Cisco said it will spend the amount to build data centers to help run the new service called Cisco Cloud Services.
Cisco, which mainly deals in networking hardware, wants to take advantage of companies' desire to rent computing services rather than buying and maintaining their own machines.
(Read more: Cramer sees bigcloud on the horizon - CNBC.com)
The company said it plans to deliver the service with and through partners including Australian telecom service provider Telstra, tech distributor Ingram Micro, and Indian IT company Wipro.
"Customers, providers and channel partners ... want to rapidly deploy valuable enterprise-class cloud experiences for key customers—all while mitigating the risk of capital investment," Rob Lloyd, Cisco's president of development and sales, said in a statement.
Cisco's plans were first reported by The Wall Street Journal.
Enterprise hardware spending is dwindling across the globe as companies cope with shrinking budgets, slowing or uncertain economies and a fundamental migration to cloud computing, which reduces demand for equipment by outsourcing data management and computing needs.
Shares of Cisco, which closed at $21.64 on Friday on the Nasdaq, were up 0.28 percent at $21.70 in pre-market trading on Monday. (Click here for the latest quote.)
(Read more: Cisco tops earnings expectations, boosts dividend)