Long story short: I think that, in the next year, we will see a marked shift toward subscription pricing. Amazon pushing subscriptions. Dollar shave club for X. Same for Cisco - getting recurring revenue through security/SDN/SaaS subscriptions rather than one-time hardware sales seems to be a safer long-term bet.
That's a logical pivot; I'm slightly surprised they didn't try beefing up their extended support or doing a soft rollout first. Did they lay any groundwork or expectations for migrating their platform?
Yup. For a few years at least until business see the TCO and realize that these services aren't cost-effective at scale.
It's already happening. Several examples come to mind, but for now I'll use one that is relevant to Cisco: Palo Alto Networks offers several subscription based services for its security/networking hardware.
IPS and URL filtering have always been a subscription model though.
It's like this already -- you pay yearly maintenance fees for access to software upgrades. If you let it lapse and then want to re-enroll, you're still on the hook for the lapsed time. Maintenance fees typically don't include your support contract fees, either.
To guess, I think it is because Cisco will pursue a strategy of software defined networking. That means more consolidated hardware development by fewer employees.
I don't think commodity hardware will fully replace all business of places like Cisco. For one, Cisco does have large contracts like the Chinese Government -- they helped build the "great firewall".
I have no idea how this shakes out. But multiple companies in the traditional skew/license business are having to adjust (as others stated) to a different world.