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SDN Technology

Cisco Watchers Blinded by SDN

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.

— 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 [email protected]

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DOShea 2/26/2014 | 4:48:52 PM
Chambers This comes as Cisco CEO John Chambers reminded everyone ot MWC that SDN and NFV are still in their infancy. Maybe Cisco won't get run over by a virtual freight train after all.
Mitch Wagner 2/26/2014 | 6:18:45 PM
Re: Chambers

It will be interesting to see if Cisco can change its business model to suit the new reality. Incumbent companies often have difficulties with that.

jabailo 2/26/2014 | 7:11:32 PM
Do Clouds Dream of Electric Switches? It comes down to what is a cloud and does it use switches.  Sure, between cloud replicas it might, but within a single cloud?  Isn't that more like a tightly coupled racks of blade servers?   In fact, a single IP could represent it all (why not?)

So then you have the users.  If they are customers of Google's, using their office products and mail and G:drive and hosting.   They won't have the linux server and switch.  


mendyk 2/26/2014 | 7:54:21 PM
Um...no "Even if every datacenter in the world dumps its Cisco switches, the company can continue to prosper, according to a Forrester analyst."

This is an absurd statement, whether or not it came from an analyst.
R Clark 2/27/2014 | 5:48:08 AM
Next bubble? Is this a sign that we're exiting the SDN hype phase and moving into the IoT bubble?
@mbushong 2/27/2014 | 11:13:12 AM
Not doom but certainly headwinds There will always be people who predict the demise of the incumbent. That might be hyperbole, but there will certainly be headwinds. 

I actually don't think it's that Cisco is incapable of executing against an SDN strategy. They have proven they can develop products. And when in doubt, they have mastered the strategic acquisition.

But SDN is a new architecture. The new architecture reduces the need for the tomes of legacy features that have made it exceedingly difficult to get off the Cisco drug. With a new architecture, you get a more level playing field with lower barriers to entry. It's the increased competition that will whittle away share. Will it be 20 or 30 points? Probably not. But you could see a significant share movement over the next 3-5 years. 

The competition will also impact price, which can affect margins obviously.

Mike Bushong (@mbushong)

Plexxi
cwgservices 2/27/2014 | 11:17:47 AM
Re: Um...no @mendyk, I concur that it is absurd to think Cisco can prosper if every company in the world dumps their switches. Unless, of course, they dump the switches in favor of another Cisco product. If Cisco comes up with something totally new, or becomes the leader in their competitors' technology, all bets are off.
cwgservices 2/27/2014 | 11:25:20 AM
Re: Do Clouds Dream of Electric Switches? The cloud is certainly no longer new but it seems to me it still defies consistent definition. The reason is that it's more a marketing term than a technical one.

Are "tightly coupled racks of blade servers" a cloud? In the cloud? Part of the cloud?

What about a more traditional server farm, running lots of virtual private servers from a few high performance machines? Is that by definition not a cloud?

What about a single machine in someone's home or office that is operating as a 'cloud server'? Certainly somebody thinks that is a cloud, or part of one.

Very very muddy, the whole topic.
jabailo 2/27/2014 | 2:01:27 PM
Re: Do Clouds Dream of Electric Switches? What about a more traditional server farm...

Well, yes, of course.   People who have worked in IT with VPNs and Remote Desktops and Citrix have been cloudy for years!

And I too question the all-or-nothing delineation about clouds.   Does it evolve to a single cloud, or at some point does it breakdown into multiple clouds.

For me, I have always thought, and I'm seeing further evidence of this, is that we've moving towards a world where the entire application will reside, and run, inside the cloud, and only the screens will be sent back and forth.

Chromecast is an early incarnation of this, where you launch and app like Netflix from a standard tablet, but then the streaming happens between the cloud and the device.

At some point with 1G fiber, if we can get latencies down to less than a millescond, you would not even need a CPU in your home or office.   The connection would be like very long HDMI, mouse and keyboard cables going to a a computer "out there".
cwgservices 2/27/2014 | 2:12:23 PM
Re: Do Clouds Dream of Electric Switches? @jabalo, that 'new' architecture sounds an awful lot like having a big computer for your company and giving everyone a terminal and an account. Do you ever feel like we are just going in circles?
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