Light Reading

Embrane Helps Cisco Build Its SDN Strategy

Mitch Wagner
2/7/2014
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With its investment in Embrane, Cisco gets a stick it can use to whack VMware Inc. (NYSE: VMW).

Cisco Systems Inc. (Nasdaq: CSCO) plans to invest $6 million in the software-defined networking (SDN) startup, part of a C round of funding by Embrane Inc. that will exceed $12 million, according to a source familiar with the deal. (See Cisco Investing $6 Million in Embrane: Reports.)

So what's Cisco up to with this investment?

SDN is at first glance a big risk to Cisco, which makes its living selling expensive, proprietary networking hardware -- precisely the kind of thing SDN is designed to make obsolete. CEO John Chambers "asked his top executives to do an analysis on what would happen if Cisco plunged into the SDN market. They concluded it would turn Cisco's '$43 billion business into a $22 billion business,' our source said," according to a report on Business Insider.

But SDN can be good for Cisco, ZK Research analyst Zeus Kerravala tells Light Reading. The real cost for IT budgets isn't hardware; that's less than 10% of IT spending. Operational costs account for 30%, and customers will pay a pretty penny to simplify network management. "Making products easy is difficult to do," says Kerravala.

$6 million isn't actually a lot of money for Cisco.
$6 million isn't actually a lot of money for Cisco.

He adds: "Cisco is trying to create a seamless automated datacenter stack through use of a lot of integration. Customers will pay up for technology that makes things easy to manage."

To that end, "Cisco poured a lot of money into SDN," Kerravala says. "Most of their portfolio revolves around Layer 2-3. Now, with the Embrane investment, it gains a stronger foothold in the higher layers of the stack rather than the lower layers."

Part of that investment was on Insieme Networks, the "spin-in" that Cisco brought back into its fold when it unveiled its Application-Centric Infrastructure in November 2013. (See Cisco Unveils Application-Centric Infrastructure and Cisco's ACI Gets Physical With SDN.)

(Who's responsible for "naming strategy" at Cisco? Insieme sounds like the name of a snooty French tailor, while spin-in sounds like something a hippie does after tuning in and dropping out.)

Embrane's expanded universe
What does Cisco bring to Embrane (aside from 6 million clams, of course)? A customer base. "The market being opened up for Embrane is huge," Kerravala said.

Embrane was founded in late 2009 by Cisco alumni, with staff from other companies. Its products focus on delivering network services as software, including firewall/VPN, and load balancers with SSL offloading. Companies can spin up a firewall, for example, in 90 seconds.

The Santa Clara-based startup has 40 employees, but had to lay off a handful in November. While there are customers and demand for Embrane's technology, the company got ahead of itself in hiring, marketing VP John Vincenzo told Light Reading. "We thought the hockey stick was going to happen because the hype was there, but the hype was a detriment," he said.

Embrane raised $18 million in Series B funding in 2011, for a total investment of $27 million. When Embrane cut jobs, it said a Series C round was under way.

Earlier reports suggested that next investment would be $12 million, but our source says it will be greater than that. Embrane and Cisco declined to comment on any investment activities.

Current Embrane investors include New Enterprise Associates, Lightspeed Venture Partners, and North Bridge Venture Partners.

Initial customers were cloud providers, such as Sungard and Peer1, looking to compete with Amazon, Vincenzo said, adding that he hopes the company will be able to announce enterprise customers in a week or two.

Embrane's philosophy is that there are two camps in SDN: The hypervisor-centric camp comes out of the enterprise, building on the momentum of success deploying virtual machines. VMware is the leading vendor there.

The other camp is the networking team, which has until recently been a bottleneck in deployments. "The reason the network team is the bottleneck is that they haven't actually had the tools to be more efficient and dynamic," Vincenzo said. But they can be more responsive with the right tools.

— Mitch Wagner, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief, Light Reading. Got a tip about SDN or NFV? Send it to mwagner@lightreading.com.

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Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
2/13/2014 | 7:00:37 PM
Re: Who's responsible for naming strategy?
I grew up in New York. Italian-Americans were my neighbors and friends. The only language I learned from them is swear-words, though. 
sam masud
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sam masud,
User Rank: Light Sabre
2/11/2014 | 1:44:31 PM
Re: Klingon proverb
I see the hardware issue as capex, and management cost as opex.
DavidMcCullochCiscoPR
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DavidMcCullochCiscoPR,
User Rank: Light Beer
2/10/2014 | 6:03:34 PM
Re: Who's responsible for naming strategy?
Trust me, my British and Dutch roots were equally useless in deciphering our Italian friends' naming preferences. Luckily, I know people....
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
2/10/2014 | 5:58:30 PM
Re: Market timing
DOShea - That's the big problem with the hockey stick. If demand is failing to materialize, it could be you're early, and it could also be the product is a turkey. 

You can see the same problem with the Gartner Hype Cycle. 
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
2/10/2014 | 5:56:17 PM
Re: Who's responsible for naming strategy?
Way to make me feel like a provincial American, David McCulloch! :)

 
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
2/10/2014 | 5:55:15 PM
Re: Klingon proverb
Is proprietary hardware a big deal, or is management the real cost to customers?

 
sam masud
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sam masud,
User Rank: Light Sabre
2/10/2014 | 2:58:25 PM
Re: Klingon proverb
Whatever Cisco does at Layers 3 and above won't matter as far as SDN is concerned because it does nothing to resolve the tension arising from Cisco's proprietary hardware and SDN, which is about an open approach to the infrastructure.
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
2/7/2014 | 5:16:55 PM
Klingon proverb
Cisco is basically following the old Klingon proverb: Keep your friends close and your enemies closer. 
DOShea
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DOShea,
User Rank: Blogger
2/7/2014 | 11:19:32 AM
Re: Who's responsible for naming strategy?
Is it wrong that this makes me yearn for a startup to be named Osso Buco Networks?
DOShea
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DOShea,
User Rank: Blogger
2/7/2014 | 11:15:19 AM
Market timing
Re: Vincenzo's comments about the hockey stick, seems like we have been hearing that for some time now, yet there still seems to be so much certainty throughout the industry that there will be some huge market impact in another two years or so. Hope they're right.
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