Facing Inconvenient Truths

What would happen if the two largest network equipment vendors and some of the biggest carriers in the world stood up in public and said that there was a major threat to the whole future of broadband, a threat that could undermine everything we believed would happen to improve our mobile lives?  What would happen if the three giants in technology stood up and said that the whole industry had undergone a fundamental change, so fundamental that it was unclear just where it would end up?

Answer:  Nothing.

Why do I say that?  Because all that was said this week, and nothing happened.  In fact, nothing much was even reported.  It really makes me wonder what’s going on in our industry and how we’ll shape it constructively for the future when we apparently can’t even grasp the present

Let’s start with networking.  At BBWF, key executives for both Ericsson and Huawei took the stage to say that there was a real threat to the business model of the operators.  Huawei went so far as to ask whether anyone could continue to invest in the network given the situation.  Both called for a transformation of the operator business model, both pointed to new developments like the cloud (which Ericsson, for example, believes is perhaps the most transformational thing since voice services).  Both execs talked about a future where software transformed the network.  Both talks were insightful, interesting.  You probably heard no such thing about them, if you heard anything at all.  Coverage of the Ericsson talk was limited to a one-liner on “service provider SDN” and I couldn’t find mention of the Huawei talk at all (both are available on the BBWF site in video form by the way).

Then we have the computer space.  IBM reported top-line revenue that was light by FIVE PERCENT, much worse than expected.  Intel reported it expected PC sales growth at ABOUT HALF the normal seasonality.  Microsoft is betting on tablets and phones to take the place of PCs, betting so radically that it’s transforming a Windows interface that’s been in place for a decade or more and risking the rejection of what may be its most important platform ever.  This all came to light this week too, and while there were “reports” of the events there was no real attempt to present the obvious conclusion, which is that our use of computing is changing so radically that the whole industry is threatened by not being able to follow the turns and twists.

I guess it’s clear to you at this point that the title of this blog is aimed in part at the media.  I listened to the two BBWF talks, and it was clear what they were about.  How did reporters miss what should, after all, be a pretty big story?  Same with the earnings reports from IBM and Intel and comments from Microsoft about Windows 8.  Well, there are three factors working against our being informed these days.

Factor one is that reporting and news have changed, not just in tech but everywhere.  These days it’s about getting somebody to click on a story link.  Once they do, they get served an ad.  Thus, financially, the only thing that matters is that click, and people do what they’re financially compensated to do.

The second problem is the companies themselves.  It would have been possible for Ericsson and Huawei to issue their warnings in so stark a way as to eliminate any risk that reporters or editors would contaminate the message.  They didn’t, and this is largely due to the fact that nobody wants to rain on even a feeble parade.  Doom and gloom stories don’t play well for sellers, even if they’re true.

The final problem is us.  We want to believe that broadband will get faster, get cheaper, get better, and do more things for us.  Never mind that TeliaSonera in Europe is doing a big layoff because they say mobile profits are down.  Never mind that Sprint is getting bought, that we’re facing usage pricing even in wireline.  Never mind that your faster Internet may be faster in name only, that performance of real downloads may show no improvement even if you double the speed.  We are the money source for all of this, and if we are lousy consumers we’ll promote lousy production and lousy reporting.

Mobile broadband and the Internet are combining to create a new thing that’s going to be as revolutionary as electrical power, telephony, and the automobile.  What’s happening is a way of linking compute power, stored content, and derived knowledge to each of us at every instant of our lives.  It could level a lot of playing fields; anyone who can follow instructions might be able to repair a car or even a computer.  It could make us into a nation of vicarious consumers, people who are so immersed in virtual reality that it’s not virtual any more.  In the network sense, it demands fundamental changes in how we build networks, changes that will invalidate every transport/connection vendor business model.  In a compute sense it will polarize devices between the little stuff that can be held in our hand or worn on our forehead or wrist, and big stuff that can process a zillion pieces of information to digest them into the one thing we care about, THE RIGHT ANSWER OF THE MOMENT.  That’s going to eradicate the current business models of the IT vendors.  We are remaking tech as we sit here, and we’re sitting on the sidelines in our own revolution.

Moral:  Take control over your information.  Go to primary sources.  Demand better.  Otherwise we’re running on top of a log rolling downhill when we need to be making it into boards to build the future.


Cisco’s (Maybe, Still) Evolving SDN Story

In the ever-evolving world of SDN Cisco, the network market-leader is…well…evolving.  The latest story from the OpenStack event is that Cisco is in fact going to embrace OpenFlow and more mainstream industry principles, but my interpretation is that it’s also going to try to out-climb OpenFlow, to rise to the top of the stack to where the network and the cloud connect, and stake out some claims there while standards efforts are mired in the basement.

OpenFlow is to SDN what steering wheel is to car.  You can’t have much of a car without a steering wheel, but by itself the wheel isn’t going to take you very far.  SDN is about software defining networks, and there’s nothing in the standards yet that go anywhere near the software layer in a real sense.  That software layer is the cloud, and more specifically the DevOps and virtual network interface the cloud implements.  That’s why I’ve postulated three layers in SDN—the Cloudifier at the top to present services to the cloud, SDN Central in the middle to frame those services into network behavior, and the Topologizer at the bottom to interface bi-directionally with the network.

When VMware bought Nicira, they were taking a position at the cloud boundary and that’s what I think spurred Cisco into first picking up vCider and now tuning up its specific cloud support.  They also seem to be doubling down on OpenStack, a smart move given that they have a server family that can run it and that OpenStack offers them a way to break with VMware (given that VMware is kind of breaking with them).  So what Cisco seems to be doing is providing cloud-downward network control and virtualization that will incorporate OpenFlow where it must as a concession to standards but taking a lead where standards aren’t likely to move quickly.  From there, Cisco can present their own approaches to lower-level control, and these may be richer than the standards can offer.

Cisco’s comments on SDN have come in the context of its announcement of an OpenStack distro of its own, and the adoption of this software internally in what some say is a replacement of VMware tools now in use.  There’s a strong suggestion that Cisco is going to take the high road to SDN, literally, by controlling the cloud interface and the higher levels of SDN functionality, where application support is direct.  This has the effect of shifting the focus from how SDN might impact current equipment to how SDN might impact the cloud, a much more favorable thing for a network vendor who’s trying to promote itself and its servers in the cloud space.

The significant truth here is that the cloud really is the driver of the network of the future, and the corollary is that you’re going to have a harder time as a network vendor if you don’t have an insightful cloud strategy.  Cisco has the advantage of having servers; for other network vendors SDN positioning is doubly important because it defines their role in the cloud, a role that’s essential from a PR perspective.  It’s not just PR, though.  If you let cloud guys define the role of the network, they’ll define away all the differentiable features and you’re left pushing bits with Huawei looking over your shoulder.



Can the Mobile Cloud Catch Up?

Japan’s Softbank is taking 70% of Sprint, a move that combines with recent reports on looming declines in revenue and profit for European mobile operators to pose questions about mobile overall.  One interesting thing this deal shows is that at mobile markets mature in a given geography, profits and margins slow their growth and eventually turn around.  This leads to operators investing outside their home areas.  Think for a moment what the prospects in Japan must be if there’s a better shot at making money by buying Sprint.

Pressure on mobile revenues and profits are created by many of the same forces that created wireline problems starting a decade ago.  The Internet generates traffic for operators but revenue generation even for mobile doesn’t keep pace with traffic growth.  That means that the operators are forced into providing incremental capacity more and more efficiently, putting downward pressure on equipment prices and driving cost-conserving changes in how equipment is deployed.  This effect has been the primary cause of pressure on the network equipment vendors.

What makes mobile interesting is two differences versus wireline.  First, the history of usage pricing in mobile has made it possible to sustain better margins there for a longer period, which means that there’s been more time to consider possible solutions to the problem of revenue growth.  Second, mobile broadband is much more of a behavior-changer than wireline broadband because it opens a gate to broadband consumption where no consumption was previously possible—when the user is not at home.  Obviously these two forces tend to act in tension with each other, and I think the significance of recent mobile trends is that they show the negative forces are winning.

There’s another difference, or potential difference in mobile, though, and that difference is in how tightly mobile ties OTT to both customers and operators.  Mobile services have generated a direct customer revenue model with the app, versus the indirect model represented by advertising that’s dominated wireline broadband OTT services.  Mobile services also create “OTT disintermediation” by partner device vendors and not indiscriminate hosting providers.  The operators themselves either accepted the risks of smartphones and tablets, underestimated them, or both.  BUT, the good news is that a direct revenue model is easier for operators to play in since that’s their current model for revenue flow.

When operators saw their world changing, they launched their “transformation” projects aimed at changing their business model away from pure bit-pushing, but these projects gained little traction early on because vendors simply didn’t provide operators any support or solutions.  A couple of years ago, the generalized “transformation” stuff was displaced by “monetization” as operators focused their attention on three targets—content, mobile/behavioral, and the cloud—in order of their likely bottom-line impact.  Projects were launched in all these areas.

The problem is that these projects continued to flounder on lack of technology support.  We’ve barely reached the half-way point in getting content projects launched, and mobile projects are WAY behind that.  Only the cloud has beat expectations, and there it’s because operators could proceed without much equipment vendor support.  Mobile has shown the least progress of all, and it’s hard not to believe that mobile is lagging in large part because cloud execution of mobile/behavioral services isn’t moving forward fast enough.  The percentage of content projects involving cloud implementation is way more than double that of mobile projects.  That’s why I think the Alcatel-Lucent announcement last week was worthy of discussion, but it’s also why I think a LOT more work needs to be done here.

The big problem with mobile/behavioral services in cloud terms is that all the credible services are based on web-oriented execution—an app partnership with a website that provides information/processing.  That kind of relationship is the “Internet” that “Internet offload” typically addresses.  Thus, mobile infrastructure focus has arguably been on dumping the traffic that represents the operators’ revenue future like a hot potato!

We’ve taken the first baby step to the cloud future by making IMS more cloud-friendly; host IMS itself as a cloud app and expose IMS services and features as APIs that web developers can use when they build their behavioral-driven apps.  But we also need to figure out how to alter the basic structure of mobile backhaul, and likely metro overall, to reflect the new reality.  One reason is that mobile services will be the revenue plumb so you have to support them, obviously.  Another is that Windows 8 is proving that mobile concepts are going to be pulled back into wireline; you don’t stop behaving in a mobile-driven way just because you walk in the door.

Mobile/behavioral symbiosis is the most important issue in the cloud too, because it’s where most of the cloud revenue will come from.  You heard me!  We are NEVER going to convert everyone’s data center spending into cloud hosting; a quarter of that in rough terms is all we’ll get.  All the rest of the huge pie of cloud-based revenue (I’ll be forecasting that in detail in Netwtacher’s November issue) will come from mobile/behavioral symbiosis.  But in addition, services drive infrastructure change, and how mobile/behavioral apps work in the cloud will drive both cloud deployment and access to the cloud, meaning the metro network.  THE biggest issue in the industry, and we’re not there yet.  Vendors, see an opportunity?

Alcatel-Lucent Web-Enables IMS

One of my recurrent rants has been that the IMS proponents in the market (largely those Big Four network equipment vendors with mobile RAN and related components in their portfolios) needed to somehow make IMS a part of web development for mobile devices rather than an alternative to it.  Happily, that’s exactly what Alcatel-Lucent said yesterday it would do.  The company introduced a set of “New Conversation APIs” aimed at making IMS services visible as RESTful interfaces.  These integrate into their ngConnect developer/operator community initiative.

If all Alcatel-Lucent was doing was announcing IMS calling and messaging features in API form through a developer program, I’d not be particularly excited, frankly.  We’ve had all manner of developer programs and APIs offered already, some supported heavily by Alcatel-Lucent, and all of them have fallen on their face.  Why is this one different?  It’s in the architecture or roadmap.

Put into what I must emphasize are my terms, Alcatel-Lucent proposes to define a “virtual appliance model” for mobile devices, not based on a fixed set of interfaces like what you’d see with iOS or Android but rather based on a composable set of APIs.  The New Conversation APIs are Alcatel-Lucent’s initial contribution to this model, which is most easily visualized by considering for a moment the Firefox OS announcement by Mozilla.  Firefox OS is essentially a component that exposes handset features as APIs so HTML5 developers can get to them.  The obvious inference is that anything that’s exposed as an API can be accessed that way, which means that operators could contribute services in API form and have them composed into apps by developers and deployed on Firefox OS handsets.

Where we have to look forward in the Alcatel-Lucent roadmap is in how this happy process moves beyond making calls or sending SMS messages.  In the model Alcatel-Lucent shows in their slides, operators could build their own RESTful services and incorporate them in their virtual appliance model.  That would give them both a differentiable set of mobile assets and a unique sandbox to attract developers.  The services they expose could go considerably further, and deeper, than the initial New Conversation APIs expose.  In theory they could expose HSS data, even admission and resource control.  Obviously you’d not let developers dip promiscuously into subscriber data or drive network policies, but you could expose services that in turn utilized these lower-level IMS elements.  Thus, you can make IMS a partner in future service creation without requiring all services be IMS applications.  Instead they could be OTT-like web apps that just suck data from IMS or utilize IMS resources.  IMS is a big part of virtually all LTE deployments, so it’s there.  Why not make money from it in a realistic way?

Inevitably this is going to have to make IMS into what’s effectively a cloud application, since mobile/behavioral apps for the web are going to be cloud-hosted for sure according to operators.  Alcatel-Lucent is making that happen by transitioning IMS to be cloud-ready and hypervisor-independent.  As this happens it’s logical to assume that it will be easier to offer IMS components as services to more general application development, with as always the proviso that you’ll need to certify the APIs by trust level to insure that Junior doesn’t take down the global network.

The one thing Alcatel-Lucent hasn’t done and still needs to have, in my view at least, is announce an SDN strategy.  Software integration with the network, absent software integration with an SDN conception of the network, is out of step with current market evolution and also with operator views of the future.  Alcatel-Lucent is the only major network vendor with no SDN story, and so as a part of maturing this initiative on the virtual-mobile-appliance future, it’s essential they get one.  While there’s no SDN arrow in the Alcatel-Lucent quiver, competitors have a shot at creating something that’s at least as strong a story as Alcatel-Lucent now tells.

I’ve said all along that Alcatel-Lucent had the closest thing to a real service layer than any vendor, and this brings it so close that it might actually be there.  The qualifier is needed only because taking a direction isn’t the same as arriving at the destination; Alcatel-Lucent will still need to deliver on the things that are stated or can be inferred from their material.  We’ve been here before, Alcatel-Lucent.  I opened by saying the roadmap and architecture made this announcement different; poor articulation and execution could make it the same missed opportunity you presented with prior API-related launches.  Ball’s in your court now.


What Kind of Jolt Does the Cloud, SDN, and Vendors Need?

IBM/AT&T deal on secure private access to IBM clouds has been called the “jolt the cloud needs”, which implies that the big problem with the cloud is the security of access.  It’s a nice story, and even logical, but it’s inconsistent with not only my surveys but with others I’ve seen.  The big problem with the cloud is that the buyer can’t make the value proposition work.  Almost 2/3rds of the cloud projects in my survey stall because they don’t meet cost/benefit goals, and in almost half the cases the problem is that the buyer can’t really quantify benefits or fully develop the costs.

So what IS the “jolt the cloud needs”?  The answer is first a good and systematic way of assessing cloud costs and benefits, and second a framework of cloud services that maximizes the second while managing the first.  Vanilla IaaS cloud services, when applied to core applications, will yield costs much higher than can be achieved in-house.  We have to move beyond vanilla, and move beyond simply moving core applications, to do better.  When we can do that, the cloud will have its jolt.

You could say the same sort of thing for SDN.  Light Reading has a podcast (http://www.lightreading.com/document.asp?doc_id=225727&) that gives a series of SDN-oriented vendor spokespeople a chance to talk about what they think the big myth of SDN is.  The consensus is that the bit myth is that SDN is OpenFlow or network virtualization, and I agree, but that doesn’t define what it IS, and of course you can’t easily adopt something you can’t even define.  But there was a comment by a couple of the people that an abstraction was a key element of SDN.

But what abstraction, or at the least, what source for one?  RAD did an interesting blog on SDN (http://raddata.blogspot.co.il/2012/10/sdn-backward-step-forward.html), and the key point I think the blog makes is that SDN may be one of those all-or-nothing things.  If you look at OpenFlow and the narrow issue of eliminating adaptive behavior in favor of central control, you have a hard time creating a stable vision of a future network.  Again, I agree.  The blog goes on to suggest that the key to making SDN a step forward and not a step back in networking is the union of SDN with the cloud to create a model of service that at least passes “central control” of the network to something specific—the cloud.  The source of SDN abstraction is the cloud.  That’s the high-level value proposition missing in SDN.

We could say the network of the future, or SDN, or virtualization, will “have its jolt” when we get that cloud linkage right.  Quantum defines an abstraction for a virtual network, but it’s far from complete and surprisingly it’s not accompanied by (or preceded by) an abstraction for the cloud service or application itself.  I think the real point of the RAD blog is that we’re diving down to the implementation of SDNs without having any context to guide us.  Sound like the cloud problem?  And could it be that the lack of a precise view of where the cloud is going is one reason we don’t have a precise view of where SDNs fit?  Virtual computing, virtual networking, and virtual resources all have a great risk of becoming “phantom” instead of “virtual” if we don’t have a model from which we can orchestrate real behaviors.

It’s also interesting to speculate on whether a combination of cloud abstraction and SDN abstraction might not be the way to view things like the Telefonica Digital/Telenor cooperation on APIs.  Recall that the Wholesale Application Community folded up not long ago despite “vendor support”, suggesting that simply providing an API forum wasn’t enough.  Telefonica Digital has a strategy for exposing assets (billing, notably) through APIs, which puts the focus on assets, then on exposure, and finally on APIs.  That’s how operators have always seen it.  Could a cloud model include APIs and assets, thus creating a programming framework?  You could model the Telefonica stuff that way, though they don’t present it like that in public…yet.

Telefonica Digital has broken with traditional vendors on the cloud and in the service layer in general, and they’re going to go big here.  The Telenor pact is only the beginning, and vendors should be reflecting on how much they’ve lost, and are going to continue to lose, because they wouldn’t step up.

Why?  Because mobile is now falling.  On the other side of this picture, EU mobile operators are generally expected to lose BIG bucks over the next three years and the story this AM is that Japan’s Softbank is in talks to buy all or part of Sprint Nextel.  All of this points the mobile sector finally losing its steam, and that’s been the only area where carrier capex has been strong-ish.  This will put major pressure on vendors, and for most it is simply too late to take the right path now.  We’ll see M&A and then consolidation.


Overhang versus First-Mover Risk

We’re starting to learn the market interpretation of concepts like “overhang” and “risk”.  Last quarter we had the looming iPhone upgrade and the looming Windows upgrade, and I think it’s likely that both of these things impacted purchasing of new technology.  I also think that companies (and even some consumers) are looking at the Euromess and the fiscal cliff and wondering whether we’re not going to slip into an even worse recession in 2013.  The IMF called this an “alarming” level of risk, in fact.  So given this, prospects for tech companies in this coming earnings season are a bit dim.

I also think that we’re facing an internal problem in tech, one that we don’t want to acknowledge but one that is much more likely to change markets.  That problem is the tactics-over-strategy shift that I’ve moaned about here before.  Whether we like it or not, the whole of networking is revolutionizing under pressure from above, through what we all call “the cloud”.  The cloud is going to transform a lot of things, in fact, and I think the tendency of company executives to hunker down on the next quarter’s forecasts and forget the future is setting them up for their own cliff, the kind lemmings purportedly blindly rush over.

The cloud has less impact on the existing business and consumer applications than on future worker and consumer behavior.  This is where operators have their chance.  Both these trends are naturally addressable by a big, credible, player with direct ties to mobility and with the resources to deliver a truly distributed and diverse set of capabilities in their vision of the cloud.  It’s not about hosting virtual machines, it’s about hosting behavioral support.  It’s a new market, with the potential for new winners.

The challenge for those network operators is in the technology to bring all this about.  For five years now, operators have told me that they are dissatisfied with their network vendors’ support of their monetization goals, and in fact it’s gotten worse every single year.  This year, with the cloud the focus of so much, every single operator who has reported so far in our fall survey has said their network vendor has no respectable cloud strategy at all, and two-thirds are already prepared to look elsewhere.

Why are all these vendors sticking their heads in the sands?  To make the current quarter.  Show buyers an onrushing revolution and you either have to be able to support that revolution RIGHT NOW or you risk either deferral of the buying decision until you can, or loss of the prospective buyer to a competitor who is further along.  But that’s a little simplistic, because while it’s true that you might overhang your current sales with a grand vision of the future, there’s nothing to prevent you from preparing your products to meet that future and keeping your marketing mouth shut.  When did we not have skunk-works projects?  But while we’ve had those projects aplenty in the last five years, they’ve not delivered on the future, only on a kind of buffed-up version of the vision of the past.

So it’s time to clean house, say the operators.  In fact, even the enterprises who really get the cloud have concerns about how much insight their vendors can offer them.  The challenge is to find some new furniture, and startups and smaller players are the obvious choice.  So look at the positioning of this group and what do you find?  One-inch depth.  I have yet to see a public presentation of a fully articulated cloud positioning that makes sense.  Same with SDN, and both these sins of omission are as prevalent in the startup world as in the incumbent world.  You can’t expect reporters to write an exciting story from a slide deck that would put a caffeine addict to sleep, so boring positioning creates insipid coverage and disgruntled buyers.  That delays cloud fulfillment.

Delay is the operative word.  The risk, for vendors, is not so much that the cloud won’t realize as that it will realize without them.  Cloud computing is the inevitable result of the combination of a demand for point-of-interest support of behavior, lower communications cost, and the dominance of support and service costs in the equation of IT.  We’ll have it from someone, perhaps a year or so later than optimal, but we’ll have it.  The risk for you, dear vendor, is that we’ll have it and not you.

So we’re back to overhang and risk.  If you jump out and embrace a revolutionary trend you overhang your current stuff.  If you fail to address that trend promptly, you risk being disintermediated in the market forever.  So far, everyone is accepting that second risk.  I think that’s the wrong choice to make, and I think there’s going to be a lot of frantic repositioning when vendors figure that out.


Facing Huawei’s REAL Threat

Huawei is the company that a lot of people love to hate.  They’re a China equipment giant who’s always been suspected of having close ties to the government there.  In the past they’ve been sued for various intellectual property infringements (and settled).  The country itself has been linked to attacks on government websites, and so it’s no wonder that Congress has investigated them and decided that they (and ZTE, their smaller counterpart) are risks to national security.  Whether this is a real risk or a political play is impossible to say from outside the intelligence community.

Apart from the security risk, there’s the commercial risk that is surely real.  Networking is commoditizing and nothing is going to stop that.  Huawei and ZTE might push margins and prices down faster and force changes in network design to lower cost, but all that would happen in due course no matter who was in the market.  You can’t have a retail broadband environment where capacity growth isn’t matched by revenue growth without changing how you build networks.  This is the challenge for the vendors, and I contend that none of them are immune.

Alcatel-Lucent has a broad portfolio but one that it’s never integrated into a full strategy.  It’s entrenched in some of its flagship concepts, and while it’s been perhaps the most innovative player in the API-and-developer space, it has never positioned its stuff well there.  The very breadth of the company makes it hard for them to win anywhere without losing somewhere else, and though SDN principles would serve them perhaps better than anyone else, they have absolutely no SDN position.

Cisco is vacillating between wanting to open new markets to increase TAM and wanting to defend its incumbencies where it already has established a brand.  With the advent of cloud and SDN, the company has taken the route of supporting the higher-level service-connection part through APIs but has hung back on adopting anything substantively different in controlling and scaling the network.  The final upward-facing connection to the cloud is still a work in progress, something they likely expect vCider to help with.  They want to transform without risk, and no such transformation is ever possible.

Ericsson is the largest player in the field, and in many ways the best-positioned to take on the new challenges because they don’t have a big incumbency in the switch/router products that are under the most pressure.  But they still have to defend the features in their turf, and that means positioning as much as products.  The company is conservative, conservatism implies inertia, and inertia is fatal in a market whose value propositions are collapsing.

If most of the players have an articulation problem, Juniper has it in spades.  While the company has always had a good reputation for solid technology, they’ve become a follower in terms of supporting operator monetization.  The company’s focus on TCO simply invites everyone to look to the East where the real price leader has always been.  Any business school text will tell you that TCO measurement is fuzzy at best, and in any case never measures the ability of competing approaches to address opportunity and raise the top line.  In the current age, where monetization is such a focus, how could Juniper miss that?

NSN, despite its precarious relationship with the two companies in the joint venture that created it, may have one of the better positions.  At least they’re focused where the margins are still good.  Their problem again is articulation.  Nobody believes that mobile broadband will go anywhere other than down the tube, profit and margin-wise.  The honeymoon isn’t over, but the desk is preparing the bill and NSN needs to pay it while they can.  There’s plenty of room for service-layer differentiation today, and maybe for a year or so.  Beyond that, learn Mandarin.

We are probably going to see something we’ve not seen in years—M&A.  It’s not so much that the major firms will be snapped up (they are too big or as in Juniper’s case have too high a P/E multiple) as that they will likely be snapping up startups in 2013 and 2014 as it becomes clear that their own internal activity has missed the cloud/SDN craze.  Optical/SDN plays, data center fabrics, and cloud software are all going to be HOT.  It might be smart to start that bid-and-buy process this year, folks.  Pickings are going to get slim very quickly


Cisco Succession: Do They Need a New Leader or a New Strategy?

Cisco’s restructuring to name two “presidents” (Gary Moore, president and COO, and Rob Lloyd, president of development and sales) is raising yet again the issue of succession, but the question of who runs Cisco is less significant to the market than where he runs it.  Bloomberg said “While the discussion over succession indicates a new openness to change at Cisco, it may be instrumental to winning back business….”  Is there any beef in that?  Do they think Chambers is holding Cisco back?  If so, will Moore or Lloyd do something different?

Cisco is critical to the direction of the market right now, for a number of reasons.  First, they have the most successful account control strategy in networking so they drive the market more than any other vendor.  Second, because of this, they are more at risk to the submergence of networking into the cloud, and the measures they take to try to stay on top will set the sales agenda of the industry.  Third, their adherence to the “fast-follower” strategy for the last decade has limited innovation in networking, but arguably maintained IP as the de facto direction of the market.  Will they abandon that?

So how does it look?  To me, the vCider deal might have been the critical announcement.  As I said last week, vCider isn’t an SDN player, and Cisco’s plans for it (as they state) involve binding it into their Quantum interface implementation, which means it’s the low end of the OpenStack cloud abstraction of the network.  If Cisco was intending to chart a new course with the naming of two new presidents, then it would make sense to start sailing in that direction with any concurrent M&A activity and even announcements.  The vCider deal seems to indicate that Cisco will work to tune the network to the cloud’s interfaces, which means they don’t plan to try to drive either SDN or the cloud in a new way.

Interestingly, vCider and Quantum pose almost the same risk to Cisco that full-on SDN might.  The problem with SDN isn’t OpenFlow or standards, it’s the notion of software control of the network, which implies software VENDOR control of the fusion of networking and IT into the cloud.  The big step, the missing link, is the notion of a flexible abstraction of network services that can be used by applications (the cloud) to define their service needs and used by hardware (the network) to drive device behavior in some way.  Quantum seems to be moving in that direction, something I’ve also been noting here in my blog.  The question is whether it’s moving fast enough and far enough, and whether Cisco is inadvertently advancing its cause by supporting the interface with vCider.  The key contribution of SDN isn’t the OpenFlow management of forwarding tables, it’s the still-undefined abstraction that links virtual network SERVICES to actual device COOPERATION.  Whether that cooperation is coerced by manipulating systems of devices through today’s service protocols and management systems or driven down explicitly through OpenFlow, we still end up with software driving the bus.

The thing is, Cisco has no real option.  Virtual networking is out of the bag, and so Cisco can either embrace it and speed the devaluing of its incumbency, or resist (even obstruct) it and slow that reckoning for at least a time.  We know what they’ll likely do, and competitors in the IT world will likely be happy to let them do it.  To try to absorb the network into the cloud explicitly from above creates pressure on Cisco to climb into the cloud and compete strongly there, which isn’t what the vendors want.  So the logjam here will have to be broken by a more pure and focused cloud or network player, somebody who can gain advantage not by being in both places but by being at the place where they combine.  That’s what I hope will emerge from the fall’s SDN announcements, because SDN is that middle.

Juniper is the classic Cisco rival and has figured in speculation about a big network-vendor M&A, but I’m not sure that this is their time.  UBS just released a note on Juniper that asks “Can it execute on its product transitions?” and that cites the critical role that PTX and QFabric will have to play.  I still believe that Juniper booted both launches last year because they wouldn’t position either product correctly—meaning as the foundation of a cloud-distributed data center or the core of “cloudnet”.   Juniper is still pushing boxes uphill, each in its own direction, as the market demands convergence of network concepts on (yes, you guessed it) the cloud!

What’s the value of a single-source provider for the cloud, like Juniper, versus the combination of players like F5 and Palo Alto cited by UBS, if Juniper isn’t going to integrate its own stuff around a strategic vision?  They have TWO MONTHS to get this right, after which I don’t think any effective positioning can be gained.  Then the torch passes to another competitor.