Tech legend John Chambers explains how his new startup Pensando will face off with Amazon in a 'David versus Goliath' cloud showdown (AMZN, CSCO)

John Chambers

  • John Chambers, the former CEO of Cisco and a tech legend in his own right, explains how his startup Pensando will take on Amazon Web Services, in what he describes as a "David and Goliath" cloud showdown.
  • Chambers is the chairman of Pensando, which aims to build a new ecosystem of products — particularly software — geared to edge computing technologies.
  • Edge computing devices offer quick access to on-board computing power even while connected to the cloud — vital in markets like manufacturing or autonomous driving, where there's not always time to wait for a response from a cloud server.
  • The startup's says its goal is to be a platform "with no risk of lock-in" for customers, in a not-so-subtle dig at Amazon which has been accused of trapping clients onto its platform.
  • Chambers said Pensando hopes to play a key role in the rise of edge computing.
  • When you go to a market transition, almost never does the leader in the prior transition lead in the next," he told Business Insider. "Most innovation does not come from the incumbent who's been out there more for than 10 years," he said. "It almost always comes from startups."
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John Chambers once led a gargantuan tech powerhouse, but nowadays the former Cisco CEO is into guerrilla warfare, leading a new, little known startup challenging another industry titan: Amazon.

Chambers is chairman of Pensando, which came out of stealth mode just last month and has raised $278 million. The startup says it aims to be a new platform that would give businesses access to a host of cloud products "with no risk of lock-in."

The statement was a not-so-subtle dig at Amazon, the giant of cloud computing which has been accused of trapping customers onto its platform. Pensando actually mentions Amazon Web Services on its website, saying: "Others couldn't compete. Until now." 

"It's about democratization," Chambers told Business Insider in a recent interview. "Rather than trying to be the dominant player in each category, and dictating standards. It's a very open system place where the focus is on democratization...It is a David versus Goliath type story, except our ecosystems are huge."

Chambers vs. Amazon

Amazon denies that it locks in customers, recently telling Business Insider recently that its "customers have had many choices for who they choose for their cloud provider for many years."

Chambers, who is also the CEO of the venture firm JC2 Ventures, has a different take on the company that, over the past 15 years, has stunned the business world by  expanding rapidly from selling books, clothes and pretty much anything online to dominating a game-changing trend in corporate IT.

Chambers said there are key lessons in Amazon's rise as an enterprise tech powerhouse. He actually followed Amazon's transformation closely as a board member of Walmart, the online retailer's longtime rival in retail.

"We saw Amazon coming," he said. "But it speaks to how difficult it is for even a world class incumbent which Walmart is to make the transitions."

But he said Amazon's rise has underscored the need for give businesses choice when it comes to the technologies they use. 

'Companies want to control their technology'

"Companies want to control their technology," Chambers said. "No matter if you're in manufacturing, retail, finance, healthcare, government, big, small etc., you want choice. Amazon locks you in. You don't gain competitive advantage. You can't set your own technology strategy. So this is about choice."

Chambers offered a broader critique of Amazon's massive reach as a corporate behemoth. He praised Amazon founder and CEO Jeff Bezos who, he says, "has done an amazing job, probably the best in all of high-tech."

But Amazon has amassed so much power that Chambers strongly suggests it has been generally bad for businesses.

"But whether you're in books, or whether you're in groceries, or whether you're in retail, or whether you're in finance, they're likely to be your competitor," he said. "If you are depending upon them for your technology solution, and they're also very likely to be your competitor, and they control the evolution of how they use this technology, then you lose control of your destiny."

But while he concedes that Amazon is the undisputed king of the cloud, Chambers sees opportunities to break its stranglehold on tech in the next big battleground: edge computing.

That's the new technology trend that allows devices, including PCs, tablets and smartphones, and sensors used in factories, self-driving cars and planes to get quick access to on-board computing power even while connected to cloud-based networks. Instead of the devices having to transmit data for processing and insights to data centers in another location, edge computing enables them to get faster access to computing power often in real time. 

'Software-defined everything'

It's an arena where Pensando essentially plans to flood the zone with a host of new products. The startup plans to roll out "a tsunami of technologies," Chambers said. Pensando is focused on offering edge products for computing, networking, storage and security. "It's largely software," Chambers said. "Think of it as software-defined-everything."

Pensando is pushing into this market with help from big partnerships that no doubt it is able to form thanks to Chambers' stature. Chambers spoke of building an ecosystem with "top customers like Goldman Sachs." He also said: "We're going to move with top players and storage like NetApps, move with top players in technology like HPE, and move in terms of top service providers because they want to be able to control their own destiny."

He did not mention Cisco, where Pensando's founders — Mario Mazzola, Luca Cafiero, Prem Jain, Soni Jiandani — were once top executives and engineers under Chambers. Three of them left in 2016 due to disagreements over the reorganization under new CEO Chuck Robbins and went on to start Pensando the following year. Other Cisco executives have left to join the Pensando team.

Robbins has downplayed the impact of the departures. "Those guys are great engineers, and they build great technology," he told Business Insider in a recent interview. But he said what they're building is "not some directly in your face kind of solution to Cisco. So I wish them well and I hope they do great."

Asked about the way the Pensando founders ended their Cisco stints, Chambers said, "When I left Cisco, I made a commitment to myself, I would not ever comment about Cisco, good or bad...I have deliberately allowed my successor to set his own course and for me not to comment on it."

But Chambers also said the platform Pensando hopes to build would include major players in tech. "I would be surprised if any infrastructure player doesn't want to be part of this," he said. "And you can assume we're talking to them all."

If Pensando succeeds in building a vibrant edge computing platform, Amazon will face a serious challenge in a new battlefield where it doesn't enjoy a clear advantage.

"When you go to a market transition, almost never does the leader in the prior transition lead in the next," Chambers said. And he said in a fast-changing market, the fresh ideas typically come, not from traditional legacy players, but from newcomers.

"Most innovation does not come from the incumbent who's been out there more for than 10 years," he said. "It almost always comes from startups."

Got a tip about Pensando, Amazon 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.

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