going to consume and when. I have to imagine that, that has some impact over operations, staffing and making sure you have the resources to satisfy them. Can you talk a little bit about how this subscription type of pivot is affecting the business?

S I would say our subscription pivot started 3 to 4 years ago. It's not completely new for us, and it started about 3 to 4 years ago. From a go-to-market standpoint, you would see us where our route-to-market has expanded to many different ways in terms of where you can consume it from a marketplace, you can consume it as a managed service. In terms of the enterprise agreements, our focus really is around how do we simplify some of the licensing for our customers as well, right? And we'll continue to do that, where your ability to buy kind of multi-product portfolios from there. On the back end, to enable that on the operations side, this is where a ton of work that already got started a few years ago and has continued with the charter that Maria Martinez has, especially in terms of exactly enabling that. And that also drives more multiproduct sales for us at the end of the day as well. But enabling EAs, incentivizing our sales force. Again, a big part of this also comes from how customers want to consume from us, right? And that's where we're taking cues from in terms of where they're asking us for multi-products under an EA, simplifying the licensing agreement, simplifying the contracting, kind of providing more of a unified experience, and it translates back into product as well. So I would say, Simon, we started this 4 years ago, and it's well underway.

So in conversations I've had with some of your competitors, one of the assertions they've made is that the complexity is actually intentional, and that the intention is to lock in customers to Cisco's solutions. And so how would you respond to somebody arguing that Cisco is complex on purpose?

So having -- I don't build. I don't write code anymore, they wouldn't let me. But I can tell you, in terms of day in and a day out, when you come in as an engineer and you're building product, I mean, you take great pride in terms of your product being adopted and used by the customer to be able to solve their needs. And I think we've pivoted to the culture, to the organization to focus more on not just the cool tech, but also in terms of how does it solve a customer problem? What are we delivering? Like I say, I'd go back to outcomes and experiences. And that experiences that we talk to our teams about, and I think that we'd design into our products is really around how do we simplify for our customers at the end of the day. As an engineer, you come in, you want your products to be adopted. You're not thinking about how do I make sure that I tie my customers down? You take huge pride in being able to build and deliver a product that you see used by our customer at the end of the day. And sure, yes, we -- as you go higher up in the organization, as you run a business, you're also thinking about how do I drive business growth? But I think this is -- so I don't quite understand that notion because we -- how we -- we design for the best experience. We design for adoption. We want this to be product-led growth. Product-led growth can only happen if your customers see value from it, if it's easy to use, it's easy to install, it's easy to deploy because, at the end of the day, I want them to expand it. I want them to renew it. You can't do that if you build complexity in there. And so I would -- that notion having -- coming from someone who's built products, I can't put my arms around it.

So I want to pivot the conversation to your other role as the Applications General Manager. So I appreciate the fact that with the new segmentation Cisco has presented, we can get better sense of the size of that business because it wasn't obvious in the old segments. But maybe if you could talk a little bit about your experience integrating the AppD acquisition into Cisco and maybe how it's succeeded or where you're focusing on doing better with that particular acquisition?

So I picked up AppD in the beginning of this calendar year. I would say it's a fantastic product. It's a fantastic product and a great team as well, probably one of the reasons we were 9x kind of leader in the Gartner Quadrant as well. AppD as a product, by itself, has some great capabilities, right, around -- especially around business insights. And that's unique in the marketplace because I don't see anyone else being able to as effectively do as what we do in terms of not just to tell you when something went wrong, it actually ties that back into what's the business impact at the end of the day. Because a lot of products can tell you if something went wrong, but tying that back into, okay, what's the business impact to revenue or user experience, that's a differentiation as well. So again, we'll -- what I would have liked to -- in terms of integration into Cisco, AppD is now on our global price list. You'd asked like, well, why didn't that happen before? I mean there are certain aspects of it probably could have happened earlier. But as I look at it right now, our full-stack observability offer is an integrated offer with AppD and ThousandEyes, and AppD and Intersight as well. It gives us the ability to really deliver on like 7 use cases, focus on performance, focus on optimization and focus on security as well. In terms of pace of this, I would love to see it accelerated about a couple of years ago, but I still think that we're in pretty good shape. And I'm very confident between the teams that -- engineering teams of AppD and the product teams and kind of the assets that we have with ThousandEyes and Intersight. I think we're at the right time in terms of being able to deliver full-stack observability for our customers moving beyond domain monitoring. So AppD, I would say, is a key part of our applications portfolio, and I continue to see it with having a lot of promise.

So you've used this phrase full-stack observability a couple of times. I've heard it elsewhere even today in some earlier sessions. We're definitely hearing this term more and more, maybe keeping in mind audiences, financial analysts maybe not speaking in all the terminology. This is a relatively new term, I think, for many of the folks listening in. Could you provide sort of the simple definition for full-stack observability?

Okay. So think about this as -- absolutely, let me attempt to do that, right? So within each domain, within -- whether it's -- think about these as infrastructure domains, network domains, internet applications. Within each one of these, you have separate monitoring tools. It actually will alert you when something goes wrong and hopefully tell you in terms of how to address it as well. Now each one today, the way I look at it, is there's good monitoring tools, including what we build, what competitors out there in the industry you can find as well. It's like looking -- it tells you, within that haystack, what are the needles within that haystack that I need to look at to, either the infrastructure level, maintain the health of the infrastructure. So you want your compute up and running. You want a storage up and running. You want a network up and running. You want the application up and running, right? It will tell you to look at the -- look for the needles within that haystack as well. But what happens more and more is if you look at how applications are developed, the -- most of the traditional ones are developed as they're within ITs purvey. All the different components that kind of make up that stack that the application needs, whether it's the infrastructure or the network, for example, they sit within IT's purvey as well, right? So -- but even to have visibility into -- and then you have cloud native applications, which, by the way, your developers are leveraging capabilities that your IT teams would develop, cloud providers can provide to you, SaaS providers. Like you may need like a -- you may say hey, I need a Salesforce, SFDC, for example, or you may want different authentication service. You may want a different payment services part of the application. So it's now not within what your IT teams have visibility into. So no longer -- especially given applications have increased in importance, where, if you think about it, in your own -- I know I use a lot more applications than I ever did before over the last 2 years to do everything, not just buy groceries. I actually recently bought a car using an application, and it took me 10 minutes just to pick up my key from the showroom, right? Gone are the days where you sit for 3 hours. So when you think about that application experience and brands having one opportunity to deliver, you no longer can just look for the different needles of the haystack within each domain. You need to look at what the needles in the full haystack, from the applications all the way down to the infrastructure, and now across a hybrid multi-cloud world as well. To be able to do that, you need to be able to have a common correlated set of data that everybody is looking at in terms of where you de-duplicate kind of the events and alerts, and then you tie it back to the business context and say, "These are the alerts I want to prioritize because, based on something that may be happening in the infrastructure, or maybe some third-party payment service that I'm leveraging as a SaaS offering elsewhere, I can see my revenue being impacted." So I'm going to go address that first versus addressing something at the infrastructure level that probably I can see I need to optimize the performance of the infrastructure a little better. I may put that off for later. I'll address the ones that have revenue impact and the business impact at the end of the day. Full-stack observability helps you do that, where need a common correlated set of data that goes across the full stack, not just at every domain level to be able to do that. So to me, full-stack observability builds on traditional monitoring and looks at that common correlated data across the full stack, from application to everything that, that application is dependent on to be able to address and get to the root cause of issues that impacts your customer, impacts your business as soon as possible. That's the vision that we have within Cisco because, at the end of the day, for a customer, within day 1, applications are available 24/7. They're secure. And by the way, I'm going to be able to optimize it in my infrastructure, so I don't keep growing infrastructure at it and increasing costs. I want to optimize my cost as well. You can only do that when you look at it across this full stack and have visibility insights and the ability to take action. I hope that was helpful, Simon, and not just a whole bunch of technology included in that.

No, it definitely is. And I guess, one of the things I didn't know until you mentioned it was the ThousandEyes falls into this organization. I had been thinking of it more as a security solution. So this begs the question of how are you coordinating these efforts with those within the security business unit, where you're looking at essentially security breaches, which have to be interrelated; as well as the traditional infrastructure, where I think about products like Cisco's DNA, where I think about you want to be able to automate your network. So if I've got full stack observability, and I'm looking at security issues or I'm looking at configuration issues, I want some interplay between these systems. How do we manage that?

Yes. So organizationally, ThousandEyes doesn't even sit within my organization. It actually sits in Todd's organization, right? But if you look at how we've done our strategic pillars, they go across domains, across architectures and across organization because our focus is really on deliver outcomes, deliver experiences. And we are pulling capabilities and portfolios from different parts of the organizations, for that matter. Take security as an example, right? Security and observability are coming together. So when I look at today in terms of where we have secure applications within AppD, within AppDynamics, and really, this is about securing an application in run time. We're feeding from our security portfolio, alerts, incidents and advisories that then help us then correlate in terms of understanding the risk to an application at the end of the day. In the same vein, by the way, we've got these powerful AIML models that we're running within AppDynamics, for example, that actually dynamically create a baseline for the application in terms of kind of when it is, when we feel like it's a security issue that we can actually then communicate that back into the SecOps teams as well, right? So it's a bidirectional kind of communication that happens. That's just one example in terms of how you have domains that are coming together. Just like in SASE, you have security and networking kind of coming together as well in terms of being able to deliver secure access for users to any applications, any data, no matter where those -- where the applications and the data sits, for that matter. And I think -- going back to what we talked about before in terms of breadth of the portfolio, I think you can only do this because I believe you put it upon the customer to integrate it. Or you provide that integrated capabilities, where it's really around enabling use cases for our customers at the end of the day.

So I've got 2 questions via e-mail from the audience, and I suspect they're out of scope. So if you want a punt, you're allowed to. I'll preface it.

Okay.

So don't feel forced to come up with an answer. But one of the questions is asking about Cisco's opportunity now that it's acquired Acacia, and Acacia is launching a next-gen digital signal processor. How do you see Cisco's opportunity to gain share in the DCI market?

I would like to -- I would say this is a conversation, Emily, that we should have Jonathan kind of talked to in more detail. I mean, obviously, that Acacia acquisition, hugely strategic for us. And we see that, especially in terms of kind of driving growth in the number of parts of our portfolios, especially from web scale. But I think it will be good for Jonathan to get into details on that a bit more.

Okay. Yes. And the next one is very similar about routed optical networking growth, optics and silicon coming together. I suspect I get these questions sometimes because that's kind of my background, optics. So we'll circle back with Emily to get to those. In terms of maybe trying to...

Yes, Jonathan would do a really good job in terms of outlining how we're kind of changing the economics of -- especially delivery of networks through what we're driving in terms of having an optical conversion. So I think he's best suited to do that.

Yes. You could -- one can only wear so many hats, so we're okay with that. So maybe bringing it back to sort of the bigger picture. This industry is focusing to this concept of multi-cloud. And so to me, what that implies is there's on-premise, there's private clouds, there's public clouds. And so I think the most bearish folks out there argue that traditional suppliers for on-premises like Cisco can evolve. Don't have a place in this new world. And I think it's exaggerating the endgame that everything is ultimately going public cloud. How do you sort of think about this concept of multi-cloud within the overall strategy? What does Cisco need to do to align with its customer needs?

So Simon, we talk about our cloud strategy in terms of having talked to multiple customers. We say the de facto way of operating for our customers is hybrid multi-cloud, very app-centric world as well. And we believe that, that is actually a growth driver for us in many ways, right? So I would say, more than 9 out of 10 customers that I speak to would say is they have applications and workloads and data that will sit on-prem for a number of reasons, right, in terms of their -- these are critical applications for them that they're not planning on either re-factoring or moving to the cloud. They're not planning on doing that. They have data that needs to stay on-prem for a number of reasons, whether it's around security, governance, control, sovereignty for a number of those reasons as well. But there is a number of their applications and workloads that they're not just developing cloud native to keep on-prem, but deploying in the cloud as well, right? So I see a number of our customers going on-prem, public cloud, and by the way, Edge and SaaS, as a key part of their environment. Just like traditional applications and cloud-native applications, they'll stay in that environment as well. So when I think about this and say, "What are customers looking for?" Right? They're looking for their developers to be able to have agility, speed and ability and velocity in terms of what they can consume. So the first thing is they want to give developers freedom to be able to go and build their applications with services, micro services and capabilities from anywhere. To be able to do that, you want to be able to actually seamlessly connect on-prem to the cloud in terms of being able to consume -- connect and consume those cloud services. We do that already today with our SD-WAN, OnRamp, provides a very seamless connection to our major cloud providers as well. They won't be able to secure that. They won't be able to observe that, right? So observability, for example, to be able to -- you don't just build your applications, cure it and then and deploy it. You want to be able to observe that application. You want to do that across a hybrid multi-cloud world as well. And that's what our full-stack observability offering absolutely does that because it allows you to observe that across a multi-hybrid cloud environment. So when I look at this -- and the third one is around a common operating model, a common operating model where you can have policies that -- common policies that go across on-prem to the cloud, you don't want to treat each of these environments as different silos because when you do that, that adds to the complexity as well. So I would say is customers driving, seeing hybrid, multi-cloud, app-centric as a de facto way of operating is totally in our wheelhouse. And based on what you just said is, I'm thinking we need to probably be out there talking about this a lot more in terms of whether it's around connecting, securing, observing in this cloud-first world. How do we enable -- how are we doing that today and continue to do that with our customers? We probably need to be out there talking about it a bit more.

Well, maybe you've just answered my last question, which is what do you think is the least well-understood portion of the Cisco story?

In addition to what we just talked about, I would say 2 things. One is around how many think about us as a top 10 software company? We are -- and you -- we still hear words around legacy and hardware thrown around as well. And it's like we're topped in software company, and I'd love for us to -- the second one is around innovation. There's a ton of innovation that's -- organic innovation that's happening in our businesses today. And those are the 2 things that I'd love for everyone to think -- when they think Cisco, it's [ helping ] the word cloud that comes out is cloud, it's software, it's innovation.

Well, that's great. No, I appreciate it. Well, we're out of time. I need to jump to my next session, as I imagine you do. But with that, Liz, let me thank you very much, Emily, as well for joining us. Folks, this is just wrapping up our session with Cisco Systems. This is Simon Leopold signing off.

Thank you so much, Simon.

Thanks a lot.

Take care, Simon. See you. Bye.