Welcome!

DevOps Journal Authors: Carmen Gonzalez, Trevor Parsons, Jackie Kahle, Rex Morrow, Datical, Liz McMillan

Blog Feed Post

What can we learn from Cisco’s latest results?

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.]

The post What can we learn from Cisco’s latest results? appeared first on Plexxi.

Read the original blog entry...

More Stories By Michael Bushong

The best marketing efforts leverage deep technology understanding with a highly-approachable means of communicating. Plexxi's Vice President of Marketing Michael Bushong has acquired these skills having spent 12 years at Juniper Networks where he led product management, product strategy and product marketing organizations for Juniper's flagship operating system, Junos. Michael spent the last several years at Juniper leading their SDN efforts across both service provider and enterprise markets. Prior to Juniper, Michael spent time at database supplier Sybase, and ASIC design tool companies Synopsis and Magma Design Automation. Michael's undergraduate work at the University of California Berkeley in advanced fluid mechanics and heat transfer lend new meaning to the marketing phrase "This isn't rocket science."

@DevOpsSummit Stories
Founded in 1997, ActiveState is a global leader providing software application development and management solutions. The Company's products include: Stackato, a commercially supported Platform-as-a-Service (PaaS) that harnesses open source technologies such as Cloud Foundry and Docker; dynamic language distributions ActivePerl, ActivePython and ActiveTcl; and developer tools such as the popular Komodo Edit and Komodo IDE. Headquartered in Vancouver, Canada, ActiveState is trusted by customers an...
SYS-CON Events announced today that ElasticBox is holding a Hackathon at DevOps Summit, November 6 from 12 pm -4 pm at the Santa Clara Convention Center in Santa Clara, CA. You can enter as an individual or team of up to 10 developers. A New Star Is Born Every Month! All completed ElasticBoxes will then be sent to a judging panel - 12 winners will be featured on the ElasticBox website in 2015. All entrants will receive five full enterprise licenses for one year + ElasticBox headphones + Elasti...
SYS-CON Events announced today that Calm.io has been named “Bronze Sponsor” of DevOps Summit Silicon Valley, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Calm.io is a cloud orchestration platform for AWS, vCenter, OpenStack, or bare metal, that runs your CL tools puppet, Chef, shell, git, Jenkins, nagios, and will soon support New Relic and Docker. It can run hosted, or on premise and provides VM automation / expiry, self-service portals,...
Blue Box has closed a $10 million Series B financing. The round was led by a strategic investor and included participation from prior investors including Voyager Capital and Founders Collective, as well as the Blue Box executive team. This round follows a $4.3 million Series A closed in December of 2012 and led by Voyager Capital. In May of this year, the company announced general availability of its private cloud as a service offering, Blue Box Cloud. Since that release, the company has dem...
The speed of product development has increased massively in the past 10 years. At the same time our formal secure development and SDL methodologies have fallen behind. This forces product developers to choose between rapid release times and security. In his session at DevOps Summit, Michael Murray, Director of Cyber Security Consulting and Assessment at GE Healthcare, will examine the problems and present some solutions for moving security in to the DevOps lifecycle to ensure that we get fast A...
SYS-CON Events announced today that Zentera Systems, an industry visionary delivering hybrid-cloud management solutions, will exhibit at DevOps Summit Silicon Valley, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Zentera Systems, Inc.™ is a Silicon Valley based private company, providing a Cloud Federation Platform (CFP) built on a virtualization architecture with patent-pending technology to address virtual network, cloud firewall, data p...
Software development, like manufacturing, is a craft that requires the application of creative approaches to solve problems given a wide range of constraints. However, while engineering design may be craftwork, the production of most designed objects relies on a standardized and automated manufacturing process. By contrast, much of moving an application from prototype to production and, indeed, maintaining the application through its lifecycle has often remained craftwork. In his session at De...
High performing enterprise Software Quality Assurance (SQA) teams validate systems are ready for use – getting most actively involved as components integrate and form complete systems. These teams catch and report on defects, making sure the customer gets the best software possible. SQA teams have leveraged automation and virtualization to execute more thorough testing in less time – bringing Dev and Ops together, ensuring production readiness. Does the emergence of DevOps mean the end of Enterp...
In his keynote at DevOps Summit, David Tesar, Microsoft Technical Evangelist on Microsoft Azure and DevOps, will discuss how Microsoft teams who have made huge progress with a DevOps transformation effectively utilize operations staff and how challenges were overcome. Regardless of whether you are a startup or a mature enterprise, whether you are using PaaS, Micro Services, or Containerization, walk away with some practical tips where Ops can make a significant impact working with the developmen...
Cloudwick, the leading big data DevOps service and solution provider to the Fortune 1000, announced Big Loop, its multi-vendor operations platform. Cloudwick Big Loop creates greater collaboration between Fortune 1000 IT staff, developers and their database management systems as well as big data vendors. This allows customers to comprehensively manage and oversee their entire infrastructure, which leads to more successful production cluster operations, and scale-out. Cloudwick Big Loop supports ...

POMPTON LAKES, N.J., Oct. 17, 2014 /PRNewswire/ -- Kubisys announced today its namesake CID Platform, which automatically captures production environments and orchestrates the provisioning and deployment of replicas for development, testing and QA. The Kubisys CID Platform makes it easy for developers of mission critical multi-tier applications, such as Microsoft Dynamics AX, to follow DevOps practices for continuous delivery. The Oct. 20, 2014 04:00 PM EDT  Reads: 1,777

The recent trends like cloud computing, social, mobile and Internet of Things are forcing enterprises to modernize in order to compete in the competitive globalized markets. However, enterprises are approaching newer technologies with a more silo-ed way, gaining only sub optimal benefits. The Modern Enterprise model is presented as a newer way to think of enterprise IT, which takes a more holistic approach to embracing modern technologies. This model makes use of Composable Enterprise framework ...
Through the magic of cloud computing, infrastructure is no longer the long pole in the IT process. Organizations can now set up the infrastructure they require within minutes instead of weeks. However, removing this bottleneck has exposed another; application delivery is the next issue to be resolved. With the ongoing move to digital-first enterprises, companies are now faced with a software-intensive business environment. Simply put, IT needs to figure out how to accelerate the application depl...
There's fog coming to the world of IT. Some people are calling this "The Cloud." This fog turns everything inside out. It will take your monolithic applications, the guts of which are contained within large bodies of code, and break them apart so that discrete units of functionality are contained within their own process, exposed through an interface for others to see. Complexity is moving from the inside of a few large processes to the outside of many smaller processes. People are rightly sca...
This is part of the ever-expanding "Microservices and PaaS" blog series covering the rapidly evolving use of microservices in modern cloud software projects. Parts I and II introduced microservices concepts and discussed patterns and practices being spearheaded by microservices pioneers, notably Netflix, who were represented at a recent microservices meetup that was the genesis of this series. Part III presented a list of challenges and pitfalls that adopters of microservices face. This list is...
In their session at DevOps Summit, Stan Klimoff, CTO of Qubell, and Mike Becker, Senior Data Engineer for RingCentral, will share the lessons learned from implementing CI/CD pipeline on AWS for a customer analytics project powered by Cloudera Hadoop, HP Vertica and Tableau. Stan Klimoff is CTO of Qubell, the enterprise DevOps platform. Stan has more than a decade of experience building distributed systems for companies such as eBay, Cisco and Seagate. Qubell is helping enterprises to become mor...
The impact of DevOps in the cloud era is potentially profound. DevOps helps businesses deliver new features continuously, reduce cycle time and achieve sustained innovation by applying agile and lean principles to assist all stakeholders in an organization that develop, operate, or benefit from the business’ lifecycle. In his session at DevOps Summit, Prashanth Chandrasekar, General Manager at Rackspace, will exam whether / how companies can work with external DevOps specialists to achieve "De...
I just recently wrote a blog about BOTs causing unwanted traffic on our servers. Right after I wrote this blog I was notified about yet another “interesting” and unusual load behavior on our download page which is used by customers to download latest product versions and updates. If you see such a load behavior you typically assume that you just released a new product version or maybe an update to our agents and many people are downloading it like crazy. Unfortunately that was not the case. The...
SYS-CON Events announced today that O'Reilly Media has been named “Media Sponsor” of SYS-CON's 15th International Cloud Expo®, which will take place on November 4–6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. O'Reilly Media spreads the knowledge of innovators through its books, online services, magazines, and conferences. Since 1978, O'Reilly Media has been a chronicler and catalyst of cutting-edge development, homing in on the technology trends that really matter and spurri...
SYS-CON Events announced today that Gigaom Research has been named "Media Sponsor" of SYS-CON's 15th International Cloud Expo®, which will take place on November 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA. Ashar Baig, Research Director, Cloud, at Gigaom Research, will also lead a Power Panel on the topic "Choosing the Right Cloud Option." Gigaom Research provides timely, in-depth analysis of emerging technologies for individual and corporate subscribers. Gigaom Research'...