UBS released an Ethernet switching report today that confirms the trends that my surveys have shown for two years now—including the fact that it’s the data center network evolution that’s driving enterprise network equipment spending. What my data has also shown is that enterprises are not likely to see a data center network evolution in a vacuum; they link it to an IT architecture migration to virtualization, cloud computing, or both. That’s why there have been so many recent announcements of cloud IT support from network equipment vendors.
Brocade has now jumped into the fray. The company has always been strong in the data center, but more on the storage side. Its Foundry acquisition gave it credentials in the enterprise WAN side of data center networking, and it has an OEM deal with IBM that’s offered it some new paths to market. Still, it’s fair to say that Brocade hasn’t kept up in this space, and more fair to say that it’s lost some opportunity to steal share from its arch-rival Cisco. UBS also lowered its estimates on Cisco to reflect business-model transition, a fancy way of saying that management is distracted and things are in a state of flux.
Brocade’s strategy, which it calls the “Virtual Enterprise”, is built on an architecture that Brocade says is open and extensible, and is in turn called “CloudPlex”. I have to admit that “Virtual Enterprise” based on “CloudPlex” seems like an attempt to link all the right buzzwords to an announcement, and that cynical view may be somewhat validated by the fact that the new stuff associated with CloudPlex isn’t yet available. Unlike rival-for-Cisco-market-share-castoff Juniper, Brocade didn’t tie its new architecture to a single new product, or to any specific future one either.
Spinning an architecture in advance of having specific execution to support it isn’t necessarily bad, though. My surveys have consistently said that enterprises and service providers alike need to understand the ecosystem that a vendor’s vision represents before they worry too much about boxes, speeds, and feeds. The problem in this case is that the details on CloudPlex are sketchy themselves and it’s not at all clear just how the concept links virtualization to the cloud. That’s particularly true when Brocade doesn’t supply virtualization/cloud software except through partnerships. I think Brocade could tell a strong story here, but they’ve not done it yet.
On the economic front, earnings are generally sustaining the markets with the uncertainties following the bin Laden death weighing on risk-adverse traders. The private-sector payroll data isn’t stellar but it’s also not a sign of a collapse, and SMB sentiment is the best it’s been for three years. It may be that stocks have reached the level they need to be at given current risk and reward balance, and it will probably take some news to move things one way or the other. I still see the fundamentals of tech spending holding steady, but that’s short of the mark for where they should be at this point in the recovery. The productivity value proposition of tech needs bolstering, and that’s not happening at the pace that it could be. As long as we keep tech benefit cases contained, it’s going to be hard to grow spending even at the rate of GDP.