The Server Giants and NGN

Next year is going to be pivotal in telecom, because it’s almost surely going to set the stage for the first real evolution of network infrastructure we’ve had since IP convergence twenty years ago.  We’re moving to the “next-generation network” everyone has talked about, but with two differences.  First, this is for real, not just media hype.  Second, this “network” will be notable not for new network technology but for the introduction of non-network technology—software and servers—into networking missions.

Today we begin our review of the network players of 2015 and beyond, focusing on how these companies are likely to fare in the transition to what’s popularly called “NGN”.  As I said in my blog of December 19th, I’m going to begin with the players with the most to gain, the group from which the new powerhouse will emerge if NGN evolution does happen.  That group is the server vendors, and it includes (in alphabetical order) Cisco, Dell, HP, IBM, and Oracle.

The big advantage this group has is that they can expect to make money from any network architecture that relies on hosted functionality.  While it’s often overlooked as a factor in determining market leadership during periods of change, one of the greatest assets a vendor can have is a justification to endure through a long sales cycle.  Salespeople don’t work for free, and companies can’t focus their sales effort on things that aren’t going to add to their profits.  When you have a complicated transformation to drive, you have to be able to make a buck out of the effort.

The challenge that SDN and NFV have posed for the server giants is that the servers that are the financial heart of the SDN/NFV future are part of the plumbing.  “NFVI” or NFV Infrastructure is just what you run management, orchestration, and virtual network functions on.  It’s MANO and VNFs that build the operators’ business case.  So do these server players try to push their own MANO/VNF solutions and risk limiting their participation in the server-hosted future to those wins they get?  Do they sit back to try to maximize their NFVI opportunity and risk not being a part of any of the early deals because they can’t drive the business case?

The vendor who’s taken the “push-for-the-business-case” route most emphatically is HP, whose OpenNFV architecture is the most functionally complete and now is largely delivered as promised.  A good part of HP’s aggression here may be due to the fact that they’re the only player whose NFV efforts are led by a cloud executive, effectively bringing the two initiatives together.  HP also has a partner ecosystem that’s actually enthusiastic and dedicated, not just hanging around to get some good ink.  HP is absolutely a player who could build a business case for NFV, and their OpenDaylight and OpenStack support means they could extend the NGN umbrella over all three of our revolutions—the cloud, SDN, and NFV.  They are also virtually unique in the industry in offering support for legacy infrastructure in their MANO (Director) product.

Their biggest risk is their biggest strength—the scope of what they can do.  You need to have impeccable positioning and extraordinary collateral to make something like NFV, SDN, or cloud infrastructure a practical sell.  Otherwise you ask your sales force to drag people from disinterested spectators to committed customers on their own, which doesn’t happen.  NGN is the classic elephant behind a screen, but it’s a really big elephant with an unprecedentedly complicated anatomy to grope.  Given that they have all the cards to drive the market right now, their biggest risk is delay that gives others a chance to catch up.  Confusion in the buyer space could do that, so HP is committed (whether they know it or not) to being the go-to people on NGN, in order to win it.

The vendors who seem to represent the “sit-back” view?  Everyone else, at this point, but for different reasons.

Cisco’s challenge is that all of the new network technologies are looking like less-than-zero-sum games in a capital spending sense.  As the market leader in IP and Ethernet technologies, Cisco is likely to lose at least as much in network equipment as it could hope to gain in servers.  Certainly they’d need a superb strategy to realize opex efficiency and service agility to moderate their risks, and Cisco has never been a strategic leader—they like “fast-followership” as an approach.

Dell seems to have made an affirmative choice to be an NFVI leader, hoping to be the fair arms merchant and not a combatant in making the business case for NGN.  This may sound like a wimpy choice, but as I’ve noted many times NGN transformation is very complicated.  Dell may reason that a non-network vendor has little chance in driving this evolution, and that if they fielded their own solutions they’d be on the outs with all the network vendors who push evolution along.  Their risks are obvious—the miss the early market and miss chances to differentiate themselves on features.

IBM’s position in NFV is the most ambiguous of any of the giants.  They are clearly expanding their cloud focus, but they sold off their x86 server business to Lenovo and now have far less to gain from the NGN transformation than any of the others in this category.  Their cloud orchestration tools are a strong starting point for a good NFV MANO solution, but they don’t seem interested in promoting the connection.  It’s hard to see why they’d hang back this long and suddenly get religion, and so their position may well stay ambiguous in 2015.

Oracle has, like HP, announced a full-suite NFV strategy, but they’ve yet to deliver on the major MANO element and their commitment doesn’t seem as fervent to me.  Recall that Oracle was criticized for pooh-poohing the cloud, then jumping in when it was clear that there was opportunity to be had.  I think they’re likely doing that with SDN, NFV, and NGN.  What I think makes this strategy a bit less sensible is that Oracle’s server business could benefit hugely from dominance in NFV.  In fact, carrier cloud and NFV could single-handedly propel Oracle into second place in the market (they recently slipped beyond Cisco).  It’s not clear whether Oracle is still waiting for the sign of NFV success, or will jump off their new positioning to make a go at market leadership.

I’m not a fan of the “wait-and-hope” school of marketing, I confess.  That makes me perhaps a secret supporter of action which makes me sympathetic to HP’s approach more than those of the others in this group.  Objectively, I can’t see how anyone can hope to succeed in an equipment market whose explicit goal is to support commodity devices, except on price and with much pain.  If you don’t want stinking margins you want feature differentiation, and features are attributes of higher layers of SDN and NFV and the cloud.  If those differentiating features are out there, only aggression is going to get to them.  If they’re available in 2015 then only naked aggression will do.  So while I think HP is the lead player now even they’ll have to be on top of their game to get the most from NGN evolution.