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Cisco CEO: It's Early Days for Virtualization

News Analysis Dan Jones, Mobile Editor 2/26/2014

BARCELONA -- Mobile World Congress 2014 -- Cisco CEO John Chambers says that network virtualization is an essential part of the company's future but that it is still "early days" for the technology.

Chambers tackled SDN and NFV as part of a wide range of topics at a media roundtable here in Barcelona.

"I think you will see us embrace software-defined networking and network functions virtualization and emerge as the leader in both but as part of an architecture," Chambers said. "It's still very early days." (See Cisco Sees NFV as a Key to New Sales.)

SDN and NFV refer to the idea of being able to provide network functionality on standard servers without the need for custom hardware. (See Defining SDN & NFV.)

Helping Chambers field questions was Kelly Ahuja, SVP and GM of Cisco Systems Inc. (Nasdaq: CSCO)'s mobility business group, who stressed that orchestration automation and optimization were both part of the virtualization picture.

Cisco, of course, has been pulling together these pieces for a while. Cisco told us in October last year that more than 20 Asian operators have been testing its Quantum SON self-optimizing network technology. (See The SON Always Shines on LTE.)

Chambers said that the trend towards software platforms has been changing the company's spending and acquisition priorities. "I think it already has shifted quite dramatically," he commented, while noting that 85% of Cisco's engineers have always been involved with software.

— Dan Jones, Mobile Editor, Light Reading

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dapperdave 3/20/2014 | 4:00:19 PM

Re: Cisco's HW-based strategy is actually SW-centric While 85% of Cisco's engineers are software engineers, they're developing on platforms that are ASIC-based. Cisco's value prop over the past three decades has been based upon hardware-acceleration of its control and forwarding/filtering engines... with that HW accel offerred through custom Cisco ASICs (APIC is a perfect example). I dont think this customized hardware value prop is going to change much in core networks or ToR, MoR, EoR switches. Whether in the enterprise or SP. Cisco is safe there for a good while.

Where Cisco will get initially drilled is networking at the edge, where competitive service agility will override the previous performance mantra. Nicira at the DC edge IMHO has a pretty impressive value prop related to service agility and netwowrk mgmt opex reduction.

Likewise, service agility and opex savings requirements are driving WAN edge vendors to embrace the substantial benefits of orchestration in general and NFV/SDN in particular. But at the WAN edge (again, IMHO), big SPs and enterprises will glacially embrace ... only after the other "pioneers" embrace it. Smaller MSPs will be the early adopters - offering managed services that deliver the opex and service agility benefits now - to SMBs. SMBs dont care how this gets done. They just want their MSPs to give them higher service velocity at a lower price. NFV is part of the puzzle that allows that capability in the MSP-->SMB market today.

Dave Corley

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DanJones 2/28/2014 | 11:57:43 AM

Re: Cisco's HW-based strategy is actually SW-centric Yeah, he made the point that it would be really hard for another company to compete with Cisco in the breadth of areas that they cover in the networking space in general.

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mendyk 2/28/2014 | 8:19:24 AM

Re: Cisco's HW-based strategy is actually SW-centric I agree with you regarding Cisco's macro strategy and the buying tendencies of operators. For Cisco to continue to grow in a meaningful way, it does need to continue to expand its customer base, and the key to that growth is in selling its hardware given the strategy of tying its SDN/NFV initiative to Cisco boxes. If COTS boxes do prove capable of handling NFV for telcos, then Cisco's strategy may backfire. But of course it could always change.

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t.bogataj 2/28/2014 | 3:47:19 AM

Cisco's HW-based strategy is actually SW-centric Cisco bets with confidence on two things.

First, locking their customers by providing features that depend on their HW. Just peek at their 9000 series, and what's contained in their APIC.

Second, they know that most operators love to be locked (whatever they say otherwise). Given the current restructuring of CAPEX (shift from HW to SW) for SDN/NFV gear, Cisco expects relatively more revenue for SW (which runs on their HW). As Infonetics' reports and surveys show, 95% of operators expect to obtain SW from their existing big telecom equipment manufacturers.

That's good enough for Cisco.

T.

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SachinEE 2/27/2014 | 5:35:29 AM

CEO knows best Virtualization for communication is still a shaky subject and needs further research. Although working models are emerging, they are simply too unsecure to be put to the market. Unless we find a stable ground of implementing the virtual space into communication and mobile systems, every CEO will feel unsure of the companies direction into virtualization.

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danielcawrey 2/26/2014 | 3:27:44 PM

Re: Natural Evolution I agree with FakeMitch here. Chambers has to tread carefully, and so far he is doing that job well.

Cisco cannot alienate its old school roots, and the 85% figure on software lends itself to that. In order to move forward the company also has to remain true to its legacy.

For now.

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DOShea 2/26/2014 | 2:20:10 PM

Re: Natural Evolution There's no proof Cisco or traditional hardware vendors have lost anything yet. That is another thing that makes the "early days" comment more accurate than dubious. Maybe, just maybe, we will see things change with AT&T Supplier Domain program, which already has offered up one surprise, but we need to see more evidence. Carriers have to prove they won;t let themselves be locked into Cisco.

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mendyk 2/26/2014 | 11:38:40 AM

Re: Natural Evolution This is not likely to be a binary process. Cisco's customers will expect NFV, and Cisco will deliver it, apparently on its own terms. If operators decide to keep CSCO, then anything they do with new installations (i.e., without Cisco gear) will simply add to network complexity, which is what they want to avoid. Unless Cisco (and some other vendors) change strategy, operators may still end up being locked into their suppliers. Either that or make things more complicated for themselves. I think this will require more than one "article" to explore.

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Carol Wilson 2/26/2014 | 11:31:37 AM

Re: Natural Evolution You make a good point - Cisco actually contributed much of the code that underlies OpenDaylilght's "open" SDN controller platform, Hydrogen. But it's interesting that the folks making the most noise about using that platform are IBM and Ericsson.

I'm not engaged in covering Cisco on the enterprise side, but on the telecom network operator side, teh story is muddy indeed. As Chambers says, this is early days and there is time for things to sort out.

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Mitch Wagner 2/26/2014 | 11:28:39 AM

Re: Natural Evolution

I can't imagine that service providers will want to tear out their Cisco boxes. Rip and replace is always a hard sell.

Actually, it's an impossible sell.

What I do see happening is that service providers will want to install SDN and NFV on new equipment as they expand their networks and replace old equipment.

The networks will go to SDN and NFV, but only as old equipment becomes obsolete and networks expand.

I see established companies like Cisco, HP, IBM, Juniper, etc. having an advantage in that area over virtualization-specific startups. The established companies have a breadth of existing technology and partnerships that startups can't match.

I may or may not be working on the article on this.

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