At the 2021 Investor Day, the company said it’s targeting a $400 billion total addressable market (TAM) in existing and expansion markets and another $500 billion of potential TAM in adjacent markets. “It’s clear we’re not opportunity constrained,” Liz Centoni, Cisco Chief Strategy Officer and GM of applications, said at the event. “There are meaningful opportunities in each of our existing markets with ample room to penetrate even further within each one… The expansion markets are large, and they’re growing with significant opportunities tied to higher CAGRs.” CEO Chuck Robbins said the future of the business would stand on six technology areas: secure, agile networks; hybrid work; security; internet for the future; optimized application experiences; and capabilities at the edge. “Those are the technology areas we think are leading customers in multi-year investment cycles,” Robbins said. Meanwhile, from a business model perspective, Cisco is in an ongoing effort to increase its subscription software revenue. When Robbins took the helm of Cisco in 2015, the company brought in $3.4 billion in subscription software. In the fiscal year 2021, it was nearly $12 billion. 80% of Cisco’s software is now sold as a subscription. Meanwhile, Cisco’s $15 billion in FY 21 software revenue makes it one of the 10 biggest software companies in the world, noted CFO Scott Herren. “That’s a very under-appreciated aspect of the transition we’ve made over the years,” he said. Robbins acknowledged the vision for Cisco’s future is complex. “The technology we build and deliver – it’s a broad portfolio, and it is complicated,” he said. He added, however, “We have probably the most precise execution tied back to our strategy that we’ve had in as long as I can remember.” Robbins highlighted Cisco’s growing business with web scalers and its focus on the cloud as an example of the company’s evolution over recent years. The webscale space now represents 30% of Cisco’s service provider segment. “Four or five years ago, cloud was viewed as a negative headwind for Cisco,” Robbins said. On a later conference call, he added, “This existential threat that was cloud five years ago has now become a driver of not only our overall business [but also] our transformation, which is contributing to the subscription space.”
