The CEO of Cisco explains how its new plan to sell processors to companies like Facebook or Microsoft is helping it change its business model for the cloud computing era

• Cisco, the networking gear maker, announced Wednesday that it will now also sell chip processors to customers like Facebook or Microsoft.
• CEO Chuck Robbins tells Business Insider that Cisco has embraced a more flexible strategy based on the different and evolving needs of customers in the cloud, which caused a disruption by allowing businesses to set up their networks on web-based platforms.
• It signals a new focus on serving so-called web-scalers - mega-companies like Facebook that have long built their own IT hardware, rather than rely on vendors like Cisco.
• Robbins told Business Insider: "From the day I took over, I declared that we were going to sell our technology to our customers in whatever way they wanted to consume it. A big piece of feedback that we got when I started re-engaging is, 'You guys need to do business with us the way we need you to do business with us, not the way you've done it for 25 years."
• Click here for more BI Prime stories.

Cisco on Wednesday unwrapped a host of new products, including something that seems odd coming from a company best known for networking gear like routers and switches: processors, of the kind most associated with companies like Broadcom and Intel.

CEO Chuck Robbins himself led the rollout in San Francisco which featured customers like Facebook, Microsoft and AT&T - tech giants with whom Cisco has formed stronger bonds with its new, more flexible approach to the cloud.

"We didn't have a great relationship with these guys four, five years ago," he told Business Insider. "And now you hear from them and it's primarily because we've agreed to sell to them and work with them in any way they like."

Complimentary Tech Event

Transform talent with learning that works

Capability development is critical for businesses who want to push the envelope of innovation.Discover how business leaders are strategizing around building talent capabilities and empowering employee transformation.Know More

Robbins said this flexibility is at the core of Cisco's cloud game plan, which the tech giant has embraced ever since he took over as CEO four years ago. That plan is focused on the different and evolving ways businesses are taking to the cloud.

"From the day I took over, I declared that we were going to sell our technology to our customers in whatever way they wanted to consume it," Robbins said. "A big piece of feedback that we got when I started re-engaging is, 'You guys need to do business with us the way we need you to do business with us, not the way you've done it for 25 years."

For Cisco, that means pretty much meant selling hardware and software used by businesses to set up private data centers. The cloud changed that by allowing businesses, including big corporations, to set up their networks on web-based platforms run by the likes of Amazon, Microsoft and Google. This meant businesses could now scale down or even abandon private data centers, which was bad news for companies like Cisco.

Robbins said this trend led to worries about the company's direction about five years ago. "We had to be very clear about what is our role as Cisco in this transition to the cloud."

New cloud trends provided some answers. One was the hybrid cloud, in which businesses set up networks in public platforms, but maintained huge chunks of their data and applications in in-house data centers. The other was so-called multicloud, in which companies set up networks across different public clouds and on private data centers.

Cisco and other traditional tech companies, like IBM and Dell, are now focused on offering the gear and systems needed by customers that have embraced those those trends.

Eventually, Cisco identified other new opportunities, Robbins said.

The processor question

Cisco actually has been making its own semiconductors for its own networking equipment, but the decision to start selling them separately sprang from conversations with major customers, known as the web-scalers.

These are tech giants, such as Amazon, Microsoft and Facebook, that have been building massive data centers to power their networks. But unlike in the pre-cloud world, when businesses bought the equipment used for setting up data centers from traditional vendors like Cisco, these web-scalers have relied on their own customized servers and server infrastructure, via efforts like the Facebook-created Open Compute Project.

And so, these titans initially saw little need in turning to traditional tech vendors like Cisco.

But these data centers need state of the art and more powerful semiconductors for those machines, which are expensive to develop and manufacture, with heavy investments in R&D. This is where Cisco, which has invested millions in these processors for their own products, is now stepping in.

"As we engaged with the web scalers, it was clear that we had to approach them differently and do business with them differently," Robbins said. "And some of them wanted us to consider silicon. So in the last couple of years, when we really came to the conclusion that we're going to have to do this."

Selling its own processors is a big move that could pose a threat to companies like Juniper, a Cisco rival, and Broadcom, a communications chip company. But that decision fits into how Cisco plans to continue to adapt in the cloud era, Robbins said.

"I think that customers are going to have more flexibility in the future than they've had in the past," he said.

Got a tip about Cisco or another tech company? Contact this reporter via email at bpimentel@businessinsider.com, message him on Twitter @benpimentel or send him a secure message through Signal at (510) 731-8429. You can also contact Business Insider securely via SecureDrop.

Get the latest Cisco stock price here.