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Nortel, announced on June 20th, that it will liquidate its assets and may get less then $2B, which is less then 1% of its pre-dotcom boom valuation. This is such a sad story as $2B will be divided among holders of approximately $4.5 billion in Nortel debt, and more than $2 billion owed in severance to ex-employees and pensions to retired managers, and other obligations, according to the Wall Street Journal. While the CDMA and LTE groups are being sold to Nokia Siemens for an estimated $650M, the enterprise unit which includes its IP Telephony, UC, Routing, Switching, et al., products is being valued at less than $500 million since it’s losing money, according to people familiar with the business. As Warren Buffet said, when the tide goes out you get to see who’s swimming naked, and Nortel was very naked.

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The spring business cycle in our industry brought HP and Microsoft closer together, Avaya’s launch of Aura, Cisco’s go-to-market strategy for its unified computing system (UCS), Brocade’s 8000 FCoE switch launch, 3Com/H3C’s new 12500 data center core switch and re-emergence into the enterprise market, Voltaire’s entry into the ethernet data center market and much more. With the stocks of many networking companies trading higher than before the crash of 2008, it’s becoming clear that the efficiency gains of IT will play a major role in the fall economic up turn. With that in mind I review the major spring launches and provide my assessment.

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Data center IT pros live in interesting times, as they have not seen design changes so sweeping since IBM introduced S360 architecture in the early 1960s. While Moore’s Law maps out a hardware compute trajectory of higher capacity, increased density and lower pricing, a new software approach to computing, networking and storage has been building over the past few years which is accelerating the effect of Moore’s Law and fundamentally changing data center design and IT delivery. At the center of this change is virtualization of computing, storage and networking which is starting to expand beyond the data center all the way to client end points. The value of virtualization’s economics and utility is well documented with power, cooling and server reduction thanks to an increase in the number of applications that run on servers. And while the industry is readying for a second generation of virtualized data centers thanks to VMware’s vSphere 4, another data center innovation is finally taking shape that offers consolidation of LAN and SAN switches, reduced cabling requirements and cost while increasing performance. This innovation is called a unified fabric. In this Lippis Report Research Note we discuss the unified fabric (UF) from architecture, maturity, and value proposition points of view.
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During this downturn Cisco has taken the opportunity to launch initiatives that rivals simply do not have the scale and wherewithal to deliver. Cisco is delivering well thought out solutions to big problems with its smart grid initiative, EnergyWise energy management, Unified Computing System (UCS), collaboration, and now IT security. At RSA Cisco launched its Cisco Security Intelligence Operations (SIO) that leverages its presence in service provider and enterprise networks to deliver a global correlation of threats and in the process offers the deepest and widest range of IT security defenses available in the industry. SIO is in essence a “security cloud” service capable of identifying threats propagating throughout the internet and intranets before corporate networks are infected by transmitting mitigating code to enterprise security devices such as IPS, firewall, Web and email systems.

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There are multiple business and technology trends that are now interacting and forcing IT planners to rethink their wide area network (WAN) design. The macroeconomic downturn has proven once and for all that business and its processes are global. With economic globalization and the current turbulence people are required to collaborate more closely, more frequently and across greater distances, more so than at any other point in time. At the same time IT leaders have been consolidating IT service delivery into data centers as well as consolidating their number of data centers. Data center consolidation offers large economic efficiency but places greater distance between data, applications and end-users, putting great strain on application performance. Corporate green initiatives have driven up the number of home and mobile workers to the point that 15% of traffic flows to and from mobile workers and data centers. Adding more pressure, WANs have historically been designed in a piecemeal fashion with little to no regard for delivering consistent WAN Services among sites.

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Unified Communications (UC) as an integrated launch point to multiple communications applications will swiftly fade as UC is integrated into corporate social networking and collaboration applications. This is the impression I walked away with after the Orlando VoiceCon industry event. The implication of this is systemic, sending change throughout the industry from suppliers, buyers, and even industry event organizers. What I mean is that UC as a standalone desktop application has limited value. IT and business leaders are pressing suppliers to improve user experience and in the process productivity.

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It’s been over a week since Cisco launched its Unified Computing System (UCS) initiative. I’ve reviewed all the presentations, documents, financial analyst research notes, twitter and Facebook chatter as well as talked to a dozen or so IT leaders and in this Lippis Report Research Note I provide my assessment. There’s so much to consider with the UCS launch, the technology, the data center value, go to market strategy, competitive responses, etc. But I have a one important observation. This is the first time in the history of IT that a networking company has entered the computing industry. My first job in 1984 was at Digital Equipment Corporation, where networking was always an accessory, or stepchild, to computing. And yes, a lot has transpired since then but the sheer fact that a networking company has grown to the size of Cisco and that it can stand up and say “Hey IBM and HP, I’m entering your core market and there’s nothing you can do about it” is a remarkable occurrence. Anyone who has spent his or her career in networking and has worked within DEC, IBM or HP networking groups knows how it feels to be tangential to corporate strategy. For this group, UCS was a moment that tipped networking technology and networking professionals to a higher level of importance and influence in the IT industry. In this Lippis Report Research Note we review UCS and Cisco’s opportunities and challenges.

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In Lippis Report 120 we discussed how cloud computing is driving new networking requirements for both public and private cloud implementations. We focused on ethernet switch devices in that Research Note. But cloud computing may also require a new network design paradigm as well. The three-tier network model of edge or access, then aggregation or distribution and core have been the building blocks of modern computing networking for the past two decades and are still fundamental to classical enterprise network design. But in high performance data centers and in particular cloud computing a new two-tier model is being considered.

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The data center market has been undergoing tremendous change over the past 24 months, with consolidation, green projects and virtualization deployments accelerating, thanks in part to the bleeding macro economic climate. Building upon the next phase of data center virtualization is cloud computing, which in 2008 ushered in initiatives with announcements made by nearly every computer, software, networking, internet hosting and storage concern. While it’s clear that the industry is in the center of the hype curve a simple example reveals that the hype is justified. One well-known example demonstrating the power of cloud computing is animoto and Amazon. In April of ’08 animoto, a music video production application on Facebook ramped up from 25,000 to 250,000 users in three quick days scaling from 50 instances of usage on Amazon’s EC2 cloud service to 3,500 without service interruption; that’s like having nearly 4,000 servers to support this application.

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For this Lippis Report Research Note I talked with Cisco’s Mark Fulgham, VP Marketing Data Center Emerging Technologies at Cisco on Unified Computing, and Jim Ganthier, VP HP BladeSystem Marketing, Metrics and Solutions. Scheduling difficulties precluded IBM from participating; thus we’ll focus primarily on Cisco and HP in this Research Note. IBM is rumored to shortly be announcing a tighter relationship with Juniper Networks and Brocade to bolster its Dynamic Infrastructure to be more competitive with HP’s Adaptive Infrastructure and Cisco’s Data Center 3.0 with Unified Computing initiative. Look for more information as it occurs; follow us on our Twitter account and join our cloud computing/networking Facebook group.

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The stock market crash of 2008 and the subsequent global economic downturn have diverted attention away from major IT industry themes. But as business and IT leaders come to grips with new economic realities one theme, Green IT, has not lost its luster. In fact, green is increasingly being viewed as “lean” as it complements corporate efficiency initiatives, which have been prioritized during this current business cycle. In short, the economic slow down is offering business and IT leaders an opportunity to accelerate their Green IT plans as these programs improve operational and energy efficiency.

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This is not 2001, but 2009. This recession’s impact on the IT industry is nothing like the Great IT Depression of 2001 when $5 trillion of IT market value was wiped out, IT firms worked off large product inventories pushing margins down and hundreds of thousands of IT jobs were lost. 2009 IT spending is projected to be +/- 2%, which does not include the yet to be approved $700 to $850B stimulus package which IT will benefit from because of its universal broadband, healthcare IT investment, smart grid and green energy initiatives. In fact IT jobs, especially those with networking skills, are in demand. But 2009 is similar to 2001 in one regard: IT leaders are flocking to the safety of large IT suppliers who possess healthy balance sheets and staying power; companies such as IBM, Cisco, HP, Microsoft, CA, Oracle, et al. No doubt there is caution in the air as IT leaders focus on smaller projects that have quick payback or large IT projects that can be delivered at speed to realize business value in short order. While the first two quarters may be slower than normal, the hope is that the back end of 2009 will be stronger. With this as a backdrop here are our Top 10 IT Predictions for 2009:

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I believe in IT. Even with all the gloom in the economic news, IT will play a major role in the recovery. This economic mess is not a typical business cycle of supply and demand balance or imbalance. It’s rooted in the greed of a few who sold sub-prime mortgages to those who could not afford them, rating agencies that gave AAA rating to BBB sub-prime mortgage-backed bonds, investment banks that solicited investors to short these bonds only so they could use the short to synthesize and multiply the number of bad bonds which eventually clogged the credit market and ignited the stock market crash of 2008. This cycle of greed has and will continue to cost us, our children and our grandchildren dearly as we are forced to bail out financial institutions, the auto industry and fund a stimulus package sized in the $500 to $700 billion range. With this concerning economic backdrop, I believe in IT more now than at any other time in my career. Why? Because after all the cost cutting, reduction in force or layoffs, supply chain rationalization, expense reduction initiatives, etc., IT is the only tool humans have to improve and sustain productivity gains.

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While the global economy slows down, network security spending continues to be robust as business and IT leaders seek to protect corporate assets and achieve compliance, thus avoiding a major distraction at a time when market focus is needed most. The largest corporate security vulnerability is data loss and it’s getting harder to protect it. Here’s why.

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