Interop 2006: Evolution of the Networking Industry

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This was a presentation from 2006 where (starting on slide 30) I described how the way consumer networking vendors built their products would ultimately upend the way enterprise vendors built products. Today, the hype around SDN, commodity switching products, and linux based network operating systems is making much of this come true.

This presentation was first given in May 2006 at the Interop trade show.

Slide 30, is where I talked about how the networking market would split from vertically organized vendors to horizontally specialized vendors. I predicted this transition would take 10 years.

At the time, the use of merchant silicon in datacenter and enterprise switching products was a rarity. Today, it is common. Then linux derivative network OSes were limited to consumer products, today they are taking over large scale cloud datacenters.

The networking market hasn’t come as far as I expected in 10 years, but it’s pretty cool much of this either came true or is on the cusp of coming true. Much more change is under way.

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Interop 2006: Evolution of the Networking Industry

  1. 1. www.idc.com The State of Enterprise Networking: Interop 2006 Abner Germanow Director, Enterprise Networking
  2. 2. Agenda • A quick refresher on disruptive markets • The state of the enterprise networking market • Solving the complexity and crisis • Guidance ©IDC, 2006
  3. 3. A quick refresher course in disruptive markets
  4. 4. Sustaining vs. Disruptive Innovation Disruptive Innovation ProductPerformance Time Source: The Innovator’s Dilemma
  5. 5. Interdependency Vs. Modularity Beat competitors with speed, responsiveness and standards Performance Time Beat competitors with complete solutions
  6. 6. Shifts in Interdependency and Modularity Has a Long IT History Equipment Materials Components Product design Operating system Applications software Sales & distribution Field service Intel, Micron, Quantum, Komag, etc. Compaq, Dell, Gateway, Packard Bell Microsoft Word Perfect, Lotus, Borland CompUSA Independent contractors Microsoft 1960–1980 1980–1990 1990–Present Dell IBM ControlData DigitalEquipment Monsanto, Sumitomo Metals, Shipley, etc. Teradyne, Nikon, Canon, Applied Materials, Millipore, etc. Assembly Compaq Contract Assemblers
  7. 7. Where are we today?
  8. 8. Gigabit is healthy, but 100 MB will represent the majority of shipments for a while 0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 2002 2003 2004 2005 fix m - 100 MB fix m - 1000 MB mod - 100 MB mod - 1000 MB Layer (All) Vendor (All) Sum of Ports Year Quarter Form Factor Speed
  9. 9. 10 G Port Growth 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 2002 2003 2004 2005 fix m mo Layer (All) Vendor (All) Speed 10 G Sum of Ports Year Quarter Form Fac
  10. 10. WLAN Market Share by Shipments 0% 20% 40% 60% 80% 100% 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 Other 3Com Aruba Symbol Cisco WLAN Share of Shipments
  11. 11. 0% 20% 40% 60% 80% 100% 4Q 2004 1Q 2005 2Q 2005 3Q 2005 4Q 2005 AP vs Controller Share by Revenue Controller AP WLAN Product Mix Shifted: Share of Revenue
  12. 12. Where are we going?
  13. 13. Core Enterprise Network Forecast $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 2003 2004 2005 2006 2007 2008 2009 Billions LAN Switch Router
  14. 14. New Enterprise Markets Are Hot $0 $5 $10 $15 $20 $25 $30 $35 $40 2003 2004 2005 2006 2007 2008 2009 2010 Billions LAN switch Router IP PBX WLAN Application Networking
  15. 15. What’s on the agenda in 2006? 0% 5% 10% 15% 20% 25% 30% Branch Routers Compliance Wiring closet LAN switch Network Management Core/Backbone LAN switch Headquarters Routers IP Voice No major networking initiatives Wireless LAN deployments Security function / appliances Source: IDC Enterprise Networks Vertical Views Survey, May 2006 N=623 (Prelim data, unweighted) Q: What are the top two upgrades or initiatives making up largest share of your organization's data network equipment spending over the next 12 months?
  16. 16. Security Problems: 1. Need to reduce response times, but security and networking groups often have different priorities 2. Conga line of appliances doesn’t scale ©IDC, 2006
  17. 17. Security goal #1 Reduce response times
  18. 18. Network Network identifies suspect traffic
  19. 19. Network Network identifies suspect traffic Security Function Security product analyzes traffic
  20. 20. Security Function Network Security product analyzes traffic Security product issues mitigation recommendations to network Network identifies suspect traffic
  21. 21. Network Network identifies suspect traffic Network takes action to block, rate limit, or quarantine Security Function Security product analyzes traffic Security product issues mitigation recommendations to network
  22. 22. Demand For Closed Loops Exists In All Hot Markets SecurityMobility IP Telephony App Networking Enterprise Network Storage Network Compute Storage
  23. 23. Common Themes In Hot Topics A closed loop with the network is a win-win Control may lie outside networking group Web services standards SecurityMobility IP Telephony App Networking Enterprise Network Storage Network Compute Storage
  24. 24. One End of the Solution Spectrum: Build It Yourself Acquire or develop technologies and integrate in house Pros:  Grow revenues through growth in hot products.  Development teams can be forced to work together Cons:  Assumes customer wants to buy everything from you  Angry partners ©IDC, 2006
  25. 25. The Other End of the Spectrum: Play with Others Develop a set of APIs and use a standard platform build links to secondary and tertiary technologies Pros:  Customers can use multiple vendors  Vendors can specialize Cons:  Customers can’t exploit the value of the open platform until the 2nd or 3rd application  Multiple vendors blame others for problems ©IDC, 2006
  26. 26. Security goal #2 Consolidate conga line of appliances
  27. 27. Classes of Appliances at the WAN gateway •WLAN access point management •Wide area file services •WAN Bandwidth Management •URL Filtering/content management •IP PBX/PSTN Gateway •Network access control/computer quarantine •Intrusion detection/prevention •Messaging Security •Authorization/authentication •Anti-virus/spyware
  28. 28. What platforms do customers want a VPN to run on? 16% 43%6% 25% 10% General purpose server Purpose built appliance Blade in blade server LAN Switch or router Managed Service Q14. I am going to read a list of applications, and I would like you to indicate your preference of five platforms for that specific application. You can select more than one platform for each application. In other words, on which platform would you like … to reside? Source: IDC Next Generation Network and Security Special Study, May 2006 N=411
  29. 29. COTs Modularity: Breaking Networking into IT-sized Chunks
  30. 30. Shifts in Interdependency and Modularity Has a Long IT History Equipment Materials Components Product design Operating system Applications software Sales & distribution Field service Intel, Micron, Quantum, Komag, etc. Compaq, Dell, Gateway, Packard Bell Microsoft Word Perfect, Lotus, Borland CompUSA Independent contractors Microsoft 1960–1980 1980–1990 1990–Present Dell IBM ControlData DigitalEquipment Monsanto, Sumitomo Metals, Shipley, etc. Teradyne, Nikon, Canon, Applied Materials, Millipore, etc. Assembly Compaq Contract Assemblers
  31. 31. What will networking look like? Equipment Materials Components Hardware design Operating system Applications software Sales & distribution Field service 1990–Present Assembly Usual Suspects Usual Suspects The Future 3Com,Cisco,Nortel Atheros, Broadcom, Intel, Marvel, ?? Contract Assemblers Accenture, IBM, EDS, VARs, SIs
  32. 32. Accenture, IBM, EDS, VARs, SIs Atheros, Broadcom, Intel, Marvel, ?? What will networking look like? Equipment Materials Components Hardware design Operating system Applications software Sales & distribution Field service 1990–Present Assembly 3Com,Cisco,Nortel Intoto? Nexthop? Level 7? Symbol? Linux?, IOS? JUNOS? Others? Cisco? Extreme? IBM BladeCenter? Bivio? Contract Assemblers Usual Suspects Usual Suspects 3Com? Adtran? Cisco? Procurve? The Future
  33. 33. Example: Intoto Ecosystem Source: Intoto OS Vendors (BSP integration) SnapGear 3rd-Party Apps Antivirus Antispam Content filtering WLAN autoconfig. Hardware ODM Semiconductor Vendors (Chip integration) Service Providers (Provisioning and certifications) 3rd-Party Certification Consortiums (Industry Standard Certifications) End-user Product (OEM Branding + Channel + Support) Networking OEM Hardware ODM Hardware Platform (CPU/NP, coprocessors, PCBA, OS, and BSP) Production-ready Security Gateway Platform (Intoto Network-centric Security Gateway Platform Software + Integration + Certifications) Software ODM
  34. 34. Modularity in Networking: New Market Disruption Example: Netgear  Buy code from third parties  Off-the-shelf silicon  Off-the-shelf operating systems  Integrate software and hardware  ODM manufacturing  Consumer & SMB Focus
  35. 35. Performance Time Three Strategies for Market Disruption
  36. 36. Non-consumers or Non-consuming occasions Time Different Performance Measure Performance Time Three Strategies for Creating Growth New Market Space: Consumer & Security Products
  37. 37. Long-term Outlook for Network COTs Modularity Traditional network R&D OS ASICs
  38. 38. Long-term Outlook for Network COTs Modularity COTS model matures in consumer and SMB markets Traditional NEM R&D Modular NEM R&D OS ASICs Integration Usability Partners Specialists
  39. 39. 3 Notes on Market Disruptions  Disruptions in networking take a long time (10+ Years)  Disruptive businesses are often lower margin than incumbents  COTS model comes with risk that incumbent and new entrants fail
  40. 40. Networking Vendors: Where Are They Headed?
  41. 41. Start-ups Airspace, Andiamo (both acquired by Cisco,) Aruba, NetDevices, Trapeze, many others Develop on Linux Off-the-shelf silicon Consolidate  Apps  Functions  Services ©IDC, 2006
  42. 42. Disruptors Adtran, Dell, D-Link, Huawei?, F5, Linksys (Acquired by Cisco), Netgear, ZTE? Off the shelf silicon (Broadcom, Intel, Marvel, etc) Network device software  Intoto, Level 7, Nexthop Customer-defined controls (F5) OS: Windriver, Linux, other COTS OS ©IDC, 2006
  43. 43. Challengers 3Com, Enterasys, Extreme, Foundry, Juniper, Nortel, Procurve Mix of custom ASICs and COTS silicon OEM or partner with specialists for security, voice, WLAN Open APIs to internal developers and/or partners Modular operating systems ©IDC, 2006
  44. 44. Modularity in Networking: Cisco’s Opportunity & Threat Integration is a key value proposition for voice, security, and mobility Little to no incentive to buy COTs IOS is now “internally modular” Will Cisco’s ability to add, consolidate, and simplify new features or even acquire and integrate become too slow?
  45. 45. Cisco IIN: Intelligent Information Networking  Technologies that produce a better network SONA: Services Oriented Network Architecture  An architecture and technology set that should enable customers to virtualize and consolidate a set of infrastructure services across an enterprise.  The benefit of this consistency will be to helping other parts of IT gain efficiencies and increase the network’s share of total IT spend.
  46. 46. Guidance For Vendors 1. The enterprise network market continues to grow, with new access, WAN, and applications driving demand for new functions, scale, and manageability 2. COTs does not equal commodization of network equipment in the enterprise. 3. Enterprise equipment vendors need to use COTs in order to shift and prioritize R&D, not to cut R&D spend 4. There is resistance to network service integration INTO network equipment, but demand for integration with in the near term WITH network equipment
  47. 47. Contact Info Please email me at agermanow@idc.com

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