Adding Up the SDN Effect
4:50 PM -- Few customers have really plunged into software defined networking (SDN), but the technology is going to be a bigger fact of life for equipment vendors, and that's something to worry about.
Numbers from Brian Marshall, an analyst with ISI Group Inc. , seem to support that. In a report published Wednesday, Marshall claims that in five years, the capex budget of the "Web 2.0 Big Six" will equal that of AT&T Inc. (NYSE: T) and Verizon Communications Inc. (NYSE: VZ) -- roughly $37 billion.
(The big six are Amazon.com Inc. (Nasdaq: AMZN), Apple Inc. (Nasdaq: AAPL), eBay Inc. (Nasdaq: EBAY), Facebook , Google (Nasdaq: GOOG) and Yahoo Inc. (Nasdaq: YHOO).)
The analysis isn't talking about all service-provider capex, just the two big U.S. telcos. But considering how much concern AT&T's budget generated coming into 2012, it seems noteworthy that the Gang of Six could eventually wield purchasing power that could make or break vendors' quarters. (See Carrier Capex Could Rebound Quickly.)
The difficulty for equipment vendors is that while telcos sought out exacting standards and reliability, the Web 2.0 companies mainly want stuff to be cheap. That leaves Marshall "somewhat concerned longer-term by initiatives aimed at taking costs out of their IT infrastructure," he writes, citing Google and Yahoo's interest in OpenFlow, and Facebook's Open Compute Project. At Interop next week, I expect every switch and router vendor to be pitching an SDN story, arguing why the technology won't commoditize their markets. They could be right, but Marshall is probably correct in saying that a growing chunk of the business will be directed at customers who wouldn't mind a commoditized market. Vendors have to play along with SDN, but SDN isn't necessarily their friend.
— Craig Matsumoto, Managing Editor, Light Reading