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Summary:

Cisco spin-in Insieme comes back to the mother ship as the multi-front battle with SDN rivals VMware et al. roils on.

Cisco Nexus 9000 Switch Family

Cisco CEO John Chambers traveled to New York City for Wednesday morning’s launch of new products key to Cisco’s SDN story and, oh, by the way, to announce that Cisco is bringing Insieme, the spin-in dedicated to SDN, back in house.

john_chambersThat tidbit was buried 4 pages into the  press release announcing a new Series 9000 switch family and the Application Policy Infrastructure Controller (APIC) designed to bring SDN goodness to them. Cisco invested $100 million in April 2012, and a year ago agreed to invest an additional $35 million provided Insieme hit certain targets. When Insieme is fully back in house, the maximum potential payout will be $863 million, according to Cisco.

But first the deliverables: The new Nexus 9508 switch is available now; smaller 9300 switches will come a bit later; and the APIC controller and the full NX-OS operating system to support it is due in April 2014. The APIC controller is Cisco’s answer to Nicira’s (owned by VMware) controller software, and the control point of the whole SDN layer cake. It’s also the product that Cisco hopes will act as the selling point for its entire stack of hardware and software.

In case you have not been following this story line, Cisco is a giant in the networking routers and switches industry that run the world’s data centers. Its revenue stream has largely depended on the sale of this high-margin hardware every couple of years to customers needing new features and functions. SDN changes that by offering features via virtualized apps running outside the Cisco hardware. There’s also a looming threat of companies buying white box hardware and switches that Cisco is responding to here, as well.

The hope is that with this application-centric infrastructure, companies will see the value in having Cisco software controlling everything and making sure it works all the way down the stack. So no need to look outside the Cisco fold — although with Cisco’s One-PK API outside companies can integrate their products into this Cisco stack.

My favorite quote comes from an unnamed source who told Business Insider that when Chambers asked what an embrace of SDN would mean to the company, was told it would turn Cisco’s “$43 billion business into a $22 billion business.” You see the problem.

The siren call of SDN

The allure of SDN — as pitched by Nicira, now part of VMware, Big Switch, and other newer companies — is that hardware devices can be reconfigured and updated via software, which means users can get updates and improvements without buying as much hardware. And, in theory, the hardware they use can be lower-end commodity stuff.

Clearly that’s a threat to networking hardware companies, not only Cisco but Juniper Networks and others, which have all scrambled to come up with SDN game plans.

So in the expectation that Cisco was going to (probably) finally disclose its Insieme game plan, last week, a flurry of SDN related press releases erupted: Last week, hot startup Cumulus launched a new release of its Linux-based operating system for commodity switches; Arista Networks unveiled new software for its switches and Big Switch announced a new CEO.

Slow-mo SDN rollouts

Analysts said the latest Insieme announcements are the latest in a trickle of news. Gartner analyst Andrew Lerner said ACI provides network flexibility via “template-based provisioning and infrastructure automation, delivered via a controller plus software that is baked into the switching hardware. “

That controller works with any virtualization software — a fact that Cisco stressed to me — and supports both physical and virtual devices in the same way, but requires new Cisco switching hardware, Lerner added.

Rival solutions like VMware’s NSX don’t care about the underlying network hardware but overlay it with software.

So basically Cisco says you need its new hardware to run its SDN — something that does not bother ZK Research analyst Zeus Kerravala. “There’s nothing wrong with that. It’s impossible to make the case where off-the-shelf commodity hardware will come close to the performance benefits of optimized hardware,” he said.

Current Analysis analyst Mike Fratto said Cisco may face pushback though because many customers will not want to upgrade all their Cisco hardware to get SDN benefits and there will likely be backward compatibility issues between the new gear and older Cisco hardware.

As of now, Fratto noted, what Cisco has delivered is just some new switches and that’s not a headline. “When they come out APIC in the second quarter of 2014 is where it gets interesting. “

In other words, the slow-mo SDN rollout continues.

Stacey Higginbotham contributed to this report.

  1. Barb,

    “In case you have not been following this story line, Cisco is a giant in the networking routers and switches industry that run the world’s data centers.”

    Keep in mind that players like Google and Facebook have been designing and building their own hardware for switching as well as servers in their own data centers (see Open Compute Project). This is being done because folks like Cisco and Juniper cannot provide the features they want in the time they require. They also are forced to buy a lot of extra baggage (ie. features) that they do not need.

    “There’s nothing wrong with that. It’s impossible to make the case where off-the-shelf commodity hardware will come close to the performance benefits of optimized hardware,”

    ASICs, Cisco’s specialty, are a way to obtain customer “loyalty”. A lot of merchant hardware out there can and will be able to provide great performance to the majority of the network world. Going forward it’s mostly about the software. The real question is if companies like Cisco are not going to be eaten alive by the Open community. The Open community can get things done much quicker than the closed enterprises. If they adapt they will survive. Cisco at least knows now that it needs to adapt. Let’s see if it can deliver.

    Paul

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  2. According to http://www.3anetwork.com research, 2013, the first quarter net sales of $11900000000, according to the general accounting standards (GAAP) net income of $2100000000, non GAAP and net income of $2600000000.

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