The Impacts of the New Cisco/Huawei Dynamic

Not surprisingly, Interop looks like it’s going to be all about the cloud.  Not surprisingly, a lot of the noise is nothing more than that, but there are some things emerging that might be indicators of real market shifts.  While the cloud is the focus, I don’t expect there to be much in the way of substance in the cloud announcements.  We’ll have to look deeper.

The most strategically significant announcement came from Huawei, who has launched a data center switching line and also a high-end telepresence system.  The combination of these two offerings is a lot more significant than either would be alone, but the data center switch offering is significant in itself.  In part this is because Alcatel-Lucent also announced an upgrade for its enterprise data center product, and because both Huawei and Alcatel-Lucent made the cloud connection clear.

On the switching side, the important thing here is that everyone is now accepting that the cloud is the justification for data center switching changes on a large scale.  Given that everyone had pretty much accepted that enterprise network equipment spending was going to be driven by data center trends, that makes the cloud the most important thing to seize in positioning.  Absent a cloud position, there’s little you can say about data center switching other than spout technology buzzwords, and that doesn’t play well in the media or with buyers.  Enterprises tell me that they need tech trends with business consequences to justify major IT changes of any sort, and the cloud is that thing.  Whether we like it or not, we’re in a cloud era.

The thing that makes Huawei’s switch and telepresence important when taken together isn’t symbiosis between the two (obviously; you don’t need telepresence from one end of the data center to the other!) but the implications on the competitive dynamic between Huawei and Cisco.  Chambers has been saying that Huawei is the guy to beat, and we now see one reason he might have done that.  Huawei is clearly going to go after the enterprise space by paralleling Cisco’s product line and riding on Cisco’s positioning coat-tails.

Cisco is on a roll, make no mistake.  Cisco has the best sales morale, which combines with good strategic positioning to mean that it is in a position to move the ball and get deals approved.  Huawei wants to step in at the deal-approval point and offer the buyer a big discount versus Cisco, which is a smart way to get into the game.  Other vendors in the space are likely to be collateral damage; this is a two-horse race unless somebody does something radical.

Who?  Alcatel-Lucent could take some of its CloudBand stuff into the enterprise, and in fact most of its carrier-specific cloud positioning could be applied well at the enterprise level.  I don’t think they’re going to do that at this point, because the best time would have been this week to coincide with their enhancement to their OmniSwitch products.  Juniper might have set the bar completely for the cloud positioning of data center products last year with its QFabric and PTX, but it booted it and there’s little chance they can ignite something new at this point.  F5 seems the most likely candidate among the smaller vendors, but I don’t think any small vendor can survive in this battle of the giants.  Cisco will set the agenda, Huawei will compete on price, and everyone else will likely watch from the sidelines and under-realize their goals.  The only hope for the next tier now is a killer positioning of data center switching with OpenFlow/SDNs, something that’s actually not only possible right now but even easy.  It’s just that incumbents shy away from undermining the notion that switches and routers are only going to get bigger, more complicated, and more expensive over time.

The challenge this poses for Cisco is obvious, but to a degree Cisco has the position from which they can break the deadlock.  Huawei can counter on price only for fairly simple product-for-product face-offs.  For strategic combination of stuff, they don’t have any enterprise credibility to speak of.  Cisco has historically tried to let others lead and “be a fast follower”, reaping the benefits of an early opportunity demonstrated by someone less powerful.  They may need to get a bit more out in front than usual if they don’t want to lose sales and margins to Huawei.


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