Even if every datacenter in the world dumps its Cisco switches, the company can continue to prosper, according to a Forrester analyst.
Cisco Systems Inc. (Nasdaq: CSCO) released unhappy news in its first-quarter earnings last week. The company had warned that revenue growth was going to be below analyst expectations, and that warning became reality. However, the first-quarter results are "an inflection point in an undulation" that returns to growth with a change in strategy, rather than "a parabolic upside down curve," said Forrester analyst Andre Kindness in a blog post, "The Flash Blindness Caused By SDN Hype Keeps Many From Seeing Cisco's Growth Path."
Observers predicting doom for Cisco focus on software defined networking (SDN) and cloud infrastructures, Kindness says. They assume all datacenters will look like Google's, even though nobody outside of Google really knows what Google's datacenters are like.
But let's say every datacenter switches to white box components and dumps Cisco's more expensive switches, both in the enterprise and the cloud, Kindness says. Cisco can continue to prosper and grow because the networking business itself is about to explode, driven by the Internet of Things.
For example, the typical North American or European home now has one Internet connection with a consumer router and built-in access point with eight ports for printers, TVs, mobile devices, and so on. Over the next 10 years, that same home will need over 400 ports, serving a plethora of devices including air duct register actuators, security cameras, lightbulbs, door locks, window tint, soil moisture, and mineral sensors. The network will need sophisticated security, resilience, and acceleration, inherent characteristics of the kinds of devices Cisco cells.
And homes are simple places compared with enterprises; businesses will need two or three orders of magnitude more ports than homes. Business facilities are being built with tens of thousands of flow, heat, pressure, and other sensors, with Ethernet connections feeding information to process engineers on the other side of the world.
Datacenter ports will simply become less relevant, accounting for less than a quarter of the total ports in a typical enterprise infrastructure, Kindness says
Even if Cisco loses all its datacenter network business to white box switches, it will still "remain the networking juggernaut vendor," because white box switches aren't adequate for the needs of the Internet of Things. "Unlike datacenters, where there is a perfectly controlled environment with a standard set of factors, the edge of the network at a manufacturing site, hospital, retail store, or power substation is a complex, harsh, and dynamic environment where virtualized network functions sitting on server or Linux software on a Broadcom switch won’t cut it," Kindness says.