Juniper surprised a lot of people with its quarterly earnings report, beating on earnings by over 2% and on revenue by nearly 6%. Surprise was likely not appropriate. In my blog on January 20th, I pointed out that Juniper was unfairly (in my view) assigned the smallest upside by the Street. No, I didn’t know anything about the quarter just ended, just that Juniper had acquired what I think are the strongest technology assets given the state of networking. It seemed to me obvious that they’d start paying off, and they have. The big question, then, is how high can they go?”
I don’t think there’s much doubt that Juniper’s quarter owes much to its “three pillars” of networking, Automated WAN, AI-Driven Enterprise and Cloud-Ready Data Center, talked about in some detail in its fall “influencers’ event”. In particular, I think that Juniper has been smart to introduce AI as an operations enhancement tool across both enterprise and service providers, WAN and data center. Given that operators are demonstrably reluctant to dip their toes into new revenue streams, they can solve their profit-per-bit problem only by improving operations.
Operations costs and issues are also a big priority for enterprises and cloud providers. Networks are complicated, and as we add in additional technical features and elements to improve networks’ ability to serve their missions, we make them more complicated. This threatens the stability of networks, which of course threatens the missions we’re trying to support better. Adding AI into the picture promises a reduction in the errors that, in particular, are creating embarrassment and financial losses.
All of these positive drivers are durable enough to serve Juniper well through 2022, and perhaps even into 2023, in the enterprise and cloud provider spaces. For network operators, the problem of profit compression is getting acute, and 5G deployment is creating a need to deploy new infrastructure that tends to cement in an architecture, whether it’s deliberate or default. Most Street analysts agree that the service provider space is Juniper’s biggest systemic market risk.
Juniper probably realized this as early as last spring, when they did their “Cloud Metro” announcement. Obviously, a cloud/metro strategy is aimed at the operators and also likely the cloud providers, and it could reflect the way we’d evolve to edge computing. I blogged on Juniper’s positioning when they told their story, and what they announced was essentially the network and operations framework for a future where services were created by a combination of network connectivity and hosted features. It’s a great notion, but one that I think could have been positioned more aggressively (as I noted in my blog).
The reason for my concern is Juniper’s biggest competitive market risk, Cisco. Cisco isn’t an innovator (they characterize their positioning as seeking a “fast follower” role), and in fact they’re already starting to counter-punch against Juniper’s SD-WAN and AI/operations successes. The best strategy, IMHO, to counter someone who is “fast-following” you is to lead faster, to get far enough out in front and change the dialog enough so as to make their laggard position obvious and uncomfortable. That’s particularly true when you have as strong a technology asset base as Juniper has.
Juniper might be making its technology base even stronger, too. They recently announced some new ASICs, one (Trio 6) that targets what Juniper has described as “Built for the unknown”, at the edge. This chip fits into Juniper’s MX router line, generally targeted at service-edge missions. The other, the Express 5, provides accelerated packet handling for Juniper’s big-iron PTX. You could easily see both of these fitting in a metro mission heavy on edge computing and so tightly coupled to data center technology.
The need for tight coupling between network and data center isn’t limited to metro, or to service providers, or cloud providers. The fact is that enterprises’ network strategies have been driven largely from the data center for twenty years or more, and so “Cloud Metro” is a mission for cloud-coupled networking technology that has an almost-universal application. Recall, too, that Juniper’s Apstra acquisition puts it in an almost unique position of having a strategy to couple their networking to almost any data center switching strategy.
Cloud-coupled networking has another dimension, which is that of virtual networking. In any environment where software nuggets are deployed, redeployed, and scaled in a highly dynamic way, you really need a virtual network to create the agility. Add to that the fact that, as I noted last week, consumer broadband enhancements in capacity and quality favor SD-WAN, and the combination of Juniper’s Contrail and 128 Technology Session Smart Routing look very, very, good.
None of the aggressive stuff I’m projecting here was mentioned in the earnings call, even Cloud Metro. That’s not necessarily a surprise or a bad thing, because these days earnings calls are all about the current situation; companies have been reluctant to talk about positioning stuff since Sarbanes-Oxley twenty years ago. The big question is whether Juniper will, at some point, position their future potential, making it a commitment by the company to buy into a specific model of network/cloud evolution.
There are always pluses and minuses associated with aggressive positioning, of course. The pluses are obvious; you get to define a space and set the reference for all who follow you there…if you’re right. The minuses are all based on what happens if you’re wrong, if the market doesn’t develop as you expect. From a PR perspective, though, being aggressive is almost always the best approach, because nobody takes back any good PR they’ve given you. Rival Cisco proved back in the pre-SOX days that a five-phase plan, announced with the statement that you were already in phase two, always got good ink even if you never delivered on it and it never even proved useful.
The biggest reason for naked aggression for Juniper may have nothing to do with Cisco, but a lot to do with competition. In the metro and even in the data center, the cloud and our evolved notion of services are combining to create a critical partnership between networking and hosting. In any partnership, there always seems to be a senior partner. Will it be a network vendor or a hosting vendor?
Despite the fact that Cisco has server assets, I don’t think they have any intention of being an aggressive player in defining that network/cloud relationship. That means Juniper is the only major player on the network side that has a shot. If it’s not Juniper, then it opens a path for a hosting vendor to do the job; perhaps VMware or IBM/Red Hat. Maybe even Dell or HPE. Or, just perhaps, a lower-tier network vendor gets anointed. Whoever defines the space will then shape the transformation of IT decisively, and almost surely in favor of the technology they represent. Can networking win? Yes, if Juniper or some other smaller network vendor steps up. Otherwise, we can expect to see hosting dominate the partnership and the metro, and the data center to dominate the enterprise network going forward.
White boxes and hosted network features are either fixtures of new services or indicators of commoditization. It may well be that 2022 is when we’ll see the market decide between these choices.