The Lippis Report

Back in November of 2009, I wrote Lippis Report Research Note 136 titled “HP Plans to Acquire 3Com Accelerating a New IT Convergence Era.” In that Research Note, I wrote

“When 3Com is fully integrated into HP what kind of networking revenue and market share can HP gain? ProCurve + 3Com is approximately $2B of revenue now. With the existing product lines can HP generate $5B, $10B or more of network revenue over five years? Time will tell.”

Well after nearly two years, HP Networking or HPN’s North America (NA) layer 2/3 Ethernet switch market share by revenue is nearly the same, bouncing between 5% and 6.1%, according Dell’Oro, with HPN’s Q2CY11 NA switch revenue share being down to 6%. Considering HPN’s limited results after significant investments in sales, channels and marketing, including its “proof-of-concept” plus “A Catalyst for Change” Cisco Trade-in program, not to mention engineering investment, the question is can HP make it in networking? We attempt to answer that question in this Lippis Report Research Note.

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In Lippis Report 172, I mentioned three huge trends that are starting to interact with each other creating a perfect storm that is gripping the tech industry. One of those trends is the creation of a software ecosystem in the networking market, thanks to the Clean Slate program out of Stanford University that has spawned the Software-Defined Networking (SDN) initiative and open controller protocol called OpenFlow. I spent a week in the Valley talking to people at Stanford and many industry executives from Cisco, Juniper, Marvell, Big Switch, Nicira, Arista, IBM and others. In this Lippis Report Research Note, I share with you what I learned. OpenFlow-based SDN is being both hyped and in its current state, limited, but it does represent a new paradigm that has the industry abuzz, filled with possibilities.

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It seems like every week or so there is news of a massive cyber attack where criminals get away with stealing credit card and other personal data on the order of tens of millions of individual records. Sony, Bank of America, Epsilon, Nintendo, the International Monetary Fund, the US Senate and CIA are but a few of the targets for high-profile cyber attacks that took place in 2011. According to a recent study by the Ponemon Institute, “cyber attacks have recently become more harsh and recurrent. At least 90% of the IT practitioners surveyed claimed that they had experienced one or more cyber breaches within the last year, and 89% of these respondents could not identify the source of these breaches.”

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The tech sector is at a crossroads. In just 18 short months, mobile and cloud computing has fundamentally changed business assumptions and technical underpinnings of IT delivery. And in the process IT business leaders are fundamentally changing their buying requirements and corporate IT investments challenging existing vendor relationships. The tech sector served up corporate IT along technical lines of computing, networking, storage and applications, but these lines are blurring as every major multi-billion dollar IT firm now seeks to deliver vertical offerings comprised of a single rack of compute, storage and networking to address scale and simplicity associated with the new mobile and cloud computing models. Cisco, IBM, HP, Dell and Oracle all are repositioning their data center offers to address the market opportunity and shift to assist IT leaders building iBusinesses. In this Lippis Report Research Note, we dive into Cisco’s Data Center Fabric as it’s the furthest along at integrating compute, networking and storage access for corporate advantage offering a glimpse of IT’s future.

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Being close to customers has proven to be a good strategy over the past business cycle as IT business leaders have invested in their branch offices. New customer-based applications continue to be added at the branch level expanding revenue generating opportunities while at the same time video communications have increased significantly for both client and employee interactions. In addition to corporate applications and video, internet access and cloud-based applications have boomed too over the past business cycle thanks to smartphones and mobile tablets connected to local branch Wireless Local Area Networks or WLANs. All of this would be fine if for not one issue…all application and communication traffic is being forced to backhaul over the same (wide area network) WAN/VPN to either connect to corporate data centers, public clouds or the internet. In this Lippis Report Research Note, we explore a new cloud-enabled branch office strategy from Cisco that’s simple, eliminates backhauling of internet-bound traffic while increasing security, visibility and management. What’s fascinating about this new approach is that the Return on Investment or ROI is very short as it’s paid by WAN arbitrage.

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In Lippis Report 172, I mentioned three huge trends that are starting to interact with each other creating a perfect storm that is gripping the tech industry. One of those trends is the creation of a software ecosystem in the networking market, thanks to the Clean Slate program out of Stanford University that has spawned the Software Defined Network (SDN) initiative and open controller protocol called OpenFlow. I spent a week in the Valley talking to people at Stanford and many industry executives from Cisco, Juniper, Marvell, Big Switch, Nicira, Arista, IBM and others. In this Lippis Report Research Note, I share with you what I learned. OpenFlow-based SDN is being both hyped and in its current state, limited, but it does represent a new paradigm that has the industry abuzz, filled with possibilities.

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Three strong trends are taking shape that are so powerful they threaten the status quo of the networking industry. These trends are more like storms than new markets; in fact they represent a major industry discontinuity. The first storm is happening now and is represented by merchant silicon for 10 and 40 GbE chips lowering the barrier of entry for new entrants in the Ethernet switch market. The second storm is much weaker but promises to be just as big, or bigger, than the first. This second storm is the creation of a software ecosystem in the networking industry, thanks to initiatives such as Software Defined Networks (SDN), OpenFlow, Arista Network’s EOS Central, etc. The third storm is the paradigm shift in enterprise IT spending thanks to mobile and cloud computing. These three storms are starting to interact and feed upon each other, forming a perfect storm in the networking industry. The perfect storm is already doing damage, as all major IT firms position product portfolios to navigate through it and prepare for its aftermath of making existing networking legacy.

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Even during the most difficult recession in decades, videoconferencing endpoint unit shipments increased according to Frost and Sullivan. In fact, unit and revenue growth rates are projected to be on a tear with an 18.3% and 16.5%, respectively, compound annual growth rate between 2009 and 2015. Why so bullish? Consider Camp Dresser McKee (CDM), a global water treatment design and build firm who, during the downturn, invested in high-quality video conferencing, not only to save on travel cost and executive wear and tear but to transform its business processes. CDM has been able to consolidate offices in regional centers for design engineers while close to customer projects outposts are linked back to centralized design centers via high-definition video conferencing. The value gained is far greater than travel cost savings as the capital spend on video conferencing has reduced corporate operational spend and increased efficiency while at the same time making them more competitive.

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There is no escaping the fact that cloud computing is a fundamental change in the IT industry that is in the early stages of its adoption curve. Yes, we hear a lot about Amazon’s Elastic Compute or EC2, Rackspace, Microsoft’s Azure, etc. And yes, there are multiple definitions and cloud markets such as PaaS, IaaS, SaaS, UCaaS, etc. So it’s no wonder that most IT executives think of cloud computing in terms of servers, real or virtualized, applications and power spend. And yes, the primary reason that cloud computing is a reality is because we can scale compute power. But for those building private and public clouds as well as those supplying them, a critical eye is turning toward networking as a fundamental differentiator. With IT giants hording some $300B in cash on hand, we expect networking to be a target for acquisition. In this Lippis Report Research Note, we review the large providers of IT and assess their networking capabilities.

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In the Lippis Report, we have discussed the fundamental changes shaping a new data center network architecture. These drivers are massive virtualization, a sea change in traffic patterns that are now dominated with east-west flows on top of existing north-south traffic, ultra low latency, the emergence of cloud spec data centers, etc. As a result, data center networking attributes are changing with requirements of traffic, steering in virtualized infrastructure, avoiding manual network changes as VMs move, removing oversubscription (thanks to spanning tree), streamlining network tiers to hasten east-west traffic flows, etc. The industry is responding to these changes and requirements with new approaches to data center networking, such as the Open Networking Foundation, Cisco’s FabricPath, Juniper’s QFabric, Brocade’s VCS, Avaya’s VENA, Nicira Networks’ network virtualization software, etc. In this Lippis Report Research Note, we explore a key technology to enabling two-tier network fabrics, and that’s link aggregation and its various approaches, including Multi-Chassis Link Aggregation Group, Transparent Interconnection of Lots of Links (TRILL) and Shortest Path Bridging (SPB).

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Cisco recently launched its SecureX architecture that extends perimeter-based network security to secure modern IT, recognizing the huge growth in mobile and cloud computing. SecureX is a multi-layer architecture built upon Cisco’s AnyConnect client, its global footprint in real-time threat intelligence found in SIO (Security Intelligence Operation), Cisco TrustSec, including policy servers of NAC manager and server appliances, ASA firewall and the security enforcement features of its switches and routers. SecureX is an architecture to Cisco’s network security products and service to work together in an effort to create deeper defenses and contain exploit infestation if, and when, they occur. Fundamental to SecureX is the concept of “context aware” policy across the enterprise, including remote endpoint devices, centralized policy creation with distributed security device and network enforcement. SecureX provides for innovation injection points through APIs (Application Programming Interfaces) for management and SIEM or Security Information and Event Management. In this Lippis Report Research Note, we explore SecureX with a focus on how context increases defenses and keeps IT assets safer.

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The data center switching market is heating up. To address the scale issues posed by mobile and cloud computing nearly every network vendor is launching its own version of a 10/40/100 GbE fabric to connect servers and storage to the internet. At the heart of this fabric is a two-tier (Fat-Tree) network made up of leaf/ToR and spine/Core switches. Here leafs connect servers and spines connect leafs while also being interconnected in a logical mesh. The protocols to create this logical mesh are based upon IS-IS link state routing, but each vendor is taking a unique approach with Cisco using its FastPath, Alcatel-Lucent and Avaya using SPB (802.1aq Shortest Path Bridging) while Brocade VDX is based upon TRILL (Transparent Interconnection of Lots of Links). Juniper recently announced QFabric but has not detailed what it’s using for logical meshing. At the center of new data center design are leaf and spine switches. In Lippis Report Research Note 166, we detailed the latest ToR switches. In this Lippis Report Research Note 167, we dive into performance and power consumption measurements plus the use of SPB of Alcatel-Lucent’s OmniSwitch 10K, a new entry into spine/core data center switching market.

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During December 6-10, 2010, the Lippis Report and Ixia conducted the industry’s first 10GbE data center switching evaluation of Top-of-Rack and Core Ethernet switches at the modern iSimCity lab in Santa Clara, CA. We evaluated Alcatel-Lucent’s OmniSwitch 10K, Arista’s 7504 Series Data Center Switch, BLADE Network Technologies’, an IBM Company, IBM BNT RackSwitch G8124 and IBM BNT RackSwitch G8264, Force10 Network’s S-Series S4810, Hitachi Cable’s Apresia 15000-64XL-PSR, Juniper Network’s EX Series EX8216 Ethernet Switch and Voltaire®’s Vantage™ 6048. We are conducting a second round of test scheduled for the week of April 4-8 at iSimCity, and it is open to all suppliers of 10GbE data center switching. We learned a lot about these products, both in the lab and out. In this Lippis Report Research Note, we dive into the Top-of-Rack 10GbE switches we tested as they represent a new generation of products that exhibit low power consumption, low latency, high performance and are all based upon new single chip designs from Broadcom, Marvell or Fulcrum Micro.

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There are powerful market forces changing IT delivery. IT application delivery is becoming increasingly centralized thanks to data center server virtualization plus mobile and cloud computing. Desktops are being virtualized, too, thanks to network speeds that deliver low latency and high bandwidth, creating a thin client user experience that is indistinguishable from a thick client but at lower desktop management cost. One serious implication of this concentration of IT in data centers is that a new IT security model is needed as mobility brings greater threat exposure while virtualization changes traffic patterns and the rules of security appliance placement. In this Lippis Report Research Note, we present a new model for IT security in the virtualized mobile and cloud-computing era.

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