|By Michael Bushong||
|August 18, 2014 06:00 AM EDT||
As we head through earnings season, we get the opportunity to learn a bit about the state of the networking industry. Each data point gives us a bit more information about how the competitive landscape is unfolding, and ultimately how this will shape the market. So what do we know so far?
Start with Arista
Perhaps the most important data point for anyone in the networking industry not called Cisco is Arista’s post-IPO performance. Since their much-anticipated IPO earlier in the year, Arista’s stock is up more than 25%. Part of the price certainly reflects pent up demand, but performance also tracks with their impressive earnings growth.
So what does this mean for the rest of the industry?
Arista proves that there is demand in the networking market and that there are large enough volumes of customers who favor value more than pure incumbency and entrenched relationships. It also suggests that the market needs a strong second supplier for networking solutions.
While customer demand does not ensure vendor execution, it does mean that if vendors can demonstrate value, there is enough interest in the marketplace to build very lucrative businesses. It is true that there will always be buyers who subscribe to the mantra No one ever got fired for buying Cisco, but there is reason to believe that the cadre of those who put building something better above merely avoiding risk is growing.
What about Cisco?
Cisco’s earnings coverage has been dominated by the announced layoff of 6,000 employees. We should be somewhat fair when looking at these numbers. Cisco employs more than 70,000 people worldwide. While 6,000 is no small number, Cisco’s employee purges are really an annual event. At a company with as diverse a portfolio as Cisco, we should expect that they will constantly evaluate the bets they have placed, and then back off investments that aren’t performing and double down where it makes sense. To put it candidly, I think that people are taking their eye off the ball a bit by focusing on the cuts.
So where should we be focusing if not on the cuts?
Cisco’s numbers were actually not bad across the board. They beat estimates by by 2 cents per share and consensus revenue estimates by $300 million. To put those numbers into perspective, they beat estimates for the quarter by about as much as Arista earned in all of 2013. That’s not a bad haul. Another interesting point of view – for Cisco to grow 10% year-over-year, they basically have to build a Juniper Networks every year (not easy considering Juniper took 16 years to get to $5B in revenue).
That said, the stock has been hammered a bit. So why? Basically, Cisco’s strong numbers are underpinned by a couple of scary trends. Weakness in emerging markets (especially China) is worrisome. But beyond that, they reported year-over-year losses in both routing and switching (7% and 4% respectively).
The emerging markets trends are not terribly surprising given the global fallout in the post-Snowden era. But those trends are more damaging when you consider the losses in both routing and switching. It would appear that Cisco is losing share across both areas. So long as new markets are growing fast enough to offset share movement in more stable geographies, maybe things are not so bad. But if those new markets stall out, then share losses mean there is significant headwind.
When you take competitive growth and Cisco losses side-by-side, you get a little bit of nervousness in the investor community.
Why margins matter
If competition is heating up, Cisco will have to pay closer attention to pricing. This is partly why there is a strong focus on Cisco’s gross margins across the board. The fear for some is that a changing network landscape that features more competitors and new technology trends like bare metal switching will ultimately force Cisco to drop those healthy margins down into the 50s (they reported 61.8% for the year).
Interestingly, if Cisco is forced to drop price, it will actually create shockwaves through the industry. Players who have counted on being cheaper as part of mitigating the risk of switching to a new vendor will find that one of their competitive edges has been blunted. In markets that tend to buy on features and performance (carrier routing, for instance), this might not matter so much. But in more price-sensitive spaces (switching, for example), this starts to matter.
It will be interesting to watch both Arista and bare metal advocate counterpunch. They have to be preparing for Cisco to drop prices aggressively at some point. This could be why we are seeing a lot more attention paid to DevOps and automation, both of which allow vendors to continue the Total Cost of Ownership discussion with OpEx replacing CapEx in the models. The challenge is that OpEx is notoriously hard to model well.
Beyond the big numbers
The other number Cisco talked about is around ACI adoption. Chambers indicates that Cisco has over 580 ACI customers. Strictly speaking, I believe this number refers to Nexus 9000 customers, which is arguably not full ACI without the APIC controller (recently shipping). But regardless, for a nascent product (announced last year but fairly recently available), this demonstrates strong demand. More importantly, this indicates a healthy appetite for a different way of networking. Cisco’s ACI represents a new architecture built around the application and leveraging an SDN architecture. That customers are willing to migrate from legacy deployments to a new architecture is telling. It signals a change in buying behavior that favors solutions that are more application-oriented.
An interesting juxtaposition
Arista’s strength and Cisco’s ACI progress create an interesting juxtaposition. On the one hand, you have a market that is hungry for a second supplier. On the other, you have a set of buyers interested in a new way of networking. At some point, these trends will have to reconcile. The result has to be that a second supplier to the newer networking paradigms emerges. This creates intense opportunity, which will nurture a renewed focus on innovation in an industry that spent most of the new millennium making only incremental improvements.
The bottom line
So who wins? Ultimately, the winner has to be customers. Competition breeds improvement, both in terms of pricing and innovation. Those companies most capable of innovating should find hope in both Cisco’s and Arista’s earnings. And anyone banking on a legacy networking approach should eye these results with a concerned eye. We will see new players continue to rise at the expense of the laggards. And no amount of product re-labeling (But I SWEAR it’s SDN!) is going to make a ton of difference.
[Today’s fun fact: One brow wrinkle is the result of 200,000 frowns. This is why San Diego Padres and Minnesota Vikings fans have such weathered faces.]
Most of the IoT Gateway scenarios involve collecting data from machines/processing and pushing data upstream to cloud for further analytics. The gateway hardware varies from Raspberry Pi to Industrial PCs. The document states the process of allowing deploying polyglot data pipelining software with the clear notion of supporting immutability. In his session at @ThingsExpo, Shashank Jain, a development architect for SAP Labs, discussed the objective, which is to automate the IoT deployment process from development to production scenarios using Docker containers.
Nov. 30, 2015 03:30 PM EST
DevOps is about increasing efficiency, but nothing is more inefficient than building the same application twice. However, this is a routine occurrence with enterprise applications that need both a rich desktop web interface and strong mobile support. With recent technological advances from Isomorphic Software and others, rich desktop and tuned mobile experiences can now be created with a single codebase – without compromising functionality, performance or usability. In his session at DevOps Summit, Charles Kendrick, CTO and Chief Architect at Isomorphic Software, demonstrated examples of com...
Nov. 30, 2015 01:45 PM EST Reads: 430
Discussions of cloud computing have evolved in recent years from a focus on specific types of cloud, to a world of hybrid cloud, and to a world dominated by the APIs that make today's multi-cloud environments and hybrid clouds possible. In this Power Panel at 17th Cloud Expo, moderated by Conference Chair Roger Strukhoff, panelists addressed the importance of customers being able to use the specific technologies they need, through environments and ecosystems that expose their APIs to make true change and transformation possible.
Nov. 30, 2015 08:00 AM EST Reads: 565
Microservices are a very exciting architectural approach that many organizations are looking to as a way to accelerate innovation. Microservices promise to allow teams to move away from monolithic "ball of mud" systems, but the reality is that, in the vast majority of organizations, different projects and technologies will continue to be developed at different speeds. How to handle the dependencies between these disparate systems with different iteration cycles? Consider the "canoncial problem" in this scenario: microservice A (releases daily) depends on a couple of additions to backend B (re...
Nov. 30, 2015 07:00 AM EST Reads: 470
Container technology is shaping the future of DevOps and it’s also changing the way organizations think about application development. With the rise of mobile applications in the enterprise, businesses are abandoning year-long development cycles and embracing technologies that enable rapid development and continuous deployment of apps. In his session at DevOps Summit, Kurt Collins, Developer Evangelist at Built.io, examined how Docker has evolved into a highly effective tool for application delivery by allowing increasingly popular Mobile Backend-as-a-Service (mBaaS) platforms to quickly crea...
Nov. 30, 2015 06:00 AM EST Reads: 389
Growth hacking is common for startups to make unheard-of progress in building their business. Career Hacks can help Geek Girls and those who support them (yes, that's you too, Dad!) to excel in this typically male-dominated world. Get ready to learn the facts: Is there a bias against women in the tech / developer communities? Why are women 50% of the workforce, but hold only 24% of the STEM or IT positions? Some beginnings of what to do about it! In her Day 2 Keynote at 17th Cloud Expo, Sandy Carter, IBM General Manager Cloud Ecosystem and Developers, and a Social Business Evangelist, wil...
Nov. 30, 2015 04:00 AM EST Reads: 609
Culture is the most important ingredient of DevOps. The challenge for most organizations is defining and communicating a vision of beneficial DevOps culture for their organizations, and then facilitating the changes needed to achieve that. Often this comes down to an ability to provide true leadership. As a CIO, are your direct reports IT managers or are they IT leaders? The hard truth is that many IT managers have risen through the ranks based on their technical skills, not their leadership ability. Many are unable to effectively engage and inspire, creating forward momentum in the direction...
Nov. 30, 2015 12:00 AM EST Reads: 421
In his General Session at DevOps Summit, Asaf Yigal, Co-Founder & VP of Product at Logz.io, explored the value of Kibana 4 for log analysis and provided a hands-on tutorial on how to set up Kibana 4 and get the most out of Apache log files. He examined three use cases: IT operations, business intelligence, and security and compliance. Asaf Yigal is co-founder and VP of Product at log analytics software company Logz.io. In the past, he was co-founder of social-trading platform Currensee, which was later acquired by OANDA. He was also an early employee of server performance-monitoring company...
Nov. 29, 2015 04:00 PM EST Reads: 261
Continuous processes around the development and deployment of applications are both impacted by -- and a benefit to -- the Internet of Things trend. To help better understand the relationship between DevOps and a plethora of new end-devices and data please welcome Gary Gruver, consultant, author and a former IT executive who has led many large-scale IT transformation projects, and John Jeremiah, Technology Evangelist at Hewlett Packard Enterprise (HPE), on Twitter at @j_jeremiah. The discussion is moderated by me, Dana Gardner, Principal Analyst at Interarbor Solutions.
Nov. 29, 2015 06:45 AM EST Reads: 749
With major technology companies and startups seriously embracing IoT strategies, now is the perfect time to attend @ThingsExpo 2016 in New York and Silicon Valley. Learn what is going on, contribute to the discussions, and ensure that your enterprise is as "IoT-Ready" as it can be! Internet of @ThingsExpo, taking place Nov 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 17th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The Internet of Things (IoT) is the most profound cha...
Nov. 28, 2015 12:00 PM EST Reads: 566
Internet of @ThingsExpo, taking place June 7-9, 2016 at Javits Center, New York City and Nov 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with the 18th International @CloudExpo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world and ThingsExpo New York Call for Papers is now open.
Nov. 27, 2015 12:00 PM EST Reads: 567
There are over 120 breakout sessions in all, with Keynotes, General Sessions, and Power Panels adding to three days of incredibly rich presentations and content. Join @ThingsExpo conference chair Roger Strukhoff (@IoT2040), June 7-9, 2016 in New York City, for three days of intense 'Internet of Things' discussion and focus, including Big Data's indespensable role in IoT, Smart Grids and Industrial Internet of Things, Wearables and Consumer IoT, as well as (new) IoT's use in Vertical Markets.
Nov. 25, 2015 12:00 PM EST Reads: 558
IBM has announced a new cloud-based service that enables developers to automatically translate cloud and mobile apps into the world's most-spoken languages. IBM Globalization Pipeline, now available in beta on Bluemix, IBM's Cloud platform, rapidly opens up new global markets to companies without requiring them to rebuild or redeploy their apps. The beta version will support English as the base language and nine additional languages including: French, German, Spanish, Brazilian Portuguese, Italian, Japanese, Simplified Chinese, Traditional Chinese, and Korean.
Nov. 25, 2015 08:00 AM EST
After more than five years of DevOps, definitions are evolving, boundaries are expanding, ‘unicorns’ are no longer rare, enterprises are on board, and pundits are moving on. Can we now look at an evolution of DevOps? Should we? Is the foundation of DevOps ‘done’, or is there still too much left to do? What is mature, and what is still missing? What does the next 5 years of DevOps look like? In this Power Panel at DevOps Summit, moderated by DevOps Summit Conference Chair Andi Mann, panelists looked back at what DevOps has become, and forward at what it might create next.
Nov. 20, 2015 05:00 PM EST Reads: 393
SYS-CON Events announced today that TechTarget has been named “Media Sponsor” of SYS-CON's 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. TechTarget storage websites are the best online information resource for news, tips and expert advice for the storage, backup and disaster recovery markets.
Nov. 5, 2015 10:00 AM EST Reads: 582
SYS-CON Events announced today that O'Reilly Media has been named “Media Sponsor” of SYS-CON's 17th International Cloud Expo®, which will take place on November 3–5, 2015, at the Santa Clara Convention Center in Santa Clara, CA. O'Reilly spreads the knowledge of innovators through its technology books, online services, research, and tech conferences. An active participant in the technology community, O'Reilly has a long history of advocacy, meme-making, and evangelism.
Nov. 5, 2015 09:45 AM EST Reads: 549
Docker is hot. However, as Docker container use spreads into more mature production pipelines, there can be issues about control of Docker images to ensure they are production-ready. Is a promotion-based model appropriate to control and track the flow of Docker images from development to production? In his session at DevOps Summit, Fred Simon, Co-founder and Chief Architect of JFrog, will demonstrate how to implement a promotion model for Docker images using a binary repository, and then show how to distribute them to any kind of consumer, being it a customer or a data center.
Nov. 3, 2015 10:00 AM EST Reads: 729
In today's enterprise, digital transformation represents organizational change even more so than technology change, as customer preferences and behavior drive end-to-end transformation across lines of business as well as IT. To capitalize on the ubiquitous disruption driving this transformation, companies must be able to innovate at an increasingly rapid pace.
Nov. 3, 2015 09:00 AM EST Reads: 515
Webair, a leading provider of Cloud Hosting, Colocation and Managed solutions, today announces that its Chief Technology Officer, Sagi Brody, will speak at Cloud Expo 2015 Silicon Valley, to be held November 3-5, 2015, at the Santa Clara Convention Center in Santa Clara, California. Cloud Expo 2015 Silicon Valley is a world-class conference that brings together thought-leaders and cutting edge practitioners in the cloud / utility computing, Big Data, Internet of Things (IoT), Software-Defined Data Center (SDDC), DevOps and Web Real-Time Communication (WebRTC) space, which, in addition to prest...
Nov. 3, 2015 06:00 AM EST Reads: 510
DevOps is a software development method that places emphasis on communications between Software Engineering, Quality Assurance and IT Operations (SEQAITO ) with the goal to produce software and services to improve, increase the operational performance for the Enterprise. Communications is key not only between the SEQAITO team members but also the communication between the applications and the SEQAITO team. How can an organization provide the human communication and the application communication to the SEQAITO team to ensure the successful development, deployment of the application?
Nov. 3, 2015 05:00 AM EST Reads: 470
Logz.io, the Predictive ELK (Elasticsearch, Logstash and Kibana) log analytics cloud service company, announced today that it was chosen to speak at DevOps Summit, which will take place on November 3-5 in Santa Clara, California. Logz.io will explore the entire process that we have undergone – through research, benchmarking, implementation, optimization, and customer success – in developing a processing engine that can handle petabytes of data. We will also discuss the requirements of such an engine in terms of scalability, resilience, security, and availability along with how the architectur...
Nov. 3, 2015 12:45 AM EST Reads: 444
Automating AWS environments is important for all businesses as it simplifies creation and setup of cloud resources, facilitates otherwise complex processes, and streamlines management. The benefits of automation are clear: accelerate execution, reduce human error and unwanted consequences, and increase the enterprise’s ability to rapidly adapt, all while reducing the overall cost of IT operations. In his session at 17th Cloud Expo, Patrick McClory, Director of Automation and DevOps at Datapipe, dives deep into the technical specifics of automation for AWS including a discussion of best pract...
Nov. 2, 2015 06:00 PM EST Reads: 670
Father business cycles and digital consumers are forcing enterprises to respond faster to customer needs and competitive demands. Successful integration of DevOps and Agile development will be key for business success in today’s digital economy. In his session at DevOps Summit, Pradeep Prabhu, Co-Founder & CEO of Cloudmunch, he will cover the critical practices that enterprises should consider to seamlessly integrate Agile and DevOps processes, barriers to implementing this in the enterprise, and provide examples on how an integrated approach has helped major companies embrace a cloud first,...
Nov. 2, 2015 06:00 PM EST Reads: 685
In a recent research, Analyst firm IDC found that the average cost of a critical application failure is $500,000 to $1 million per hour and the average total cost of unplanned application downtime is $1.25 billion to $2.5 billion per year for Fortune 1000 companies. In addition to the findings on the cost of the downtime, the research also highlighted best practices for development, testing, application support, infrastructure, and operations teams.
Nov. 2, 2015 04:00 PM EST Reads: 518
In their session at DevOps Summit, Asaf Yigal, co-founder and the VP of Product at Logz.io, and Tomer Levy, co-founder and CEO of Logz.io, will explore the entire process that they have undergone – through research, benchmarking, implementation, optimization, and customer success – in developing a processing engine that can handle petabytes of data. They will also discuss the requirements of such an engine in terms of scalability, resilience, security, and availability along with how the architecture accomplishes these requirements. Lastly, they will review the gory details of the technolo...
Nov. 2, 2015 03:00 PM EST Reads: 652