If a Butterfly Flaps Their Wings, Should You Care?

When should the incumbent pay attention to an upstart competitor?

A couple of weeks ago Arista Networks (ANET) reported their quarterly numbers and they were fantastic. No need to sugar coat the numbers, they were excellent. A decade ago I worked at Ciena and I remember when we started to see a new competitor in our market called Infinera. At the time Infinera came to market, Ciena was recording ~$100-120m quarters. Within a year of seeing them, Infinera was recording $8-20M quarters that had grown to $40M a quarter by mid-2006. Running a $500M business is vastly different than running a $150M business, which were the annual revenue runs rates for CIEN and INFN in 2006. Looking at the Arista results, the thought occurred to me to look back a decade. Continue reading

It is Hard to Grow Large Cap Tech Companies

I am often asked what my opinion is of Cisco. Is it going out of business because of white box? Should they buy Arista? Should they buy NetApp or EMC or Citrix or RedHat? The news today that HP is going to break into two companies tells me that we have reached a point where it is difficult to grow large cap tech that have multiple business units. No CEO of a large cap tech company wants to be the AOL/Time-Warner of this market era. A few thoughts on the subject of large cap tech companies. Continue reading

A Thought on the SDN Early Warning

At dinner a couple of weeks ago with some industry colleagues I found myself thinking and then stating that I think the SDN community did itself a disservice by being vocal and derogatory towards the incumbent supplier vendor community. If you read the previous post that would be the steam shovel companies. Continue reading

Networking Thoughts to Start 2014

SIWDT is my second blog.  My first blog lasted few years from 2005 to 2007.  I created my first blog, which can still be found on the Wayback machine, after having an unexpected breakfast with Dave Winer in 2006.  It was at a conference in San Diego and if you do not know who Dave Winer, please stop reading now and go back to whatever you were doing before you thought to read this blog. Continue reading

Future Generations Riding on the Highways that We Built

When I was in high school and college, I never thought about a career in networking; it was just something I did because it was better than all the other jobs I could find.  I worked at my first networking startup in the late ‘80s and twenty-five years later, I am still working in networking. Continue reading

Four Reasons Why I am Bullish on CSCO…

I have been a known CSCO bear in the past.  All you need to do is click on the CSCO category on my blog to see two years worth of postings.  Recently, I have become a CSCO bull for the long term.  I have been building a position in the $23-24.25 range.  I did not become bullish on CSCO because I did some work on it and found some facts to fit my thesis.  It was a different path that lead me to becoming bullish.
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SDN and VMWorld:::WWJTD Edition

I had a great week at VMWorld.  The show was fantastic for Plexxi as we recorded 6x as many leads as last year, but the friction simmering in networking has emerged from behind closed doors and spilled out in full public view.  Here are a few links if you missed what I am referring to: Continue reading

Market Mea Culpa, DevOps, Opco Tech Conf and Summer 2013

My July market call did not work out.  I am long some equities and long some vol (which is not working out), with a high percentage cash position.  The Yen short worked.  I am looking forward to the upcoming Cisco results as they will be the first to report a July month and if their guidance for enterprise spending is positive, I will go long high beta tech growth names.
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The Week Ahead: June 24, 2013

The most read post on my blog was written on February 22, 2012.  It was about the Cisco spin-in called Insieme.  It has been read thousands of times and still holds the single day read record for my blog.  I do not consider it the best post I have written, but I am looking forward to reviewing it and measuring the accuracy of the prediction this week.  I really do not know what Insieme is building, but if these reports here and here are true, we should all have some form of clarity this week.
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Notebook 02.19.13: Merchant Silicon, Insieme, Controllers, Portfolio and stuff…

Before the week is over, I am going to write a blog post entitled “Imagine that SDN Did Not Exist, What Would Do with All the Free Time?”  That is something I will find the time to crank out either on my current flight to SFO or the return flight.  Until then, here are a few things I have been collecting in my SIWDT Evernote to write about.
Continue reading

Networking: Time to Change the Dialog

I am off to NYC to present at an SDN gathering hosted by Oktay Technology.   I am going to change up my standard pitch deck, so I am curious to see the reaction.  I have decided that I have been too nice and I plan to be more provocative and change the network dialog from speeds, feeds, ports and CLIs to a discussion about the network as a system and orchestrating the network from the applications down – opposed to the bottom up wires approach.
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Odd Week of News and Notes

An odd week of news and notes.  Truth be told, there is not a lot that I am really motivated to write about, but there were a number of noteworthy articles and videos during the week.  Here is my run down of things I read or watched during the week:

1. About mid week I started to see all these hits on my blog from Networkworld.  Jim Duffy had listed my blog on a list of useful Cisco blogs.  Kind of cool and thanks to Jim.  With that maybe I should write something about Cisco.

2. Here is a link to an interview that John Chambers did with Reuters.  At the ~4 min mark he talks about market and technology (~7 min mark) transitions, the next big thing, etc.  I really have to wonder what transitions they have organically caught over the years?  The Flip phone?  No.  Cable business?  No, they bought that in the form of SA.  I think Cisco is a sales machine, but they bought Crescendo and rolled up the switching market in mid-1990s.  They bought Webex, they bought SA, bought a bunch of optical companies that were a disaster.  They buy a lot of companies, they are not innovators and they do not catch market transitions.  They buy technology and market transitions.  There is nothing wrong with that, but the company is not visionary in nature.  They wait till customers tell them to buy into a market in the form of a company.  As for what customers think of Cisco, this article is on a general level representative of what I hear in the market.

3.  Yesterday I read this article on SDN. Speaking of Cisco, it is full of quotes from Cisco:

The operative word in the term software defined network isn’t software. It’s defined, said David Yen, senior vice president and general manager for Cisco’s data center group. He said networks need to be defined by the applications that are using them. “It’s a change in perspective,” Yen said. ‘It’s really an evolution of this art of networking intelligence. And furthermore, a lot of the SDN idea is actually blending in some of the functions and features that traditional data center management software is doing. People are turning their attention more and more to the application perspective,” Yen said. “For the ease of developing applications and for the ease and effectiveness of deploying applications, it’s the right time for the underlying infrastructure to serve whatever the application desires.”

From Plexxi’s perspective, it is really great to read senior leaders at the marquee name in the industry adopting our view.  We agree that networks need to be defined by the applications that use them, rather than those pesky distributed protocols trying to figure out state and we certainly think that the underlying network infrastructure should be reflective of the application requirements.

4. Sounds like a tough week for the Juniper QFabric team if this article is correct.

5. Did I mention that Plexxi was listed as a hot startup by the WSJ?  Yea…#12.

Wrapping up what I wrote: Cisco does not get market transitions, they buy them.  Cisco SVP of Data centers thinks SDN is about applications.  Juniper QFabric team downsized.  Plexxi next big thing and we think that applications matter, and the NFL finally fixed the mess and Goodell should not be back or I should get a refund for 3/16ths of my season tickets value.

/wrk

Global Cloud Networking Survey

I think the latest Cisco Global Cloud Networking Report has flown under the radar.  I read a few articles on it, but for the most part I think it was ignored with all the InterOp news.  It is a really interesting report and summarizes a lot of what I see and hear in the world of IT.  I have been posting about the frustrations of IT leaders with the state of the network.  Despite what the skeptics have written about SDN, when you talk to IT leaders and then read a report like Cisco’s Global Cloud Survey, one conclusion is possible:  the network is f’ing broken.  Two additional corollaries: (1) all of us in the networking industry have had a hand in creating the mess and (2) the first people to innovate and fix the network will be the winners.  The networking industry is divided into two groups: those perpetuating the mess and those who are trying to fix it.  Here are some choice quotes from the report:

  • Almost two in five of those surveyed said they would rather get a root canal, dig a ditch, do their own taxes than address network challenges associated with public or private cloud deployments.
  • More than one quarter said they have more knowledge on how to play Angry Birds—or know how to change a spare tire—than the steps needed to migrate their company’s network and applications to the cloud.
  • Nearly one quarter of IT decision makers said that over the next six months, they are more likely to see a UFO, a unicorn or a ghost before they see their company’s cloud migration starting and finishing.
  • More than half of IT decision makers said they have a better overall application experience at home with their personal networks than they do at work.

Thinking about Unicorns and six months, I spent some time listening to a Lightreading webinar on the Evolving the Data Center for Critical Cloud Success.  On slide 11 the presenters have “A Facts-based Reality Check for Cloud Delivery” which includes the following facts about the “Largest Live Test Bed in The Industry:”

  • 6 Months of Planning
  • 8 Weeks of On-Site Testing
  • 25 Test Suites Across DC, Network and Applications
  • $75M Equipment in the Tes
  • 80 Engineers Supporting Testing

NewImage

The more things change, the more they stay the same.  Which group are you in?

/wrk

Notebook 05.12.12: CSCO, INTC, SDN, OpenFlow, Cash

It has been awhile since I thought about CSCO in terms of the equity value.  I read many reports on CSCO post their Thursday earnings call and most reports generally like the long term prospects of the company and think CSCO will do better as the macro economic conditions improve.  Over the past year, I have written a lot about CSCO and it is all in the blog archive.  Here a few thoughts on CSCO post their recent earnings call.

Chart: Below is a 10Y weekly chart of CSCO.  Technical charts do not predict the future, but they do show a sentiment trend from the past and it is possible to map the trend to events.  The three red circles from the center to the lower right represent the price peaks from mid-2007.  They are a series of lower highs.  There is a five year wedge developing and the astute observer will note that this wedge looks to be resolving around the Oct/Nov time frame, which is the end of CSCO’s Q1 FY2013 and early November reporting date.

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It should be noted that wedges do not necessarily resolve to the negative.  Below is a 10Y weekly chart of INTC and the breakout of a long downward channel is visible.  I pitched INTC as part of the 1G to 10G server transition to the CEO and tech analyst at Alger in September 2011 when I interviewed for a position with the firm.  I wrote about it here.

End of the Switching EraI am firm believer that we are at the end of the 20 year run of the Switching Era (1992-2012) in networks.  The network is changing and that is going to have an affect on CSCO.  They will buy innovation through Insieme and/or others.  The new networks will start small this year, barely noticeable to CSCO and become visible by mid 2013 and they will have a real affect on CSCO in 2014.  All you need to know is that then entire global base of networks are up for replacement.  CSCO will win their share, but it is possible and probable they will lose share in this cycle.  The last cycle was the evolution of shared LANs to switched LANs driven by GbE and CSCO used M&A and product cycles (Cat 5k/6k) to win the vast amount of market share in that era.  If you want to be long CSCO, forget about macro conditions, telepresence, transformational connected communities, cloud, big data, mobility and all the other crap.  All you need to be comfortable with is the knowledge that CSCO will win and upgrade the core of networks in the next five years.

NewImage

OpenFlow/SDN: I have written a lot about SDN and OpenFlow and what it all means or might mean or does not mean in the past month.  The real question you have to ask about CSCO is why do they fail at internal innovation?  CSCO confirmed the Insieme investment ($100M with right to buy for $750M) last month.  They have used this proven method in past to great success.  No arguments from me on the validity or success of the strategy.  The question I would ask is why does CSCO have to use this method?  I accept that it works, I accept that it is proven — but AAPL does not use this strategy.   A person who thinks about companies might ask:  why does a company with an annual R&D budget of $5B need to use the spin in strategy?  Is $5B too little to fund innovation with so many legacy product lines to support?  The other odd data point is the Insieme team is building a product for the heart, I repeat the heart of the Cisco franchise.  Switching is not some adjunct part of the company.  Switching is the business in which the company made the very first acquisition.  I know that great innovation has been done by companies taking teams and separating them from the core business such as IBM with the PC.  I get it.

On the other hand if you add up all the venture capital in the next-generation of networking companies in the US it has to be around $200M give or take $50M.  CSCO invested $100M in Insieme, provided space and have a call option on Insieme for $750M.  Was it not possible to do the same internally for $250M over two years, which is 5% of the annual R&D budget?  Did anyone on the BOD even ask the question why the company has to go outside the company to build something innovative for company’s core franchise?  This leads back to the 10Y chart.  If the company has to do something special to accelerate a product solution in the core franchise of their business, two unspoken facts must be true.  (1) There is a bigger threat to their core switching franchise than they are willing to identify and (2) they cannot drive their internal teams in the their core franchise to innovate.

I have read speculation that the whole OpenFlow/SDN movement will die in a few years.  As I posted earlier, changes in how networks will be designed will have little to do with OpenFlow in my view and SDN is just a poor term.  Networks have always been about software.  We have all been through various software debates in networking.  How many people remember APPN versus APPI?  Back in the early 1990s, CSCO was all about APPI when they were going against the monster incumbent IBM who was willing to license APPN for $400k.  Interesting comments from CSCO this past week complaining about Huawei using on site support people to lock out competition.  I felt the same way in the late 1980s and early 1990s, but I used to complain about the teams of IBM employees at every F500 company selling SNA.  Where is IBM today in terms of networking?  Market share can shift from the company with 80% share.  Perhaps more of you remember tag switching and Ipsilon Networks; today we have MPLS.  Side note on IBM.  It may be unnoticed by many people, but IBM acquired a company called BNT in October 2010.  I continue to read speculation that IBM is going to rebuild their networking division.  The same division that CSCO destroyed in 1990s and then purchased in 1999.  More than a decade after IBM exited the networking business, why would IBM want to get back in the networking business?  You can come up with your own answer, but I do not think the answer is: more of the same.

Cash: CSCO has not filed their 10Q for the Q3 FY12 yet, but if we look at the 10Q filed on 2.21.12 CSCO had $41.7B of cash off shore and $5B of cash in the US.  I do support CSCO’s position that US companies domiciled in the US should be offered a cash repatriation holiday perhaps with some sort of on-shore investment requirement.  I would call it bring home cash for US jobs.  How is that a bad?  I think it is terrible that US companies are using off-shore cash for  foreign investments when that cash could be used in the US.

As always this is just a bunch of speculation by me.  I am sure I not in possession of all the relevant facts and it quite likely much of my speculation is incorrect.  For new readers to my blog, Notebook posts are a collection of data points and theses that I am thinking about.  I was inspired to write Notebook posts after reading Alchemy of Finance.

/wrk

Arista at Networking Field Day, Insieme Follow-up and Markets

The Tech Field Day team posted videos from most of their meetings last week.  I was an avid viewer during the week, but I was sure I missed some points so I went back and watched a few selected videos.  One of the videos I watched was from Andy Bechtolsheim, co-founder of Arista Networks.  I heard Andy speak at the Flagg 2012 High Performance Computing Linux for Wall Street conference on Monday and it was a good opportunity to compare notes.  Here are three paraphrased points and three quotes from the video.  The quotes are at the 7:40 mark of the video:

  • We are not aware of a single production OpenFlow network
  • OpenFlow does not interoperate with legacy infrastructure
  • Really hard to change how networks are built

Networks have evolved pretty slowly from a protocol perspective.”  I agree and have written the same here.

Reality is people spend a lot of money on networking gear. Once it is installed it works. Don’t touch it, you may break it.”  I have been writing about this for more than a year and I called it out in my Tubthumping post.

Once people have adopted a certain network topology they are highly unlikely to change it unless there is really something better comes along.”  I agree with Andy and have written much the same, but this is the point at which we diverge and I choose The Road Not Taken.

Insieme Follow-up: My two posts on Insieme here and here are by far the most popular posts I have written.  As expected they generated a lot of reader reaction.  In my first post I offered up a couple of possible product strategies.  I tend to think that the Path 1 strategy is the most likely direction.  Use custom ASICs in a new Leaf/Spine product set (note if you watch the AB video I linked to in the first paragraph, Andy talks about this network architecture being the state of the art and locked in for years as networks are slow to change).  The new Leaf/Spine product set will have the ability to hook back into the legacy Nexus (~10k installed customers), but have very high bisectional bandwidth for storage.

For years it has been speculated that CSCO would buy a storage company like NTAP, but with the rise of flash, SSDs (note there are ~14 storage startups targeted at the home-enterprise-cloud provider markets), CSCO could add storage to the Nexus platform with the new Insieme product line.  Let us assume the company has product plan hashed out and they are aggressively recruiting the product development team.  If we assume January 2012 start, we could expect this product in 18-24 months and the 18 month assumption is if everything goes perfectly.  Most likely is we would see the product in 1H 2014.  What we would see is a new Nexus compatible set of switches, 100G ready, but using ASICs that allow for very high cross-sectional bandwidth and some sort of CSCO storage product.  Yes, I think this team puts CSCO squarely into the storage game against incumbents and startups alike.  UCS now gives you networking, blades (Romley) and storage.

I think the days of getting a significant (e.g. Cerent) integration and cost advantage through an ASIC are over, but using an ASIC does provide deterministic supply advantages.  Back to the Andy video, he says that Arista prefers to use merchant silicon from all suppliers and in his talk at the HPC he had several slides onMoore’s Law and riding the merchant silicon wave and predicated 16/32/64 core silicon in years to come.  As the Leaf/Spine architecture holds (remember (i) slow rate of network architecture change and (ii) once the network is installed do not touch it) some competitors will ride the merchant silicon cycle and a few will do ASICs.  Using ASICs does remove one from the pack and having to be tied to the product development cycles of chip suppliers (BRCM, MRVL and INTC), but at the same time there are suppliers like Pica8 and Cumulus Networks who are thinking ODM hardware from Asia-Pac and bring your own OS.  It looks like the battle will be joined with CSCO/Insieme thinking closed architecture, ASICs, one stop shop for network-compute-storage and at the other end of the spectrum are the white box/DIY/Open Flow abstraction layer companies with several companies in the middle focused on specific application use cases and even putting FPGAs with APIs in the switch data path.  As always this is all speculation and probability is in favor of me being in error.

Market Thoughts: We have ha a bit of sell off.  As I wrote a few days ago I had been trimming exposure into rally.  I let the APKT position go on Monday and I hope to buy it back.  I have some shorts on and would like to go back to being long oil and gas, but I took profits in those positions a few weeks ago and now I am just waiting for entry points.  We have earnings starting soon and I really do not like having any large positions into earnings events.  I am content to read the news and react.

/wrk

* It is all about the network stupid, because it is all about compute. *

** Comments are always welcome in the comments section or in private. ** 

New Spin-In Called Insieme: A Framing Exercise

The following are my thoughts on the NYT report that Cisco was creating or supporting a new startup called Insieme.  I have decided to use a framing format for this posting, because I really do not know what Cisco or the Insieme team is thinking.  It is not as if they asked me to review their plan.  All I have done in this posting is look at a number of data points and draw two conclusions.  The conclusions are at the bottom of the posting if you have spent too much time using Twitter and have a diminished ability to focus on reading.

Frame 1: What is a Spin In? Back to the 90s and Ardent

Ardent Communications was founded in 1996 as a planned spin-in startup focused on building a specific product designed for Cisco Systems.  The spin-in model was a method to create a startup that could attract top talent that, in turn, would build a product defined by Cisco in short period of time.  To capitalize the new company, Cisco invited Sequoia Capital to participate in the funding of the new venture.  To foster the entrepreneurial atmosphere, the employee and management pool was sized at 55% [see Cisco Systems: A Novel Approach to Structuring Entrepreneurial Ventures, Stanford University Graduate School of Business, Case Number EC-15, February 2000].  The trigger mechanism on the deal was a put/call feature that gave Cisco the option to purchase the company at a specific time or upon a product deliverable at a specified price of $232.5 million in cash or stock.  The first round of funding for Ardent closed on August 11, 1996.  Less than a year later, on June 11 1997 Cisco announced the acquisition of Ardent Communications for $156 million, which does not includes the 32% of the company already owned by Cisco bringing the total transaction value to $232.5 million.  Ardent was a made to order M&A transaction.  It combined venture capital and a publicly traded stock to build a product outside of the corporate structure and process of Cisco Systems.  The real beauty of transaction was the minimal risk incurred by Cisco and Sequoia Capital.  Unless the team failed to develop the product, it was a guaranteed exit strategy using M&A.

Frame 2: Nuova Systems and Post from October 23, 2011

I wrote a post about Arista, Cisco and Nuova back in October 2011.  Here is the relevant portion of that post.  “To understand what I am thinking about, we need to go back to Nuova Systems.  Cisco acquired the company in April 2008.  From this company emerged the Nexus 5000 class set of products.  What was unique about the company was the funding and the impact it has had on others in the Cisco ecosystem.  Think about where Cisco stood in 2008.  For the FY2008, Cisco sold $13.46B in switching products.  (Note that Cisco’s fiscal year is August-July).  FY2008 was the peak year in Cisco switching revenue before the onset of the global credit crisis in September 2008.  I have detailed the 2009 catch-up spend event here and here, but consider the world before the credit crisis induced spending collapse and subsequent catch-up phase.  Cisco was the dominate market share owner in switching.  There was no one close and they had spent their acquisition capital from the start on this market segment.  This is a just a partial list of Cisco’s switching centric deals starting the most important being Crescendo in 1992.  This list alone totals $6.4B:

24-Sep-93 Crescendo Communications LAN switching $94,500,000
24-Oct-94 Kalpana LAN switching $204,000,000
8-Dec-94 LightStream LAN switching $120,000,000
6-Nov-95 Grand Junction Networks LAN switching $220,000,000
6-Aug-96 Nashoba Networks LAN switching $100,000,000
3-Sep-96 Granite Systems LAN switching $220,000,000
28-Jul-98 Summa Four LAN switching $116,000,000
31-Aug-99 IBM Networking HW Division Computer networking $2,000,000,000
11-Apr-00 PentaCom LAN switching $118,000,000
20-Aug-02 Andiamo Systems Datacenter Switching $2,500,000,000
29-Jun-04 Actona Technologies Data storage $82,000,000
8-Apr-08 Nuova Systems, Inc. Datacenter Switching $678,000,000
      $6,452,500,000.00

Nuova was started in mid-2005.  It was self-funded by the Cisco executives who left to form the company. This list included: Mario Mazzola, Luca Cafiero, Prem Jain, Soni Jiandani as well as outsiders Ed Bugnion and Tom Lyon.  In August 2006, Cisco increased their ownership to 80%.  In April 2007, Nuova had ~200 employees and Cisco agreed to a cap of the potential buyout of remaining 20% at $678M.  A year later, April 2008 Cisco closed the deal to acquire the remaining 20% for $678M.  No venture capital firms were involved to my knowledge.  Jayshree Ullal left Cisco in May 2008 and joined Arista in 2009.”

Frame 3: Google Search Terms

After I wrote the Arista post in October 2011 and mentioned the Nuova team, my blog started getting hits from people searching for the team.  Here is a the summary of those search terms and views:

Search Term

Views

mario mazzola luca cafiero

22

luca cafiero

21

luca cafiero new startup

15

mario mazzola new startup

9

prem jain startup

7

mario luca prem

7

mario mazzola

5

luca cafiero cisco

4

mario mazzola startup

4

luca cafiero startup

3

mario mazzola 2012

3

prem jain OpenFlow

3

mario prem luca

3

106

Frame 4: Twilight in the Valley of the Nerds

I am a firm believer in providing credit where credit is due and citing sources.  The blog Twilight in the Valley of the Nerds was one of the first sites, if not the first site to post about a new start-up brewing.  You can find the posts here on July 28 2011 and the most recent posting here.

Frame 5: Why a Spin In?

Before I present what I think Insieme is building, a few short thoughts on the idea of a spin-in.  My first reaction to the NYT article was: why is this not being done inside the traditional constructs of the corporation?  In the post-Madoff age of private capital ventures, the accounting and valuation process is much more scrutinized.  I know auditors of PE-VC funds are increasingly demanding support and documentation for valuations.  It has been reported just last month that the SEC is looking into how valuations are marked and the conflicts within investment pools.  If we assume that the Insieme product can be built for $50M and that it would take 24 months, what is the value of the corporate entity and why is it better for Cisco to build a product outside of the company?  I think I can answer my own question.  JNPR started QFabric in mid 2008 and it took a lot longer to bring the solution to market than planned, sometimes doing an engineering project outside the company is a better plan.  When I worked at CrossComm in the late 80s early 90s, we took a core team out of the company to build the company’s next-generation product.  We put them in a building a few exits up the highway where they would not be distracted by the day-to-day events in the legacy product lines.  I can understand how internal resources can be distracted by present day activities; that is something I have blogged about over the past several months.  The question that John Chambers has to ask himself is what is the appropriate price to pay for the asset.  I am going to assume that there will be pressure on the valuation of Insiemi compared to the valuations used for Andiamo and Nuova and therefore I think 10X on an assumed $50M investment means a $500M exit for the team if successful.  These numbers are assumptions on my part; feel free to insert any number for the capital to build a product.  Maybe it is $35M or maybe it is $100M.

Conclusion: What I Really Think they are Building

I received a good comment over the weekend (much of which I agree with) on what CSCO has accomplished in the switching space.  I think there are two paths that the Insiemi team could be going down.

Path 1: Assume there is unfinished business in the storage space, which is why I linked above to the comments over the weekend.  I think it is possible that the MLP team would go build what would become a new Nexus family member with storage network hooks.  This would be Cisco’s strategy to abandon FCoE as a convergence strategy.  DG at Arista already opened this discussion last year.  The new Insiemi box would use a similar approach to Xsigo’s product strategy, but instead of using Infiniband, the Insiemi box would be all Ethernet, but have two separate Ethernet channels (i.e. forwarding planes).  One Ethernet channel would logically allocate bandwidth vertically and be intended for traditional IP traffic deployed in hierarchical switched data networks.  Basically what the world has been building for the last fifteen years.  Nothing new in the first Ethernet channel, it would be the second Ethernet channel that would be disruptive.  This second channel would be for SAN networks and instead of being hierarchical in nature – they would scale horizontally across the compute element.  This second channel would run Ethernet down to the host (N2K?) and split out storage traffic from data traffic.  Maybe this Insiemi box acts like a storage bypass in front of the N7K.  Add in some fibre channel ports and you have a Director killer.  Coincidently you would also have a product designed to force Arista to live in their low latency and cloud market applications and force Big Switch and Nicira to address a scaling challenge that in turn becomes a capital spending challenge.  Path 1 is a strategy to box the competition into a small addressable market space.  Attacking the storage space provides a number of benefits for Cisco.  Once data is placed on a drive (does not matter what kind of drive) it becomes physical in nature.  Facilitating the connections between storage and the compute element would accelerate the demise of FC.  FC will be around for sometime, unless someone helps speed the decline.  Building a transition switch and using SDN like features to facilitate SAN networks (i.e. NAS) while keeping the traditional Ethernet flows separate is a strategy to address some part of the big data market.  Path 1 is really an extension of the current Nexus strategy, which was switching, then added compute, and therefore the next step is to add storage integration.

Path 2: This is the SDN/OpenFlow strategy path.  From this Network World article, we know that the Insieme team has licensed or has access to NOS (Nexus OS).  Here are several links to various postings about Insieme and Cisco’s OpenFlow direction:

– Twilight in the Valley of the Nerds 10.22.11

– Twilight in the Valley of the Nerds 03.16.12 (read comments)

– David Meyer presentation at ONF October 2011 (Is slide #14 a tell?)

Video of David Meyer presentation at ONF October 2011

– Read “no where fast” comment about Insieme on Cisco blog

Taken in totality, I can envision a new platform that acts as a NOS to OpenFlow arbitration box.  The platform would connect to the Nexus OS (hence the license) and it would have a set of interfaces for connections to the OpenFlow network.  Cisco would use SDN like concepts to control the translation to and from the NOS network from the OpenFlow interface.  Think of it as a session border control (SBC) for your network between the NOS network and the OpenFlow network.  Cisco keeps their installed base closed to direct OpenFlow control, yet provides an OpenFlow portal in which they control the translation and arbitration function between the two networks.  The plan in Path 2 is to keep Cisco market share locked in, but tell customers that Cisco has provided an OpenFlow access point and will plan to build SDN products using NOS and OpenFlow.  I suspect that this would be a complex, software intensive platform, but would be valuable to Cisco as it would provide them a story, a migration strategy to convince customers to keep the status quo, upgrade their N7Ks and wait till the next upgrade cycle for OpenFlow as Cisco will have a SDN/OpenFlow like platform built to Cisco standards.  Does anyone remember Ipsilon Networks?

I really have little idea of what I am writhing about and it quite likely that the Insiemi team is building a completely different product than the two possibilities I have describe in this post.  I just thought it was interesting exercise to consider some development strategies if I was in their position.

/wrk

* It is all about the network stupid, because it is all about compute. *

** Comments are always welcome in the comments section or in private. ** 

Exaflood Does Not Make Sense

Another nice weekend on the east coast of the US and there is so much to think about that happened over the past week.   CSCO spent five billon of their off shore pile of cash on a video company.  ADTN announced a terrible quarter to start the year.  These two events are part of the conundrum of the past 10-11 years that when I hear people telling me how the internet is going to break, the upcoming exaflood and video is a huge problem it makes little sense to me.  At first I was going to write a big post with all sorts of charts, but the weather is too nice and I am not going to bother with the details.  It might be better to just state my opinion and if you feel differently go ahead and put money to work.  Just remember:

Innovative, Alternative Technology Solutions = Velocity

Developed Technology = Spent Capital, Doctrine, Incrementalism and Creativity Fail 

  • Since 2001 mobile phone and now smartphone growth has been great.  We have more smartphones and now tablets that sales exceed a billion devices a year.  2G went to 3G and now 4G…all of it means more devices using more capacity.
  • Many of the local loop upgrades are done in the US.  DOCSIS 3.0, FTTx, xDSL…yes, we have solved the local loop bottleneck.  It took ten years, but we are on our way to universal broadband.
  • OTT video is everywhere and soon we will have 15 or more NFLX copy cats and that is because content, especially video is a DIY content solution
  • File sharing, Dropbox, Box.net, Megaupload, S3…yes we have storage in the cloud
  • State aware apps like Gmail are the norm

All of these drivers of bandwidth are ongoing in the ecosystem and yet service provider CAPEX is lumpy!  CSCO has to buy a software based STB/codec company and ADTN who is in the heart of the local loop upgrade market has a huge miss because service providers CAPEX is lumpy, spotty, insert word of your choice.  Go look at any 10-year weekly chart of a service provider communication equipment company and you will see that the trend is down.  If the traffic trend is up, why is the equity value chart trend down?  Enough said on my part on the subject.

The NYT reported that CSCO was supporting a spin-in startup called Insieme.  I have a lot of thoughts on this subject, but I am going to take a few days to collect and organize my thoughts on the subject.  It will be the topic of my next post.  I posted some additional thoughts over on the Plexxi blog as to what I am seeing in the DC market.

 

/wrk

* It is all about the network stupid, because it is all about compute. *

** Comments are always welcome in the comments section or in private. **