Juniper had a Wall Street event earlier this week and analysts used terms like “constructive” and “realistic” to describe what the company said. The central focus in a technical sense was SDN and the cloud, not separately as much as in combination. Juniper’s estimates for growth through 2019 were slightly ahead of Street consensus, so the question is whether the characterizations of Street analysts are justified, not only for Juniper but for other wannabe network vendors still chasing the market leaders.
Juniper isn’t alone in saying that the cloud, and the SDN changes likely to accompany it, are going to drive more revenue. The view of most network vendors is that sure, “old” model spending is under pressure, but “new” model spending will make up for it. There are of course variations in what constitutes the old and new, but I think it’s fair to say that most vendors think the cloud and SDN will be a growth engine. How much of an engine it will be, IMHO, depends on how effectively vendors address the drivers that would have to underpin the change.
Let’s start with the optimistic view. If my model is correct, carrier cloud (driven by SDN and NFV) would add over 100,000 new data centers globally. All of these data centers would be highly connected via fiber, and obviously they’d be distributed in areas of heavy population and traffic. If we were to see these data centers as deployed purely for cloud computing, that in itself would generate a decent opportunity for data center interconnect (DCI).
If we presumed these data centers were driven more by SDN and NFV it could get even better. For example, if all wireline broadband were based on cloud-deployed vCPE, then all wireline access traffic would be aggregated into a data center, which means that it would be logical to assume that almost everything in wireline metro aggregation would become a DCI application. And given that mobile infrastructure, meaning IMS and EPC, would also be SDN/NFV-based, the same would be true on the mobile side. All of that would combine to create the granddaddy of all DCI opportunities, to the point where most other transport fiber missions except access would be unimportant.
If I were a vendor like Juniper with a commitment to SDN and the cloud, this is the opportunity I’d salivate over, and shortly after having cleaned myself up, I’d be looking at ways to promote this outcome in infrastructure/market evolution terms. It’s here that problems arise, for Juniper any anyone else who wants to see a DCI-centric future.
The media loves the cloud, but the fact is that even Amazon’s cloud growth hasn’t been able to get cloud computing much above the level of statistical significance in terms of total global IT spending. We still have a lot of headroom for growth, but if we assume that enterprises’ own estimates of cloud penetration are accurate, we would probably not see cloud computing generating even a fifth of that hundred thousand data centers. Most significantly, cloud computing doesn’t drive the edge-focused deployment of data centers that SDN and NFV do, and thus doesn’t compel the same level of interconnection. You have fewer bigger data centers instead.
There is nothing a network equipment vendor can do to promote “traditional” enterprise cloud computing either. This arises from the transfer of applications that fit the cloud profile out from the data center, and how a network vendor could influence that is unclear to say the least. For network vendors, in fact, the best way to promote cloud computing growth would be to get behind a cloud-centric (versus mobile-connection-centric) vision of IoT. Network vendors don’t seem psychologically capable of doing that, so I think we’d have to put encouraging cloud computing as the driver for our DCI explosion off the table.
SDN as a driver, then? Surely SDN and the cloud seem to go together, but the connection isn’t causal, as they say, in both directions. If you have cloud you will absolutely have SDN, but you can’t promote cloud computing just by deploying SDN unless you use SDN to frame a more agile virtual-network model.
This is a place where Juniper could do something. Nokia’s Nuage SDN architecture is in my view the best in the industry as a unified SDN-connection-layer model but Juniper’s Contrail could be the second-best. Juniper even has controller federation capability to allow for domain interconnection. The problem for both vendors seems to be that SDN used this way would transform networks away from traditional switching/routing, and so it could hasten the demise of legacy network revenues. Would SDN make it up? Perhaps it would change market leaders, but it’s hard to say why operators would adopt SDN on a large scale as a replacement for traditional L2/L2 if it were more expensive.
Which gets us to NFV. NFV as a means of creating agile mobile infrastructure is the most credible of the evolutionary-NFV applications. The challenge is whether a vendor who isn’t a mobile-infrastructure player can drive the deployment, especially given that Ericsson, Huawei, and Nokia all have NFV stories to tell. Obviously, any major mobile-infrastructure NFV could create an explosion in the number of cloud data centers and drive DCI, but fortune would likely favor vendors who were actually driving the deployment.
The big thing about NFV data centers is the potential they’d be widely distributed and that they’d be natural focus points for service traffic. That, as I said up front, is what would make them revolutionary in DCI terms. The obvious question is whether the mobile-infrastructure players who could drive the change would benefit enough from it—data centers would house servers after all, and DCI replacement of traditional metro infrastructure would impact most of the big vendors by cutting switching/routing spending even faster (and further).
Ericsson and Cisco would seem to have an edge here because they have a server and data center strategy that would give them an opportunity to gain revenue from a shift to hosted, DCI-centric, metro infrastructure. Ericsson has also been a strong player in professional services, and Cisco’s quarterly call this week showed they had a significant gain in professional services and that they are stressing data center (UCS and the cloud) infrastructure in their profit planning. In fact, Cisco is making a point of saying they are shifting to a software and subscription revenue model even for security.
Conceptually, smaller players in an industry should have first-mover advantages, but in networking in general (and with Juniper in particular) the smaller players have been at least as resistant to change as the giants. Juniper actually launched a software-centric strategy at a time when Cisco was in denial with respect to just about every network change—the recognized transformation and the cloud at least two years earlier than the industry at large and they had some product features (like separation of control and data plane) that could have given them an edge. They just didn’t have the market mass or insight to make good on their own thought leadership.
That’s what will make the DCI opportunity difficult for any second-tier vendor. The drivers of the opportunity are massive market shifts, shifts that will take positioning skill, product planning, and just plain guts to address. Especially now, because the giants in the space have awoken to the same opportunity.