It’s Recap Friday, a good time to look back at the sum of smaller items in the news that are individually perhaps not noteworthy, but that might sum up to indicate a valuable insight or trend. Sometimes little boulders can still create a big landslide!
Let’s start with the JDSU report; many financial analysts and tech media channels keyed in on the company’s outlook, which called for improvement through the year. Since their optical component business can be a leading indicator of network equipment sales, that particular comment then kicked off a rally in network equipment stocks. The question is whether it’s justified.
There are some operators who plan for higher capex in 2013—mostly wireless operators, but also some who plan to boost wireline capex, notably for delivery of TV. Some Street research is also calling for a generally higher spend level by operators, but the research I respect most in this space is from Credit Suisse, and they’re still saying that overall wireline is down, wireless is up a bit, and the focus will be on projects where there’s demonstrable opportunity to generate ROI.
Ericsson, the biggest player in the network game (again, having passed Huawei up in their musical-lead fight with this quarter’s numbers) showed a decline in network equipment sales but a boost in services, which put them higher overall. A decent chunk of Ericsson’s growth can be attributed to its OSS/BSS business out of the Telcordia acquisition, and none of the other vendors own an OSS/BSS property. Most don’t have anything like the service business Ericsson has either.
So does that mean that capex won’t be up? I think that in the US it’s likely to be, in the main because the US is changing faster in terms of demand, in part because of competition, and in part because US economic growth for the year will almost surely beat 3% unless the government messes up (again) with political wrangling. Europe will almost certainly NOT be up because economic conditions there are considerably worse. And what about the EU operators’ exploration of sharing infrastructure? Just the notion of that strongly hints at reduced capex, and if it happened the loss of competitive overbuild could cut capital budgets by 30% or more in aggregate.
In the private sector, I think that data center spending will be up, and security spending will be up somewhat, but in both cases it’s my view that the best-case scenarios that the economy could justify won’t be hit. Enterprises tell me that they are still struggling with the question of what exactly a good cloud networking strategy would look like, and while they believe that cloud security should be network-based and not host-based, they say that vendor stories on cloud security confuse them more even than the cloud does.
We are in an industry that’s coming of age, in a sense. The cloud represents a new harmony between networking and IT, a harmony that will re-draw the way we build networks, network services, applications, entertainment—EVERYTHING. It’s hard to see that now because we’re groping the elephant, looking at little points like SDN, NFV, IaaS, PaaS, telepresence, big data…snakes and trees and rocks on the elephant of change. Until we get, as an industry, a holistic view of the shape of the new “cloud-represented” partnership and start working toward that goal systematically and in all sectors, each of our “hot” issues will be limited in its ability to advance the market because it’s moving without the support of the rest of the ecosystem.
I think all of us in the networking space have a sense of change-is-coming, of drama that comes out of a vision of a new and therefore more interesting future. We have to harness that sense of change to a sense of MISSION, meaning that nothing happens without a set of interlocking plans and movements that bring the hole of the industry to a new level. Even today, networking and IT are interdependent and the cloud will clearly make them more so. How then can they change in little tiny disconnected pieces? Think about it, because limited thinking means limited value propositions and project benefits, limited budgets, limited change, limited profit. We’re “tactical-speaking” ourselves into a rut instead of into a cloud.