FBR: SDN’s impact on the networks deployed by service providers and large enterprises

Summary:
FBR CAPITAL MARKETS & CO sees Software Defined Networking (SDN) adoption driving sales of commodity, low-margin switches at the expense of Cisco/Juniper’s conventional switch/routers. SDN separates the data (packet/frame) forwarding “switch engine” from the control plane “server” and uses the Open Flow protocol to communicate between them. SDN revolutionizes networking implementation by using commodity hardware in both the switch/data forwarding engine (data plane) and centralized server (control plane).  All the path computation, re-routing, restoration, management, etc exists as software in the centralized compute server, which is built from off the shelf high performance compute servers.

FBR downgraded Cisco (CSCO) to Sell and said the company will find it difficult to offset weakening router and switching equipment demand. “We believe Cisco will become increasingly more challenged to offset weaker-than-expected routing and switching demand as it works to transition to a more software- and service-centric business model,” the analyst said in its downgrade report. “Looking ahead, we see the potential for additional negative technological trends that could significantly blur the lines between routers, switches AND servers,” FBR added.  “As a result, we expect: (1) a slow, but meaningful, reduction in the number of routers and switches deployed into networks; (2) the adoption of an increasingly larger mix of white box, lower-margin product; (3) the announcement of new competitive products and vendors that could negatively affect gross margins at both companies and across the space.” The investment research firm also downgraded Juniper Networks (JNPR) to underperform.

FBR analyst Scott Thompson forecasts that there will be a 40% drop in switch/router ports deployed by service providers/large enterprises in next 18-36 months (Scott says his forecast was confirmed and considered conservative by several networking companies).  https://twitter.com/thenotablecalls/status/314720086659313664

Note: We await clarification of what FBR thinks will cause the 40% drop in switch/router shipments.  Once we obtain that information this article will be updated.

FBR’s research leads them to believe that the next generation of network and datacenter hardware will blur the boundaries between routing, switching, and computing, providing a single hardware platform on which network and computing functions will be delivered through software applications.

In a just issued report, the firm states:
“Whether microservers, software-defined switches, enterprise flash, or other next-generation datacenter enablers, these technologies often share similar purposes and goals. These technologies typically have the following characteristics:
• Drive power efficiencies from a total platform perspective.
• Lower the overall datacenter footprint.
• Seek to eliminate redundant or nonessential hardware and components.
• Commoditize hardware, thus driving value into “select” software and semiconductors. This new hardware attempts to eliminate the need for custom, purpose-built hardware (example: routers, switches), instead replacing this with a common but versatile computing/switching platform.
• Drive the commoditization of hardware through the scaled use of non-branded component based hardware solutions in distributed datacenter architectures (i.e., white box servers, switches provided by reference designs from the Open Compute Project [OCP]).
• Attempt to replace ASICs with “open” merchant silicon and/or drive advanced functionality into general purpose CPUs (i.e., OpenFlow enables the transfer of the control plane into the CPU).
• Seek to utilize and optimize “open source” software and hardware alternatives (OpenFlow, OpenStack, OpenCompute hardware reference designs).
• Increase infrastructure flexibility through a software approach (example: network function virtualization).

Increasingly, service providers, large enterprises, and Web-based business are working to accelerate the innovation necessary to adopt the types of commoditized support storage, routing, switching, and computing platforms available to hyper-class providers. Our research leads us to believe that the next generation of network and datacenter hardware will blur the boundaries between routing, switching, and computing, thus providing movement toward a single hardware platform on which network and compute functions will be defined through software.

This type of platform approach to networking, particularly with respect to the service provider segment, became increasingly obvious at Mobile World Congress (Barcelona) this year as it was one of the major topics of conversation during multiple carrier keynotes.”

FBR: Software Defined Networking (SDN) is the next logical evolution in networking

“SDN, is a concept that essentially extracts the logical topology of a network from a switch or router and places it in a central repository or database, simplifying the networking topology and making the network easier to manage. SDN essentially splits the functions of a switch or router into two logical functions. It separates the control plane from the forwarding plane. The result drastically simplifies the networking hardware necessary to make a network operate, while making the control plane, or the intelligence of the network, much more flexible. OpenFlow is an important piece of the SDN puzzle and serves as a protocol that delivers the information from the control plane to the forwarding plane. While SDN will likely prove beneficial to all types of organizations, we view SDN as particularly attractive to service providers and large, scaled datacenter operators as a platform from which to launch new SaaS-based services more quickly and easily.”

FBR states and forecasts that: “Web companies moved toward SDN first, carriers moving now, perhaps enterprises later. Thus far, Web-based companies have served as the largest proponents of SDN technologies, and we expect this to continue for the foreseeable future. The demands that Web-based giants have placed on traditional switching networks have stretched networks to their limits, resulting in excessive operating costs and technical constraints to growing business models. SDN presents a much cleaner and more streamlined network solution for these customers.

Our checks indicate that nearly every top 10 service provider is intently focused on the benefits SDN solutions provide.”

Source: BIG “switches:” little SERVERS–FBR’s Holistic View of the Coming Datacenter, written by FBR Technology, Media & Telecom research group


Cisco and Juniper Respond to SDN:

Cisco is trying to respond to the SDN threat with their Open Network Environmnet (ONE)- a portfolio of Cisco  technologies and open standards that brings programmatic control and application awareness to the network, combining the benefits of hardware and software across physical and virtual.

A Cisco Sr VP recently said that SDN will be a “game changer” for data centers:

Juniper Networks say they’re executing on their SDN vision by centralizing network management

The company announced a 4-step roadmap to SDN last month:

Their CEO explained the companies SDN plans in this story:

Juniper has a free SDN Whitepaper you can download after filling out a form at: http://www.juniper.net/us/en/dm/sdn-wp/

References:

2.  IEEE ComSocSCV had the two leaders of the SDN movement talk at one of our technical meetings last year.  Their presentations are posted in the 2012 meeting archive section of our website:

Date: Wednesday, July 11, 2012; 6:00pm-8:30pm
Title: Software Defined Networking (SDN) Explained — New Epoch or Passing Fad?
Speaker 1:  Guru Parulkar, Executive Director of Open Networking Research Center
Subject:   SDN: New Approach to Networking

Speaker 2:  Dan Pitt, Executive Director at the Open Networking Foundation
Subject:   The Open Networking Foundation
http://www.ewh.ieee.org/r6/scv/comsoc/ComSoc_2012_Presentations.php

April 10th ComSocSCV Meeting on Data Center Dynamics & Trends:

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