These are the times that try the souls of networking sales management. Most of you know that I have an ongoing dialog with salespeople in many companies, and that dialog says that network spending overall is under pressure. Legacy infrastructure investment is slow-rolling because of ROI issues, and vendors who have presented next-gen architectures have failed to make a business case for their deployment. In SDN/NFV, all the sales people tell me that they are undershooting their goals. Cisco, Juniper, and even Brocade have reported anemic spending by network operators, and Wall Street isn’t liking the equipment space. What can be done? I asked some of my operator contacts to find out.
Business as usual isn’t, or shouldn’t be, on the list of options. In 2013 when SDN and NFV were getting a lot of early attention, there was a chance of redefining networking in such a way as to preserve a great deal of the legacy equipment model. That opportunity has passed forever at this point, as both vendor financial performance and operator architecture evolution has shown. However, vendors should still (as I’ve noted in prior blogs) provide specific support for opex reduction to reduce the pressure on capex.
Capex for connection technology, at Levels 2 and 3 of the “true” OSI model, is expected to decline for as far out as operators have any visibility. Initially, operators expect to slow-roll spending on these layers and put price pressure on vendors (outside the US, shifting to Huawei is a popular approach). In the longer term, they expect to move to “gray” and “white” boxes, meaning commodity devices that would increasingly include server-hosted switch/router instances.
Even at Level 1 (optical) operators aren’t expecting to generate a near-term windfall, which comes as no surprise to the optical vendors I’m sure. My contacts tell me that operators have been prepared to shift spending downward providing that the optical vendors presented a strong architecture to reduce costs higher up. That means shifting functionality downward to a “virtual wire” layer and perhaps facilitating the virtualization of Levels 2/3. The operators tell me that optical vendors have not been prepared to define that strong architecture, so optical spending is stuck in the general ROI backwater generated by continuing profit-per-bit pressures.
One clear operator reaction to the problem is “elevation”, as one CFO calls it. Instead of focusing on infrastructure changes (for which nobody is presenting a credible model), the operators are focusing on plastering a service-and-operations skim coat over the cracking foundations. This process can be as casual as offering portal-based solutions for customer care, which have to be linked to current operations and management systems, or as sophisticated as end-to-end orchestration to unify legacy technology with the various service-specific flavors of SDN and NFV now gaining favor.
Vendor reactions aren’t quite this clear, but perhaps they should be. If you ask operators what vendors should do, they present the following points.
First, present a model-driven top-end to their legacy, SDN, and NFV offerings that can be incorporated into an end-to-end orchestration (EEO) element. The number one issue with operators is preventing siloization of operations and management processes so they can harmonize their “skim coat” solutions with their evolving infrastructure. Their number two issue is agile service development, and they see the EEO-to-network link as being critical in addressing both agility and silos. It’s less important at this late point for vendors to promote a “complete” strategy (which in any case collides with the operators’ open vision) than to fit into an EEO scheme.
Operators, especially those who had taken the trouble to articulate their approach to network evolution, have been somewhat surprised by vendors’ lack of enthusiasm in supporting the initiatives. The need to integrate with EEO is absolute, the value to vendors themselves should be clear (you can fit your stuff in if you conform, and you cannot if you do not), yet there’s no rush to define the necessary models.
The second recommendation of operators is get VNF and software vendors to promote realistic license practices. Some operators claim that if you were to apply the VNF license policies to vCPE services to businesses, the cost to operators would be higher than that represented by appliances. These same operators believe that NFV kingpins have packed their partner programs with vendors who envisioned NFV as being just another dimension of the old gravy train. They want open-source VNFs now, but they’d accept license terms that didn’t totally contaminate their business case.
Part of this issue seems to arise from the fact that many VNF providers aren’t appliance vendors and have no experience with that side of the market. If you don’t realize that your customers have been selling firewalls (for example) for decades, you might be forgiven for thinking that their desire to sell firewall VNFs is your chance to make your numbers. Revenue-sharing, one vendor put it. Taking advantage, one operator responds.
The third recommendation is think gray. Operators see established network equipment vendors refusing to develop commodity switching/routing solutions or OpenFlow switches to protect their network equipment sales. According to the operators, that will only accelerate the development of credible white-box competitors. If instead, established vendors brought out lightweight intermediary “gray box” devices with optional proprietary features that would help make the business case or support orderly evolution, they could win acceptance.
Most of the major vendors have dismissed white-box networks, and yet operators have been increasingly committed to them, in no small part because they see vendors’ lack of acceptance as new evidence of manipulative intransigence. The problem, though, is that operators say that even white-box or hosted-instance vendors present their stuff as one-off alternatives to switches and routers and not as a part of an architectural shift. Operators say that the shift is the goal, and one-off-ness isn’t an option.
No industry willingly accepts radical transformations to its business model, but when the driver of change comes from outside, when the evidence that change is needed is overwhelming, and when buyers start to take defensive actions as a result of the forces of change, it’s time to make the best of things. We seem to be at that point now.