Cisco is facing a revolution that would totally change their business model, a revolution that will devalue traditional routers. They’re already seeing the signs of a business revolution, in fact. Thus, the question isn’t whether they’ll respond (they must) but how they’ll respond, and where that response might lead the rest of the industry.
To software, obviously, or at least to more software. There are growing signs that Cisco is going way deeper into software. For years, Cisco has been the only major network vendor who provided servers and platform software tools, and its recent acquisitions (Portshift, BabbleLabs, Modcam) have been more in the IT space than in the network space. It’s not surprising that Cisco would be watching the IT side, given that it faces a major challenge in its network equipment business. What may be surprising is that Cisco seems focused not on IT applications to networks, but at applications overall. The question is whether what “seems” to be true, really is.
For literally half a century, networking has been a darling of CFOs. Information penned up in data centers could be released, via a network connection, to reach workers and enhance their performance. There was so much pent-up demand that few network projects really faced much resistance. It was almost “Build it, in case they come!”
The good times are all gone, as the song goes. Network operators face compression between revenue and cost per bit, reducing return on infrastructure investment and putting massive pressure on capital budgets. Enterprises, having unlocked most of that confined information resource base, are now having difficulties justifying spending more network dollars without additional, specific, benefits. The most significant result of this combination has been a shift of focus among buyers, toward “open-model” networks.
An open-model network is a network created by a combination of white-box switches and separate network software. White-box switches have a long history, going back at least as far as SDN, but the Open Compute Project and the Telecom Infra Project are current supporters of the concept, and so is the ONF (with Stratum). Because the white-box device can run multiple software packages, it’s almost like a server in its ability to be generalized. It’s built from commercially available parts, based on open specifications, and so there’s a competitive market, unlike that for proprietary switches and routers.
Network operators, in particular, have been increasingly interested in this space because it promised a break from the classic vendor-lock-in problem that they believe has driven up costs for them, even as revenue per bit has fallen. The original SDN white-box approach was somewhat attractive in the data center, but the central controller wasn’t popular for WAN applications. Now, with players like DriveNets pushing a cluster-cloud router based on white-box technology, it’s clear that routers will be under direct threat too.
Cisco has lost business to white boxes already, and with the AT&T/DriveNets deal demonstrating that a Tier One operator is willing to bet their core network on them, further interest among operators is inevitable. Capital budgets for networking were already slipping, and white boxes could make things immeasurably worse. No wonder Cisco feels pressure, especially from investors.
Logically, there are two steps that Cisco could take to relieve their own stock-price worries. The first is to increase their revenues outside their core device sales. They started doing this years ago with things like WebEx and Unified Computing System (UCS) servers, and they’ve also been unbundling their IOS network operating system to run on white boxes, and as a subscription offering. The second is to try to beat the white-box movement at its own game.
Just selling white boxes, or promoting IOS as a white-box OS, wouldn’t generate much for Cisco. You have to be able to add value, not just replicate router networks with a cheaper platform. As I pointed out in an earlier blog (HERE), the white-box space and the SDN movement combine to argue for a strict separation of the IP control plane and the data plane. The devices that can host the control plane look very much like standard cloud servers, and the data-plane devices are custom white-box switches with chips designed to create high-performance forwarding. It’s very much like the SDN model of the forwarding devices and the central controller, except that the control plane isn’t necessarily implemented by a central controller at all. DriveNets hosts the control plane via microservices in what we could describe as a “cluster-cloud”. Google’s Andromeda composes control planes (and other experience-level components) from microfeatures clustered around an SDN core, and older concepts like the Next-Hop Resolution Protocol (NHRP) describe how to deliver IP routing from what they call an NBMA (Non-Broadcast Multi-Access) network. In short, we have no shortage of specialized non-centralized IP control planes (I’ll get into more detail on some of these in a later blog).
Referring again to my earlier blog, the IP control plane is only one of several “control planes” that act to influence forwarding behavior and create network services. IMS/EPC in 4G networks, and the control/user-plane separation in 5G NR and Core, have service control layers, and it’s not hard to see how these new service-control elements and the IP control plane could be combined in a cloud implementation. Given that, the first question is, “Does Cisco see it too?” The second is “Does Cisco think they could survive it?” It’s obvious they can, and do, see it, so the survival question is the relevant one.
The SDN model uses white-box forwarding devices as slave to control logic, and vendors like Cisco have generally (and reluctantly) provided for SDN OpenFlow control of their routers and switches. It’s looked good in the media and hasn’t hurt much because there was no practical control logic strategy that could span more than a data center. The problem is that white-box switches like the kind AT&T describes in its press release on its disaggregated core are way cheaper than routers, so a new and practical implementation of a separate control plane to create that “control logic” would validate white boxes network-wide.
One story on the AT&T deal with DriveNets frames the risk to Cisco in terms of Cisco’s Silicon One chip strategy, which demands IOS integration. That’s not the risk, in my view. The risk is that a new model of network with a separate control plane that’s expanded to support service coordination, could make packet forwarding a total commodity, and provide a mechanism for services at any level to directly manipulate forwarding behavior as needed. You could argue that the network of the future would become not an IP network (necessarily) but a forwarding plane in search of a service. If you want to talk commoditization, this is what it would look like if taken to the ultimate level.
And that, friends, is likely what’s on Cisco’s mind. Cisco has always seen itself as a “fast follower” and not a leader, meaning that it’s wanted to leverage trends that have established themselves rather than try to create their own trends. That’s probably particularly true when the trend we’re talking about could hurt Cisco, and all router vendors, significantly. And when the market doesn’t have a clear model of how this new combined “supercontrol-plane” would work, why would Cisco want to teach it that critical lesson? Why commoditize your own base?
Only because it’s inevitable, and that may explain Cisco’s current thinking. Server vendors like Dell and HPE, software giants like IBM/Red Hat and VMware, and cloud providers like Amazon, Google, and Microsoft, could all field their own offerings in this area. So could startups like DriveNets. Once that happens, Cisco can no longer prevent the secret from getting out. To the extent that this new-model network is truly best (which I believe it is), Cisco now has to choose between losing its current customers to Cisco’s own successor new-model implementation, or losing to someone else’s.
OK, suppose this is Cisco’s thinking. What characterizes this new supercontrol-plane? It’s cloud-hosted, it integrates applications and experiences directly with forwarding. It’s really mostly an application, right? Things like Kubernetes, containers and container security, and even application features like text processing, all live in the cloud, and very possibly either inside (or highly integrated with) this new supercontrol-plane element. If Cisco has to face the truth of this new element at some point, it makes sense to get its software framework ready to exploit it.
But can a fast-follower strategy work with this kind of disruption? It might. The whole reason behind white-box switches and disaggregation of software and hardware is to ensure that the capital assets that build network infrastructure are open. It’s the hardware that creates a financial boat anchor on advances. Open it up, and you cut the anchor rope. But remember that any network operator will already have routers in place. If they’re Cisco routers, and if Cisco can make its current routers compatible with its supercontrol-plane concept, then Cisco has a leg up, financially, on competitors who’d have to displace Cisco’s routers and force operators to take the write-down.
Finally, if Silicon One is a Cisco asset to be protected, isn’t it one that could be leveraged? Cisco could build white-box forwarding devices, if white-box forwarding is the model of the future. Sure, they’d lose revenue relative to selling chassis routers, but if they could make that up by feeding service applications into their supercontrol-plane, that could be OK. In any event, they can’t stick their finger in the open-model dike and think it will hold forever.
Timing issues represent the big risk to Cisco. Fast following when you’re doing layoffs and your stock has been downgraded can be a major risk if the player you let take the lead decides to do things perfectly. I wouldn’t count Cisco out at this point; they still have some pathways to a strong position in the new-model network era, but they’re going to have to accept that they’ll never be the Cisco they were, and sometimes that sort of thing creates a culture shock management can’t get past. They’ll need to overcome that shock, and be prepared to jump out if it looks like a serious rival for new-model network leadership is emerging.