Acceding to the growing ranks of customers who are demanding that software be divorced from hardware and delivered as a service, Cisco Systems, Inc. Is putting hundreds of its formerly bundled software services in the cloud and offering them on a subscription basis.

Cisco One is an umbrella offering that covers both licensing and new services. Each suite is packaged in three layers that Cisco calls “Foundation,” “Advanced Application” and “Advanced Security.” Within those are three separate subcategories for data center, wide-area-network and access functions (see chart).

Together, they comprise 17 different buckets of tools designed around different use case scenarios, such as next-generation branch offices, unified access and data center network automation. All are available in perpetual, subscription-based or enterprise licenses. Cisco said 160 customers are already using the new licensing plan. The company also said it has no intention to abandon traditional package-based perpetual licensing.

Cisco is trying to navigate a shift in customer preferences that has thrown stalwarts like Microsoft and IBM into tumult as customers increasingly opt for “white box” hardware with mix-and-match software options licensed from the cloud. Microsoft provided an appropriate backdrop to Cisco’s announcement on Monday by disclosing earnings that showed a 25% drop in sales of Windows and packaged Office. At the same time, sales of the cloud-based Office 365 offering grew strongly. IBM’s earnings, which were announced last week, also showed across-the-board drops in hardware sales but more than $7 billion in new cloud revenues.

Meraki-lous

Cisco led with its strong suit, leveraging the Meraki Wi-Fi management technology it acquired two years ago. Meraki’s claim to fame was as a supplier of wireless networks to midsized businesses, “but it’s never been just about Wi-Fi or small- and medium-sized businesses,” wrote Rob Soderbery, Cisco’s senior vice president of enterprise solutions, in a draft blog post distributed to journalists today. “It’s about making any network of any scale manageable via any browser.”

Cisco claimed that it’s already the world’s fifth largest software company and third largest software as a service (SaaS} provider. Executives said the Meraki acquisition was an eye-opener because it demonstrated that sophisticated management services could be provisioned online. The company stressed that Cisco One is not a stopgap but a roadmap for the future. “We want to make sure everything we do anticipates cloud-ready,” said John Brigden, senior vice president of software strategy and operations, in a media briefing.

The company also sent a pointed messages about its intentions in the security market by choosing security as one of the three service layers. Cisco has been racing to respond to calls from its enterprise customers to provide integrated security services and eliminate the patchwork of point solutions many of them have assembled. Earlier this month the company acquired security consultancy Neohapsis Inc., following upon earlier high-profile buys of intrusion detection provider Sourcefire Inc. and malware specialist ThreatGrid Inc., as well as an alliance with Splunk, Inc. that furthers Cisco’s vision of a network- and analytics-centric approach to security.

Cisco’s security message is persuasive, said Zeus Kerravala, principal analyst at ZK Research. “Cisco has many places where they gather security-related information including firewalls, router logs and the like,” he said. “The opportunity is to collect all of the information and then perform analytics on it to uncover security threats faster.”

Bring it on

However, the strategy is hardly without risk. By separating software from underlying hardware, Cisco opens the door to a host of new competitors in the emerging software-defined networking and data center markets. However, the company has little choice. Its prices are increasingly out of line with those of software competitors who run on commodity platforms, and competitors like Brocade Communications Systems Inc. and Juniper Networks, Inc. have stolen a march on Cisco with software-defined platforms that offer compelling cost savings.

Customers also want the flexibility to upgrade software when they want without undertaking a forklift hardware upgrade. “The reality is that the devices are outliving the software,” said Ray Wang, principal analyst and founder of Constellation Research, quoted in NetworkWorld. “Organizations will want their updated software for their intelligent devices.”

Cisco bookended the licensing announcement with two other rollouts that stressed a solutions focus. Cloud-Managed IT is a collection of provisioning, management and security tools for managing on-premise networking infrastructure from the cloud. It includes modules for location management, virtual private network provisioning, routing, switching and firewall management, among others.

The company also announced the Cisco One Enterprise Cloud Suite, a set of tools intended specifically to support enterprise hybrid cloud deployment with cloud-based functions like service catalog, multi-hypervisor support and workflow automation.

Navigating transitions is nothing new to Cisco, which has grown from its switching and routing roots to become a major player in the data center while most competitors have shrunk or fallen away. “Cisco manages these transitions well and I think they will do the same here,” said Kerravala. “I do think there will be disruption, but much of what they are doing with the cloud should augment, not replace, what they’re already doing.”