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Microsoft Drops a Data Center Interconnect Bombshell

Ray Le Maistre
3/21/2016
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ANAHEIM, Calif. -- OSA Executive Forum/OFC 2016 -- Just as the data center interconnect (DCI) system market was taking off, one of the biggest potential buyers of dedicated DCI systems boxes, Microsoft, just wiped out a whole chunk of the market courtesy of an alternative R&D collaboration with optical components vendor Inphi Corp.

Speaking here at the OSA Executive Forum Monday afternoon, Tom Issenhuth, Optical Network Architect, Azure Networking, at Microsoft Corp. (Nasdaq: MSFT), laid out the hyperscale data center operator's DCI technology needs. All well and good -- the audience of about 250 attendees were suitably rapt.

But then he dropped the bombshell: For Microsoft's "sweet spot" of less than 80km inter-data center links, it has worked directly with Inphi to develop a new module that plugs directly into data center switches, obviating the need to deploy a dedicated DCI box.

The product developed by Inphi and as yet unidentified partners is a 100Gbit/s QSFP28 DWDM module that slots straight into data center switches from the likes of Arista Networks Inc. and Cisco Systems Inc. (Nasdaq: CSCO). Inphi and Microsoft are going to demonstrate the product and how it changes the DCI landscape during the OFC show here in Anaheim -- more details are set to become available Tuesday.

But the immediate implications of Microsoft's move are substantial.

For Microsoft, it cuts costs, from a capex and opex perspective: One less box in the chain means less power, space and fewer components.

For Inphi, a company that generated revenues of $246.6 million in 2015, the news that it is going to be delivering a new product to an enormous customer, starting during the second half of this year, looks set to move the needle on its share price, which closed Monday down 0.1% at $29.17, and its revenues.

And of course Microsoft might not be the only company that wants this product -- it is not exclusive to Microsoft. Light Reading asked Issenhuth if Microsoft had held discussions with the likes of Google (Nasdaq: GOOG) and Facebook about the development: He said they chat about general market developments but that this particular move was one it was leading on its own. But "if it works for us, it should work for them too."


For the latest developments in the hot DCI market, visit the dedicated data center interconnect content channel here at Light Reading.


And then, of course, there's the impact on the systems vendors such as ADVA Optical Networking (Frankfurt: ADV) , Ciena Corp. (NYSE: CIEN), Coriant , Fujitsu Network Communications Inc. , Infinera Corp. (Nasdaq: INFN) and Juniper Networks Inc. (NYSE: JNPR) (courtesy of its acquisition of BTI Systems), that have been developing and building dedicated DCI boxes to sell to the likes of Microsoft as well as the telcos. (See Juniper Flies Into DCI With BTI Acquisition.)

"This has potentially huge implications for the purpose-built DCI box vendors," stated Heavy Reading senior analyst Sterling Perrin. "They have built their products primarily for the Webscale companies, but Microsoft is essentially saying they don't need them, at least over these distances [80km or less]. And this could mushroom to Google and Facebook -- they could do things differently of course but even if this was just Microsoft, that's still a big hit to the DCI box market, which is still in its infancy. This looks like a big blow," added Perrin.

Look out for more details on this development on Tuesday.

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

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Curiousfellow
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Curiousfellow,
User Rank: Lightning
4/22/2016 | 12:19:53 PM
Pac Man
The name of the game is always incorporating the functionality of the adjacent products into your product. Nothing new here.

 

How many great companies were reduced to a generic chip set, some lines of code and soon forgotten?

 

If I understand it correctly, this is a racking issue, there will still be control, monitoring and management that have to occur. Which may be reduced to a simple "card present" and the "power is on", since data centers have 7x24 staff that can simply walk over and check the card or pop a new one in and see what happens. CRC ARQ is probably not occuring in the optical modue.

 

As stated below, the second question is how far are data centers from the Network they are connected to? I'm guessing not very far, like just off the highway or railroad or pipeline right of way with the burried fibre. For large enough data centers, it seems entirely likely that the long haul provider would be  more than happy to drop IP routers and DWDM gear they manage into the bunker as part of the deal. Or that Data Centers are in the same Industrial Parks as the Long Haul Carrier. There may be a second part of the deal involving long haul providers that we haven't heard about yet.

 

It might be interesting to look at how much of the server market is rented space or rented servers vs companies running their own bunker with their own servers?


Who can forget the C48EF and 801 or the AT Hayes Command Set.

 

What about MBI or Wang word processors?

 

 
jaochan
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jaochan,
User Rank: Lightning
3/24/2016 | 12:09:40 AM
Microsoft Professional Support
I completly agree with the OP. With MS taking such keen interest in this area, some dramtic change will follow.
agaliana
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agaliana,
User Rank: Light Beer
3/23/2016 | 8:16:04 PM
Re: Direct Detect for DCI
How is this markedly different than using CWDM/DWDM "colored" optics directly in L2/3 devices going through a passive mux/dmux? These sorts of optics have been around for many years. None of these products killed DCI hardware. In fact, DCI grew and developed in parallel to these types of "lightweight" solutions.
brooks7
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brooks7,
User Rank: Light Sabre
3/23/2016 | 7:52:59 PM
Re: Direct Detect for DCI
From my standpoint it is pretty easy.  How are the announcements (if they both work out) likely to change market shares?

In one case, a product category might be eliminated before it becomes a significant market and the product category was thought to be up for grabs (lots of new investment).

In the other, a company might be able to change some market share in existing market for which we don't see a lot of new choosing of vendors.

Let us ask it this way...will Infinera's announcement cause any new RFPs to be written?  

I think that is why there is lots of discussion of one and not of the other.

seven

 
tojofay
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tojofay,
User Rank: Light Sabre
3/23/2016 | 2:58:45 PM
Re: Direct Detect for DCI
Here is another question Sterling: why would this announcement by Microsoft pertaining to what is about 7% of the metro market today overshadow and dwarf the annoucement of INFN's Infinate Capacity Engine that stands to be much more impactful in terms of deployment and network evolution?

Inphy's design for limited distance DCI connect a "bombshell"- INFN's INFINATE CAPACITY ENGINE a blip 

 
Sterling Perrin
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Sterling Perrin,
User Rank: Light Sabre
3/23/2016 | 11:37:40 AM
Direct Detect for DCI
The Microsoft announcement is generating a lot of buzz and debate on the exhibit floor at OFC. Everyone (including me) is speculating on the future implications for the emerging purpose-built metro DCI boxes. 

Suppliers selling external DCI boxes into Microsoft will take a hit. Tom Issenhuth stated that plan A will always be integrated direct detect and plan B will be coherent, if reach is an issue.

It is clear that there will always be a need for coherent DWDM in metro DCI and so there will continue to be a need for external DWDM. Operators won't waste their switch/router real estate by directly adding coherent optics - so these will go on external boxes.

One question is: will this breathe new life into the 100G direct detect market that largely fell away when coherent 100G came out? (It seems that this is likely)

A second question is: will other webscale providers follow Microsoft's lead in integrated direct detect? Microsoft made clear they did this on their own. It is a big unknown whether other webscales will follow.

Sterling

 
brooks7
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brooks7,
User Rank: Light Sabre
3/22/2016 | 12:02:10 PM
Re: Arista and Cisco
Your assumption is that somebody is leasing dark fiber from coast to coast.  If they are buying a L2 or L3 service, then they only need connection to the service provider - which is probably less than 80km.

seven

 
jbtombes
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jbtombes,
User Rank: Light Sabre
3/22/2016 | 11:40:20 AM
Re: Arista and Cisco
Q1: Are we talking regional/campus for sub 80km? Or links between in-house and a third-party data centers? Can't be geographically redundant, East Coast/West Coast scenario. That would break the 80km budget.
rgrutza600
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rgrutza600,
User Rank: Light Sabre
3/22/2016 | 11:18:30 AM
Re: Arista and Cisco
I am doubtful that it can be used out to 80km, let alone further.
mendyk
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mendyk,
User Rank: Light Sabre
3/22/2016 | 10:59:31 AM
Re: Arista and Cisco
Two questions -- first is, how many DCI applications fall within the 80km limit? Second is, what are the prospects for the maximum distance to be expanded?
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