Category Archives: Hewlett Packard

Xsigo: Hardware Play for Oracle, Not SDN

When I wrote about Xsigo earlier this year, I noted that many saw Oracle as a potential acquirer of the I/O virtualization vendor. Yesterday morning, Oracle made those observers look prescient, pulling the trigger on a transaction of undisclosed value.

Chris Mellor at The Register calculates that Oracle might have paid about $800 million for Xsigo, but we don’t know. What we do know is that Xsigo’s financial backers were looking for an exit. We also know that Oracle was willing to accommodate it.

For the Love of InfiniBand, It’s Not SDN

Some think Oracle bought a software-defined networking (SDN) company. I was shocked at how many journalists and pundits repeated the mantra that Oracle had moved into SDN with its Xsigo acquisition. That is not right, folks, and knowledgeable observers have tried to rectify that misconception.

I’ve gotten over a killer flu, and I have a residual sinus headache that sours my usually sunny disposition, so I’m no mood to deliver a remedial primer on the fundamentals of SDN. Suffice it to say, readers of this forum and those familiar with the pronouncements of the ONF will understand that what Xsigo does, namely I/O virtualization, is not SDN.  That is not to say that what Xsigo does is not valuable, perhaps especially to Oracle. Nonetheless, it is not SDN.

Incidentally, I have seen a few commentators throwing stones at the Oracle marketing department for depicting Xsigo as an SDN player, comparing it to Nicira Networks, which VMware is in the process of acquiring for a princely sum of $1.26 billion. It’s probably true that Oracle’s marketing mavens are trying to gild their new lily by covering it with splashes of SDN gold, but, truth be told, the marketing team at Xsigo began dressing their company in SDN garb earlier this year, when it became increasingly clear that SDN was a lot more than an ephemeral science project involving OpenFlow and boffins in lab coats.

Why Confuse? It’ll be Obvious Soon Enough

At Network Computing, Howard Marks tries to get everybody onside. I encourage you to read his piece in its entirety, because it provides some helpful background and context, but his superbly understated money quote is this one: “I’ve long been intrigued by the concept of I/O virtualization, but I think calling it software-defined networking is a stretch.”

In this industry, words are stretched and twisted like origami until we can no longer recognize their meaning. The result, more often than not, is befuddlement and confusion, as we witnessed yesterday, an outcome that really doesn’t help anybody. In fact, I would argue that Oracle and Xsigo have done themselves a disservice by playing the SDN card.

As Marks points out, “Xsigo’s use of InfiniBand is a good fit with Oracle’s Exadata and other clustered solutions.” What’s more, Matt Palmer, who notes that Xsigo is “not really an SDN acquisition,” also writes that “Oracle is the perfect home for Xsigo.” Palmer makes the salient point that Xsigo is essentially a hardware play for Oracle, one that aligns with Oracle’s hardware-centric approaches to compute and storage.

Oracle: More Like Cisco Than Like VMWare

Oracle could have explained its strategy and detailed the synergies between Xsigo and its family of hardware-engineered “Exasystems” (Exadata and Exalogic) —  and, to be fair, it provided some elucidation (see slide 11 for a concise summary) — but it muddied the waters with SDN misdirection, confusing some and antagonizing others.

Perhaps my analysis is too crude, but I see a sharp divergence between the strategic direction VMware is heading with its acquisition of Nicira and the path Oracle is taking with its Exasystems and Xsigo. Remember, Oracle, after the Sun acquisition, became a proprietary hardware vendor. Its focus is on embedding proprietary hooks and competitive differentiation into its hardware, much like Cisco Systems and the other converged-infrastructure players.

VMware’s conception of a software-defined data center is a completely different proposition. Both offer virtualization, both offer programmability, but VMware treats the underlying abstracted hardware as an undifferentiated resource pool. Conversely, Oracle and Cisco want their engineered hardware to play integral roles in data-center virtualization. Engineered hardware is what they do and who they are.

Taking the Malocchio in New Directions

In that vein, I expect Oracle to look increasingly like Cisco, at least on the infrastructure side of the house. Does that mean Oracle soon will acquire a storage player, such as NetApp, or perhaps another networking company to fill out its data-center portfolio? Maybe the latter first, because Xsigo, whatever its merits, is an I/O virtualization vendor, not a switching or routing vendor. Oracle still has a networking gap.

For reasons already belabored, Oracle is an improbable SDN player. I don’t see it as the likeliest buyer of, say, Big Switch Networks. IBM is more likely to take that path, and I might even get around to explaining why in a subsequent post. Instead, I could foresee Oracle taking out somebody like Brocade, presuming the price is right, or perhaps Extreme Networks. Both vendors have been on and off the auction block, and though Oracle’s Larry Ellison once disavowed acquisitive interest in Brocade, circumstances and Oracle’s disposition have changed markedly since then.

Oracle, which has entertained so many bitter adversaries over the years — IBM, SAP, Microsoft, SalesForce, and HP among them — now appears ready to cast its “evil eye” toward Cisco.

Some Thoughts on VMware’s Strategic Acquisition of Nicira

If you were a regular or occasional reader of Nicira Networks CTO Martin Casado’s blog, Network Heresy, you’ll know that his penultimate post dealt with network virtualization, a topic of obvious interest to him and his company. He had written about network virtualization many times, and though Casado would not describe the posts as such, they must have looked like compelling sales pitches to the strategic thinkers at VMware.

Yesterday, as probably everyone reading this post knows, VMware announced its acquisition of Nicira for $1.26 billion. VMware will pay $1.05 billion in cash and $210 million in unvested equity awards.  The ubiquitous Frank Quattrone and his Quatalyst Partners, which reportedly had been hired previously to shop Brocade Communications, served as Nicira’s adviser.

Strategic Buy

VMware should have surprised no one when it emphasized that its acquisition of Nicira was a strategic move, likely to pay off in years to come, rather than one that will produce appreciable near-term revenue. As Reuters and the New York Times noted, VMware’s buy price for Nicira was 25 times the amount ($50 million) invested in the company by its financial backers, which include venture-capital firms Andreessen Horowitz, Lightspeed,and NEA. Diane Greene, co-founder and former CEO of VMware — replaced four years ago by Paul Maritz — had an “angel” stake in Nicira, as did as Andy Rachleff, a former general partner at Benchmark Capital.

Despite its acquisition of Nicira, VMware says it’s not “at war” with Cisco. Technically, that’s correct. VMware and its parent company, EMC, will continue to do business with Cisco as they add meat to the bones of their data-center virtualization strategy. But the die was cast, and  Cisco should have known it. There were intimations previously that the relationship between Cisco and EMC had been infected by mutual suspicion, and VMware’s acquisition of Nicira adds to the fear and loathing. Will Cisco, as rumored, move into storage? How will Insieme, helmed by Cisco’s aging switching gods, deliver a rebuttal to VMware’s networking aspirations? It won’t be too long before the answers trickle out.

Still, for now, Cisco, EMC, and VMware will protest that it’s business as usual. In some ways, that will be true, but it will also be a type of strategic misdirection. The relationship between EMC and Cisco will not be the same as it was before yesterday’s news hit the wires. When these partners get together for meetings, candor could be conspicuous by its absence.

Acquisitive Roads Not Traveled

Some have posited that Cisco might have acquired Nicira if VMware had not beaten it to the punch. I don’t know about that. Perhaps Cisco might have bought Nicira if the asking price were low, enabling Cisco to effectively kill the startup and be done with it. But Cisco would not have paid $1.26 billion for a company whose approach to networking directly contradicts Cisco’s hardware-based business model and market dominance. One typically doesn’t pay that much to spike a company, though I suppose if the prospective buyer were concerned enough about a strategic technology shift and a major market inflection, it might do so. In this case, though, I suspect Cisco was blindsided by VMware. It just didn’t see this coming — at least not now, not at such an early state of Nicira’s development.

Similarly, I didn’t see Microsoft or Citrix as buyers of Nicira. Microsoft is distracted by its cloud-service provider aspirations, and the $1.26 billion would have been too rich for Citrix.

IBM’s Moves and Cisco’s Overseas Cash Horde

One company I had envisioned as a potential (though less likely) acquirer of Nicira was IBM, which already has a vSwitch. IBM might now settle for the SDN-controller technology available from Big Switch Networks. The two have been working together on IBM’s Open Data Center Interoperable Network (ODIN), and Big Switch’s technology fits well with IBM’s PureSystems and its top-down model of having application workloads command and control  virtualized infrastructure. As the second network-virtualization domino to fall, Big Switch likely will go for a lower price than did Nicira.

On Twitter, Dell’s Brad Hedlund asked whether Cisco would use its vast cash horde to strike back with a bold acquisition of its own. Cisco has two problems here. First, I don’t see an acquisition that would effectively blunt VMware’s move. Second, about 90 percent of Cisco’s cash (more than $42 billion) is offshore, and CEO John Chambers doesn’t want to take a tax hit on its repatriation. He had been hoping for a “tax holiday” from the U.S. government, but that’s not going to happen in the middle of an election campaign, during a macroeconomic slump in which plenty of working Americans are struggling to make ends meet. That means a significant U.S.-based acquisition likely is off the table, unless the target company is very small or is willing to take Cisco stock instead of cash.

Cisco’s Innovator’s Dilemma

Oh, and there’s a third problem for Cisco, mentioned earlier in this prolix post. Cisco doesn’t want to embrace this SDN stuff. Cisco would rather resist it. The Cisco ONE announcement really was about Cisco’s take on network programmability, not about SDN-type virtualization in which overlay networks run atop an underyling physical network.

Cisco is caught in a classic innovator’s dilemma, held captive by the success it has enjoyed selling prodigious amounts of networking gear to its customers, and I don’t think it can extricate itself. It’s built a huge and massively successful business selling a hardware-based value proposition predicated on switches and routers. It has software, but it’s not really a software company.

For Cisco, the customer value, the proprietary hooks, are in its boxes. Its whole business model — which, again, has been tremendously successful — is based around that premise. The entire company is based around that business model.  Cisco eventually will have to reinvent itself, like IBM did after it failed to adapt to client-server computing, but the day of reckoning hasn’t arrived.

On the Defensive

Expect Cisco to continue to talk about the northbound interface (which can provide intelligence from the switch) and about network programmability, but don’t expect networking’s big leopard to change its spots. Cisco will try to portray the situation differently, but it’s defending rather than attacking, trying to hold off the software-based marauders of infrastructure virtualization as long as possible. The doomsday clock on when they’ll arrive in Cisco data centers just moved up a few ticks with VMware’s acquisition of Nicira.

What about the other networking players? Sadly, HP hasn’t figured out what to about SDN, even though OpenFlow is available on its former ProCurve switches. HP has a toe dipped in the SDN pool, but it doesn’t seeming willing to take the initiative. Juniper, which previously displayed ingenuity in bringing forward QFabric, is scrambling for an answer. Brocade is pragmatically embracing hybrid control planes to maintain account presence and margins in the near- to intermediate-term.

Arista Networks, for its part, might be better positioned to compete on networking’s new playing field. Arista Networks’ CEO Jayshree Ullal had the following to say about yesterday’s news:

“It’s exciting to see the return of innovative networking companies and the appreciation for great talent/technology. Software Defined Networking (SDN) is indeed disrupting legacy vendors. As a key partner of VMware and co-innovator in VXLANs, we welcome the interoperability of Nicira and VMWare controllers with Arista EOS.”

Arista’s Options

What’s interesting here is that Arista, which invariably presents its Extensible OS (EOS) as “controller friendly,” earlier this year demonstrated interoperability with controllers from VMware, Big Switch Networks, and Nebula, which has built a cloud controller for OpenStack.

One of Nebula’s investors is Andy Bechtolsheim, whom knowledgeable observers will recognize as the chief development officer (CDO) of, and major investor in, Arista Networks.  It is possible that Bechtolsheim sees a potential fit between the two companies — one building a cloud controller and one delivering cloud networking. To add fuel to this particular fire, which may or may not emit smoke, note that the Nebula cloud controller already features Arista technology, and that Nebula is hiring a senior network engineer, who ideally would have “experience with cloud infrastructure (OpenStack, AWS, etc. . . .  and familiarity with OpenFlow and Open vSwitch.”

 Open or Closed?

Speaking of Open vSwitch, Matt Palmer at SDN Centralwill feel some vindication now that VMware has purchased a company whose engineering team has made significant contributions to the OVS code. Palmer doubtless will cast a wary eye on VMware’s intentions toward OVS, but both Steve Herrod, VMware’s CTO, and Martin Casado, Nicira’s CTO, have provided written assurances that their companies, now combining, will not retreat from commitments to OVS and to Open Flow and Quantum, the OpenStack networking  project.

Meanwhile, GigaOm’s Derrick Harris thinks it would be bad business for VMware to jilt the open-source community, particularly in relation to hypervisors, which “have to be treated as the workers that merely carry out the management layer’s commands. If all they’re there to do is create virtual machines that are part of a resource pool, the hypervisor shouldn’t really matter.”

This seems about right. In this brave new world of virtualized infrastructure, the ultimate value will reside in an intelligent management layer.

PS: I wrote this post under a slight fever and a throbbing headache, so I would not be surprised to discover belatedly that it contains at least a couple typographical errors. Please accept my apologies in advance.

Infrastructure Virtualization Versus Converged Infrastructure

While writing about software-defined networking (SDN) and what it makes possible, I have been thinking about how its essential premise, and the premise behind infrastructure virtualization, conflicts with visions of converged infrastructure promulgated by the leading systems vendors in the information-technology (IT) industry.

According to the Wikipedia definition, converged infrastructure encompasses servers, storage, networking gear, and software for IT infrastructure management, automation, and orchestration. Accordingly, converged infrastructure leverages pooled IT resources to facilitate automated resource provisioning in support of dynamic application workloads.

Hardware Pedigrees in Software World

Leading vendors, most with more hardware than software pedigrees, have sought to offer proprietary converged-infrastructure offerings that closely integrate the hardware elements with software-based management attributes. In this regard,  we can cite vendors such as Cisco (with a storage assist from EMC or NetApp), Hewlett-Packard, Dell, Hitachi Data Systems, Oracle (though networking remains on open question there),  and, perhaps to a lesser extent, IBM.

Now, let’s think about SDN and where it ultimately leads. Cisco would like us to believe that SDN, if it leads anywhere, will eventually take us to network programmability, with a heavy emphasis on the significance of a northbound API (or APIs).  Cisco says that the means — in this case, SDN — are not as important as the desired ends, networking programmability, and many of Cisco’s enterprise customers will doubtless agree.

SDN End Games

Another SDN outcome is network virtualization, which admittedly can also be achieved through other means. But an interesting aspect of SDN’s approach to network virtualization, with its decoupling of the network’s control and data planes, is that it results in the abstracting of software-based network intelligence from the underlying hardware-based network brawn. It’s a software paradigm taken to a logical extreme, with server-based software running at the network edge controlling an abstracted pool of no-frills networking hardware.

Indeed, this is one end game for SDN, first playing out in the data centers of the major cloud service providers that guide the affairs of the Open Networking Foundation (ONF), and then — at some indeterminate future point too difficult to forecast without a Ouija board and a bottle of scotch  — also at large enterprises worldwide.

Let’s elaborate further. SDN facilitates network virtualization, which in turn is harnessed and orchestrated by cloud-management software, which also manages virtualized compute and storage infrastructure. As we’ve seen already in the compute world of servers, it’s getting increasingly difficult for a vanity hardware vendor to earn a buck in a virtualized world. Many service providers have found that they can get boxes that satisfy their needs, at lower prices, directly from ODMs that often build servers for name-brand OEMs.  Storage is being virtualized, too.

Network’s Turn

And now it is the network’s turn.

In such a world, how much longer will it make sense for customers to achieve converged infrastructure from single-source vendors that equip their hardware with proprietary fripperies and hooks to facilitate lock-in? Again, we can see these trend playing out at large service providers. Some have begun buying their networking hardware off the rack from ODMs, saving not only on capital expenditures (certainly the case for servers), but also on operating expenses relating to the ongoing management of network infrastructure. It’s true that they’re trading one sort of complexity for another, pushing it up the stack and into software rather than an operational hardware, but it’s a trade-off they’re clearly willing to make, probably because they have the resources and skill sets to make it work (and pay).

Obviously that is not a recipe for everybody, certainly not for most enterprises today. But times are changing, and it isn’t inconceivable to foresee a day when the enterprise will be able to avail itself of third-party private-cloud software and management tools that will allow it to exploit a similar model of virtualized infrastructure.

Prescience Pays Off

In the big picture, as far as the established networking vendors are concerned, the ONF’s conception of SDN is about more than just OpenFlow, and even about more than network programmability. It’s about how SDN supports a model of network virtualization, in service to infrastructure virtualization, that significantly enfeebles hardware-based business models. Some of these hardware-oriented vendors will not successfully pivot to a model of virtualized infrastructure and software primacy.

On the other hand, some vendors have had the prescience to see this trend approaching on the horizon; they understand its inevitability, and they have positioned themselves better than others to survive, and perhaps even thrive, after the eventual market transition.

We’ll look at one of those vendors in a subsequent post.

Understanding Cisco’s Relationship to SDN Market

Analysts and observers have variously applauded or denounced Cisco for its network-Cisco ONE programmability pronouncements last week.  Some pilloried the company for being tentative in its approach to SDN, contrasting the industry giant’s perceived reticence with its aggressive pursuit of previous emerging technology markets such as IP PBX, videoconferencing, and converged infrastructure (servers).

Conversely, others have lauded Cisco’s approach to SDN as far more aggressive than its lackluster reply to challenges in market segments such as application-delivery controllers (ADCs) and WAN optimization, where F5 and Riverbed, respectively, demonstrated how a tightly focused strategy and expertise above the network layer could pay off against Cisco.

Different This TIme

But I think they’ve missed a very important point about Cisco’s relationship to the emerging SDN market.  Analogies and comparisons should be handled with care. Close inspection reveals that SDN and the applications it enables represent a completely different proposition from the markets mentioned above.

Let’s break this down by examining Cisco’s aggressive pursuit of IP-based voice and video. It’s not a mystery as to why Cisco chose to charge headlong into those markets. They were opportunities for Cisco to pursue its classic market adjacencies in application-related extensions to its hegemony in routing and switching. Cisco also saw video as synergistic with its core network-infrastructure business because it generated bandwidth-intensive traffic that filled up existing pipes and required new, bigger ones.

Meanwhile, Cisco’s move into UCS servers was driven by strategic considerations. Cisco wanted the extra revenue servers provided, but it also wanted to preemptively seize the advantage over its former server partners (HP, Dell, IBM) before they decided to take the fight to Cisco. What’s more, all the aforementioned vendors confronted the challenge of continuing to grow their businesses and public-market stock prices in markets that were maturing and slowing.

Cisco’s reticence to charge into WAN optimization and ADCs also is explicable. Strategically, at the highest echelons within Cisco, the company viewed these markets as attractive, but not as essential extensions to its core business. The difficulty was not only that Cisco didn’t possess the DNA or the acumen to play in higher-layer network services — though that was definitely a problem — but also that Cisco did not perceive those markets as conferring sufficiently compelling rewards or strategic advantages to warrant the focus and resources necessary for market domination. Hence, we have F5 Networks and its ADC market leadership, though certainly F5’s razor-sharp focus and sustained execution factored heavily into the result.

To Be Continued

Now, let’s look at SDN. For Cisco, what sort of market does it represent? Is it an opportunity to extend its IP-based hegemony, like voice, video, and servers? No, not at all. Is it an adjunct market, such as ADCs and WAN optimization, that would be nice to own but isn’t seen as strategically critical or sufficiently large to move the networking giant’s stock-price needle? No, that’s not it, either.

So, what is SDN’s market relationship to Cisco?

Simply put, it is a potential existential threat, which makes it unlike IP PBXes, videoconferencing, compute hardware, ADCs, and WAN optimization. SDN is a different sort of beast, for reasons that have been covered here and elsewhere many times.  Therefore, it necessitates a different sort of response — carefully calculated, precisely measured, and thoroughly plotted. For Cisco, the ONF-sanctioned approach to SDN is not an opportunity that the networking giant can seize,  but an incipient threat to the lifeblood of its business that it must blunt and contain — and, whatever else, keep out of its enterprise redoubt.

Did Cisco achieve its objective? That’s for a subsequent post.

Juniper Steers QFabric Toward Midmarket

In taking its QFabric to mid-sized data centers, Juniper Networks has made the right decision. In my discussions with networking cognoscenti at customer organizations large and small, Juniper’s QFabric technology often engenders praise and respect. It also was perceived as beyond the reach, architecturally and financially, of many shops.

Now Juniper is attempting to get to those mid-market admirers that previously saw QFabric as above their station.

Quest for Growth

To be sure, Juniper targeted the original QFabric, the QFX 3000-G, at large enterprises and high-end service providers, addressing applications such as high-performance computing (HPC), high-frequency trading in financial services, and cloud services. In a blog post discussing the downsized QFabric QFX3000-M, R.K. Anand, EVP and general manager of Juniper’s Data Center Business Unit, writes, “ . . . the beauty of the “M” configuration is that it’s ideal for satellite data centers, new 10GbE pods and space-constrained data center environments.”

Juniper is addressing a gap here, and it’s a wise move. Still, some wonder whether it has come too late. It’s a fair question.

In pursuing the midmarket, Juniper is ratcheting up its competitive profile against the likes of Cisco Systems and HP, which also have been targeting the mid market for growth, a commodity in short supply in the enterprise-networking space these days.

Analysts are concerned about maturation and slow growth in the networking market, as well as increasing competition and “challenging” — that’s an analyst-speak euphemism for crappy –macroeconomic conditions.

Belated . . . Or Just Too Late

At its annual shindig for analysts, Juniper did little to allay those concerns, though the company understandably put an optimistic spin on its product strategy, competitive positioning, and ability to execute.  Needham and Company analyst Alex Henderson summarized proceedings as follows:

“Despite an upbeat tone to Juniper’s strategy positioning and its new product development story, management reset its long term revenue and margin targets to a lower level. Juniper lowered its revenue growth targets to 9-12% from a much older growth target of 20% plus. In addition, management lowered gross margin target to 63-66% from the prior target of 65-67%.”

Like its competitors, Juniper is eager to find growth markets, preferably those that will support robust margins. A smaller QFabric won’t necessarily provide a panacea for Juniper’s market dilemma, but it certainly won’t hurt.

It also gives Juniper’s channel partners reason to call on customers that might have been off their radar previously. As Dhritiman Dasgupta, senior director of Enterprise System and Routing at Juniper, told The VAR Guy, the channel is calling the new QFX-3000-M “their version” of the product.

We’ll have to see whether Juniper’s QFabric for mid-sized data centers qualifies as a belated arrival or as a move that simply came too late.

Dell’s Steady Progression in Converged Infrastructure

With its second annual Dell Storage Forum in Boston providing the backdrop, Dell made a converged-infrastructure announcement this week.  (The company briefed me under embargo late last week.)

The press release is available on the company’s website, but I’d like to draw attention to a few aspects of the announcement that I consider noteworthy.

First off, Dell now is positioned to offer its customers a full complement of converged infrastructure, spanning server, storage, and networking hardware, as well as management software. For customers seeking a single-vendor, one-throat-to-choke solution, this puts Dell  on parity with IBM and HP, while Cisco still must partner with EMC or with NetApp for its storage technology.

Bringing the Storage

Until this announcement, Dell was lacking the storage ingredients. Now, with what Dell is calling the Dell Converged Blade Data Center solution, the company is adding its EqualLogic iSCSI Blade Arrays to Dell PowerEdge blade servers and Dell Force10 MXL blade switching. Dell says this package gives customers an entire data center within a single blade enclosure, streamlining operations and management, and thereby saving money.

Dell’s other converged-infrastructure offering is the Dell vStart 1000. For this iteration of vStart, Dell is including, for the first time, its Compellent storage and Force10 networking gear in one integrated rack for private-cloud environments.

The vStart 1000 comes in two configurations: the vStart 1000m and the vStart 1000v. The packages are nearly identical — PowerEdge M620 servers, PowerEdge R620 management servers, Dell Compellent Series 40 storage, Dell Force10 S4810 ToR Networking and Dell Force10 S4810 ToR Networking, plus Brocade 5100 ToR Fibre-Channel Switches — but the vStart 1000m comes with Windows Server 2008 R2 Datacenter (with the Hyper-V hypervisor), whereas the vStart 1000v features trial editions of VMware vCenter and VMware vSphere (with the ESXi hypervisor).

An an aside, it’s worth mentioning that Dell’s inclusion of Brocade’s Fibre-Channel switches confirms that Dell is keeping that partnership alive to satisfy customers’ FC requirements.

Full Value from Acquisitions

In summary, then, is Dell delivering converged infrastructure with both its in-house storage options, demonstrating that it has fully integrated its major hardware acquisitions into the mix.   It’s covering as much converged ground as it can with this announcement.

Nonetheless, it’s fair to ask where Dell will find customers for its converged offerings. During my briefing with Dell, I was told that mid-market was the real sweet spot, though Dell also sees departmental opportunities in large enterprises.

The mid-market, though, is a smart choice, not only because the various technology pieces, individually and collectively, seem well suited to the purpose, but also because Dell, given its roots and lineage, is a natural player in that space. Dell has a strong mandate to contest the mid-market, where it can hold its own against any of its larger converged-infrastructure rivals.

Mid-Market Sweet Spot

What’s more, the mid-market — unlike cloud-service providers today and some large enterprise in the not-too-distant future — are unlikely to have the inclination, resources, and skills to pursue a DIY, software-driven, DevOps-oriented variant of converged infrastructure that might involve bare-bones hardware from Asian ODMs. At the end of the day, converged infrastructure is sold as packaged hardware, and paying customers will need to perceive and realize value from buying the boxes.

The mid-market would seem more than receptive to the value proposition that Dell is selling, which is that its converged infrastructure will reduce the complexity of IT management and deliver operational cost savings.

This finally leads us to a discussion of Dell’s take on converged infrastructure. As noted in an eChannelLine article, Dell’s notion of converged infrastructure encompasses operations management, services management, and applications management. As Dell continues down the acquisition trail, we should expect the company to place greater emphasis on software-based intelligence in those areas.

That, too, would be a smart move. The battle never ends, but Dell — despite its struggles in the PC market — is now more than punching its own weight in converged infrastructure.

Putting an ONF Conspiracy Theory to Rest

We know that the Open Networking Foundation (ONF) is controlled by the six major service providers that constitute its board of directors.

It is no secret that the ONF is built this way by design. The board members wanted to make sure that they got what they wanted from the ONF’s deliberations, and they felt that existing standards bodies, such as the IETF and IEEE, were gerrymandered and dominated by vendors with self-serving agendas.

The ONF was devised with a different purpose in mind — not to serve the interests of the vendors, but to further the interests of the service-provider community, especially the service providers who sit on the ONF’s board of directors. In their view, conventional networking was a drag on their innovation and business agility, obstructing progress elsewhere in their data centers and IT operations. Whereas compute and storage resources had been virtualized and orchestrated, networking remained a relatively costly and unwieldy fiefdom ruled by “masters of complexity” rummaging manually through an ever-expanding bag of ad-hoc protocols.

Organizing for Clout

Not getting what they desired from their networking vendors, the service providers decided to seize the initiative. Acting on its own,  Google already had done just that, designing and deploying DIY networking gear.

The study of political elites tells us that an organized minority comprising powerful interests can impose its will on a disorganized majority.  In the past, as individual companies, the ONF board members had been unable to counter the agendas of the networking vendors. Together, they hoped to effect the change they desired.

So, we have the ONF, and it’s unlike the IETF and the IEEE in more ways than one. While not a standards body — the ONF describes itself as a “non-profit consortium dedicated to the transformation of networking through the development and standardization of a unique architecture called Software-Defined Networking (SDN)” — there’s no question that the ONF wants to ensure that it defines and delivers SDN according to its own rules  And at its own pace, too, not tied to the product-release schedules of networking vendors.

In certain respects, the ONF is all about consortium of customers taking control and dictating what it wants from the vendor community, which, in this case, should be understood to comprise not only OEM networking vendors, but also ODMs, SDN startups, and purveyors of merchant silicon.

Vehicle of Insurrection?

Just to ensure that its leadership could not be subverted, though, the ONF stipulated that vendors would not be permitted to serve on its board of directors. That means that representatives of Cisco, Juniper, and HP Networking, for example, will never be able to serve on the ONF board.

At least within their self-determined jurisdiction, the ONF’s board members call all the shots. Or do they?

Commenting on my earlier post regarding Cisco’s SDN counterstrategy, a reader, who wished to remain anonymous (Anon4This1), wrote the following:

Regarding this point: “Ultimately, [Cisco] does not control the ONF.”

That was one of the key reasons for the creation of the ONF. That is, there was a sense that existing standards bodies were under the collective thumb of large vendors. ONF was created such that only the ONF board can vote on binding decisions, and no vendors are allowed on the board. Done, right? Ah, well, not so fast. The ONF also has a Technical Advisory Group (TAG). For most decisions, the board actually acts on the recommendations of the TAG. The TAG does not have the same membership restrictions that apply to the ONF board. Indeed, the current chairman of the TAG is none other than influential Cisco honcho, Dave Ward. So if the ONF board listens to the TAG, and the TAG listens to its chairman… Who has more control over the ONF than anyone? https://www.opennetworking.org/about/tag

Board’s Iron Grip

If you follow the link provided by my anonymous commenter, you will find an extensive overview of the ONF’s Technical Advisory Group (TAG). Could the TAG, as constituted, be the tail that wags the ONF dog?

My analysis leads me to a different conclusion.  As I see it, the TAG serves at the pleasure of the ONF board of directors, individually and collectively. Nobody on the TAG does so without the express consent of the board of directors. Moreover, “TAG term appointments are annual and the chair position rotates quarterly.” Whereas Cisco’s Dave Ward serves as the current chair, his term will expire and somebody else will succeed him.

What about the suggestion that the “board actually acts on recommendations of the TAG,” as my commenter asserts. In many instances, that might be true, but the form and substance of the language on the TAG webpage articulates clearly that the TAG is, as its acronym denotes, an advisory body that reports to (and “responds to requests from”) the ONF board of directors.  The TAG offers technical guidance and recommendations, but the board makes the ultimate decisions. If the board doesn’t like what it’s getting from TAG members, annual appointments presumably can be allowed to expire and new members can succeed those who leave.

Currently, two networking-gear OEMs are represented on the ONF’s TAG. Cisco is represented by the aforementioned David Ward, and HP is represented by Jean Tourrilhes, an HP-Labs researcher in Networking and Communication who has worked with OpenFlow since 2008. These gentlemen seem to be on the TAG because those who run the ONF believe they can make meaningful contributions to the development of SDN.

No Coup

It’s instructive to note the company affiliations of the other six members serving on TAG. We find, for instance, Nicira CTO Martin Casado, as well as Verizon’s Dave McDysan, Google’s Amin Vahdat, Microsoft’s Albert Greenberg, Broadcom’s Puneet Agarwal, and Stanford’s Nick McKeown, who also is known as a Nicira co-founder and serves on that company’s board of directors.

If any company has pull, then, on the ONF’s TAG, it would seem to be Nicira Networks, not Cisco Systems. After all, Nicira has two of its corporate directors serving on the ONF’s TAG. Again, though, both gentlemen from Nicira are highly regarded and esteemed SDN proponents, who played critical roles in the advent and development of OpenFlow.

And that’s my point. If you look at who serves on the ONF’s TAG, you can clearly see why they’re in those roles and you can understand why the ONF board members would desire their contributions.

The TAG as a vehicle for an internal coup d’etat at the ONF? That’s one conspiracy theory that I’m definitely not buying.

HP’s Latest Cuts: Will It Be Any Different This Time?

If you were to interpret this list of acquisitions by Hewlett-Packard as a past-performance chart, and focused particularly on recent transactions running from the summer of 2008 through to the present, you might reasonably conclude that HP has spent its money unwisely.

That’s particularly true if you correlate the list of transactions with the financial results that followed. Admittedly, some acquisitions have performed better than others, but arguably the worst frights in this house of M&A horrors have been delivered by the most costly buys.

M&A House of Horrors

As Exhibit A, I cite the acquisition of EDS, which cost HP nearly $14 billion. As a series of subsequent staff cuts and reorganizations illustrate, the acquisition has not gone according to plan. At least one report suggested that HP, which just announced that it will shed about 27,000 employees during the next two years, will make about half its forthcoming personnel cuts in HP Enterprise Services, constituted by what was formerly known as EDS. Rather than building on EDS, HP seems to be shrinking the asset systematically.

The 2011 acquisition of Autonomy, which cost HP nearly $11 billion, seems destined for ignominy, too. HP described its latest financial results from Autonomy as “disappointing,” and though HP says it still has high hopes for the company’s software and the revenue it might derive from it, many senior executives at Autonomy and a large number of its software developers already have decamped. There’s a reasonable likelihood that HP is putting lipstick on a slovenly pig when it tries to put the best face on its prodigious investment in Autonomy.

Taken together, HP wagered a nominal $25 billion on EDS and Autonomy. In reality, it has spent more than that when one considers the additional operational expenses involved in integrating and (mis)managing those assets.

Still Haven’t Found What They’re Looking For

Then there was the Palm acquisition, which involved HP shelling out $1.2 billion to Bono and friends. By the time the sorry Palm saga ended, nobody at HP was covered in glory. It was an unmitigated disaster, marked by strategic reversals and tactical blunders.

I also would argue that HP has not gotten full value from its 3Com purchase. HP bought 3Com for about $2.7 billion, and many expected the acquisition to help HP become a viable threat to Cisco in enterprise networking. Initially, HP made some market-share gains with 3Com in the fold, but those advances have stalled, as Cisco CEO John Chambers recently chortled.

It is baffling to many, your humble scribe included, that HP has not properly consolidated its networking assets — HP ProCurve, 3Com outside China, and H3C in China. Even to this day, the three groups do not work together as closely as they should. H3C in China apparently regards itself as an autonomous subsidiary rather than an integrated part of HP’s networking business.

Meanwhile,  HP runs two networking operating systems (NOS) across its gear. HP justifies its dual-NOS strategy by asserting that it doesn’t want to alienate its installed base of customers, but there should be a way to manage a transition toward a unified code base. There should also be a way for all the gear to be managed by the same software. In sum, there should be a way for HP to get better results from its investments in networking technologies.

Too Many Missteps

As for some of HP’s other acquisitions during the last few years, it overpaid for 3PAR in a game of strategic-bidding chicken against Dell, though it seems to have wrung some value from its relatively modest purchase of LeftHand Networks. The jury is still out on HP’s $1.5-billion acquisition of ArcSight and its security-related technologies.

One could argue that the rationales behind the acquisitions of at least some of those companies weren’t terrible, but that the execution — the integration and assimilation — is where HP comes up short. The result, however, is the same: HP has gotten poor returns on its recent M&A investments, especially those represented by the largest transactions.

The point of this post is that we have to put the latest announcement about significant employee cuts at HP into a larger context of HP’s ongoing strategic missteps. Nobody said life is fair, but nonetheless it seems clear that HP employees are paying for the sins of their corporate chieftains in the executive suites and in the company’s notoriously fractious boardroom.

Until HP decides what it wants to be when it grows up, the problems are sure to continue. This latest in a long line of employee culling will not magically restore HP’s fortunes, though the bleating of sheep-like analysts might lead you to think otherwise. (Most market analysts, and the public markets that respond to them, embrace personnel cuts at companies they cover, nominally because the staff reductions result in near-term cost savings. However, companies with bad strategies can slash their way to diminutive irrelevance.)

Different This Time? 

Two analysts refused to read from the knee-jerk script that says these latest cuts necessarily position HP for better times ahead. Baird and Co. analyst Jason Noland was troubled by the drawn-out timeframe for the latest job cuts, which he described as “disheartening” and suggested would put a “cloud over morale.” Noland showed a respect for history and a good memory, saying that it is uncertain whether these layoffs would bolster the company’s fortunes any more than previous sackings had done.

Quoting from a story first published by the San Jose Mercury News:

In June 2010, HP announced it was cutting about 9,000 positions “over a multiyear period to reinvest for future growth.” Two years earlier, it disclosed a “restructuring program” to eliminate 24,600 employees over three years. And in 2005, it said it was cutting 14,500 workers over the next year and a half.

Rot Must Stop

If you are good with sums, you’ll find that HP has announced more than 48,000 job cuts from 2005 through 2010. And now another 27,000 over the next two years. But this time, we are told, it will be different.

Noland isn’t the only analyst unmoved by that argument. Deutsche Bank analysts countered that past layoffs “have done little to improve HP’s competitive position or reduce its reliance on declining or troubled businesses.” To HP’s assertion that cost savings from these cuts would be invested in growth initiatives such as cloud computing, security technology, and data analytics, Deutsche’s analysts retorted that HP “has been restructuring for the past decade.”

Unfortunately, it hasn’t only been restructuring. HP also has been an acquisitive spendthrift, investing and operating like a drunken, peyote-slathered sailor.  The situation must change. The people who run HP need to formulate and execute a coherent strategy this time so that other stakeholders, including those who still work for the company, don’t have to pay for their sins.

Last Week’s Leavings: Avaya and HP

Update on Avaya

Pursuant to a post I wrote earlier last week on Avaya’s latest quarterly financial results and its continue travails, I’m increasingly pessimistic about the company’s prospects to deliver a happy ending (as in a successful exit) for its principal private-equity stakeholders.  There’s no growth profile, cost containment has yet to yield profitability, and the long-term debt overhang remains ominous. The company could sell its networking business, but that would only buy a modest amount of latitude.

At a company all-hands meeting last week, which I mentioned in the aforementioned post, Avaya CEO Kevin Kennedy spoke but didn’t say anything momentous, according to our sources. Those sources described the session as “disappointing,” in that little was disclosed about the company’s plans to right the ship. Kennedy also didn’t talk much about the long-delayed IPO, though he did say its timing would be determined by the company’s sponsors — which is true, but doesn’t tell us anything.

Kennedy apparently did say that the employee headcount at the company is likely to be reduced through layoffs, attrition, and “restructuring,” the last of which typically results in layoffs. He also reportedly said Avaya had too many locations, which suggests that geographic consolidation is in the cards.

HP: Layoffs will continue until morale improves

Speaking of cuts, reports that HP might be shedding a whopping eight percent of its staff are troubling. Remember, HP is a company that was headed by Mark Hurd, a CEO notorious for his operational austerity. Hurd wielded the sharp budgetary implements so exuberantly, he must have brought tears to the eyes of Chainsaw Al Dunlap, former CEO of Sunbeam, who, like Hurd, was ousted under dubious circumstances.

During Hurd’s reign at HP, spending on R&D was slashed aggressively, and it was somewhat jokingly suggested that the tightfisted CEO might insist that his employees power their offices by riding electric stationary bikes.  After the Hurd years, and the desultory and fleeting rule of Leo Apotheker, HP now appears to be getting another whopping dollop of restructuring. The groups affected will be hit hard, and one wonders how morale throughout the company will be affected. We might learn more about the extent and nature of the cuts later today.

Cisco’s Storage Trap

Recent commentary from Barclays Capital analyst Jeff Kvaal has me wondering whether  Cisco might push into the storage market. In turn, I’ve begun to think about a strategic drift at Cisco that has been apparent for the last few years.

But let’s discuss Cisco and storage first, then consider the matter within a broader context.

Risks, Rewards, and Precedents

Obviously a move into storage would involve significant risks as well as potential rewards. Cisco would have to think carefully, as it presumably has done, about the likely consequences and implications of such a move. The stakes are high, and other parties — current competitors and partners alike — would not sit idly on their hands.

Then again, Cisco has been down this road before, when it chose to start selling servers rather than relying on boxes from partners, such as HP and Dell. Today, of course, Cisco partners with EMC and NetApp for storage gear. Citing the precedent of Cisco’s server incursion, one could make the case that Cisco might be tempted to call the same play .

After all, we’re entering a period of converged and virtualized infrastructure in the data center, where private and public clouds overlap and merge. In such a world, customers might wish to get well-integrated compute, networking, and storage infrastructure from a single vendor. That’s a premise already accepted at HP and Dell. Meanwhile, it seems increasingly likely data-center infrastructure is coming together, in one way or another, in service of application workloads.

Limits to Growth?

Cisco also has a growth problem. Despite attempts at strategic diversification, including failed ventures in consumer markets (Flip, anyone?), Cisco still hasn’t found a top-line driver that can help it expand the business while supporting its traditional margins. Cisco has pounded the table perennially for videoconferencing and telepresence, but it’s not clear that Cisco will see as much benefit from the proliferation of video collaboration as once was assumed.

To complicate matters, storm clouds are appearing on the horizon, with Cisco’s core businesses of switching and routing threatened by the interrelated developments of service-provider alienation and software-defined networking (SDN). Cisco’s revenues aren’t about to fall off a cliff by any means, but nor are they on the cusp of a second-wind surge.

Such uncertain prospects must concern Cisco’s board of directors, its CEO John Chambers, and its institutional investors.

Suspicious Minds

In storage, Cisco currently has marriages of mutual convenience with EMC (VBlocks and the sometimes-strained VCE joint venture) and with NetApp (the FlexPod reference architecture).  The lyrics of Mark James’ song Suspicious Minds are evocative of what’s transpiring between Cisco and these storage vendors. The problem is not only that Cisco is bigamous, but that the networking giant might have another arrangement in mind that leaves both partners jilted.

Neither EMC nor NetApp is oblivious to the danger, and each has taken care to reduce its strategic reliance on Cisco. Conversely, Cisco would be exposed to substantial risks if it were to abandon its existing partnership in favor of a go-it-alone approach to storage.

I think that’s particularly true in the case of EMC, which is the majority owner of server-virtualization market leader VMware as well as a storage vendor. The corporate tandem of VMware and EMC carries considerable enterprise clout, and Cisco is likely to be understandably reluctant to see the duo become its adversaries.

Caught in a Trap

Still, Cisco has boxed itself into a strategic corner. It needs growth, it hasn’t been able to find it from diversification away from the data center, and it could easily see the potential of broadening its reach from networking and servers to storage. A few years ago, the logical choice might have been for Cisco to acquire EMC. Cisco had the market capitalization and the onshore cash to pull it off five years ago, perhaps even three years ago.

Since then, though, the companies’ market fortunes have diverged. EMC now has a market capitalization of about $54 billion, while Cisco’s is slightly more than $90 billion. Even if Cisco could find a way of repatriating its offshore cash hoard without taking a stiff hit from the U.S. taxman, it wouldn’t have the cash to pull of an acquisition of EMC, whose shareholders doubtless would be disinclined to accept Cisco stock as part of a proposed transaction.

Therefore, even if it wanted to do so, Cisco cannot acquire EMC. It might have been a good move at one time, but it isn’t practical now.

Losing Control

Even NetApp, with a market capitalization of more than $12.1 billion, would rate as the biggest purchase by far in Cisco’s storied history of acquisitions. Cisco could pull it off, but then it would have to try to further counter and commoditize VMware’s virtualization and cloud-management presence through a fervent embrace of something like OpenStack or a potential acquisition of Citrix. I don’t know whether Cisco is ready for either option.

Actually, I don’t see an easy exit from this dilemma for Cisco. It’s mired in somewhat beneficial but inherently limiting and mutually distrustful relationships with two major storage players. It would probably like to own storage just as it owns servers, so that it might offer a full-fledged converged infrastructure stack, but it has let the data-center grass grow under its feet. Just as it missed a beat and failed to harness virtualization and cloud as well as it might have done, it has stumbled similarly on storage.

The status quo is likely to prevail until something breaks. As we all know, however, making no decision effectively is a decision, and it carries consequences. Increasingly, and to an extent that is unprecedented, Cisco is losing control of its strategic destiny.

Time for HP to Show Its SDN Hand

Although HP has demonstrated mounting support for OpenFlow, it has yet to formulate what I would call a full-fledged strategy for software defined networking (SDN). Yes, HP offers OpenFlow-capable switches, but there’s more to SDN than OpenFlow. Indeed. there’s definitely more to SDN than the packet-shunting hardware at the bottom of the value chain.

The word “software” is prominent in the SDN acronym for a reason, and HP hasn’t told us much about its plans in that area. I am not able to attend this week’s Interop in Las Vegas, but I am hoping HP takes the opportunity this week to disclose a meaningful SDN strategy.

HP could start by telling us what it plans to do on the controller front. Does its strategy involve taking a wait-and-see attitude, working with the likes of Big Switch Networks? Does HP have a controller of its own in the works? As an august publication once trumpeted in a long-ago  advertising campaign, inquiring minds want to know.

Above the controller, how does HP see the ecosystem developing? Does it plan to provide applications, management, orchestration? I think we have a reasonably good idea where Cisco is going with its SDN strategy — though Cisco would rather talk about network programmability (more on which later) — but HP has yet to play its hand.

HP is in Las Vegas this week. It’s as good a time as any to put its SDN cards on the table.

At Dell, Networking’s Role Secondary but Integral

Dell made a networking announcement last week, and, for the most part, reaction was muted. That’s party because Dell’s networking narrative is evolving and in transition, and partly because the announcements related to incremental, though notable, progression.

To be fair, Dell’s networking narrative is part of a larger story the company is telling in the data center. Networking is integral to that story, but it’s not the centerpiece and never will be. Dell is working from the blueprint of its Virtual Network Architecture (VNA), so its purchase and stewardship of Force10 is framed within a bigger picture that involves not just converged infrastructure, but also workload-driven orchestration of virtualized environments.

Integration and Assimilation

Some good news for Dell is that its integration and assimilation of Force10 Networks seems to have gone well and is now complete.  Dell’s OpenManage Networking Manager (OMNM) 5.0. offers a new look and support for the full line of Dell networking products, including the Force10 portfolio. What’s more, in its Dell Force10 MXL blade interconnect, a  40Gb Ethernet switch for the M1000e Blade chassis, Dell brings delivers an apt metaphor as well as a blade-server switch.

In that sense, it’s helpful to recall that Dell’s acquisition of Force10 was motivated by a desire to integrate networking into an automated, orchestrated data center in which it already offered compute and storage. Dell concluded that needed to own networking technology just as it owned server and storage technology. It further deduced that it needed a comprehensive networking portfolio, extending across SAN and LAN environments. Just as it moved previously to shake its dependence on storage partners, it would do likewise in networking.

Dell sees networking as an integral enabling technology, but not as an end in itself. Dell believes it can be more flexible than HP and IBM in certain enterprise demographics, and it believes it can outflank Cisco by being less “network centric” and more open to developments such as software defined networking (SDN).Force10, which was thought to be between a rock and hard place just before being acquired, understands and accepts its role in the Dell universe.

Fitting Into VNA

The key to understanding Dell’s data-center strategy is Virtual Network Architecture (VNA). The announcement of the new blade-server switch fits into that plan. Dell says VNA’s purpose is to virtualize, automate, and orchestrates network services so that they can adapt readily to application and business requirements. Core elements of VNA include the following:

  • High-performance switching systems for the campus and the data center
  • Virtualized Layer 4-7 services
  • Comprehensive automation & orchestration software
  • Open workload/hypervisor interfaces

So, what does it all mean? It means Dell is taking an approach that it believes will be differentiated and add considerable value in customers’ and prospective customers’ data centers. On the networking front, Dell believes it has espoused a strategy that encompasses and envelops the rise of SDN while also taking and accommodating approach to the networking gear already present in customer accounts.

Workload-Oriented Approach

In an article at The VAR Guy, Nathan Eddy quotes Dario Zamarian, VP and GM of Dell Networking, as follows:

“We are taking a workload-oriented approach — as in, ‘What does each require first?’ as opposed to starting with the network first [and] then trying to fit the application to it. In other words, networking is the enabler. The ultimate goal of VNA is to make networking as simple to set up, automate, operate, and manage as servers. VNA is doing for networking what VMware did for servers.”

Well, that’s the plan. In theory, in a slide show, all the pieces are there, but Dell has to execute and deliver on the vision. One can identify holes in the structure, places where Dell will need to buy, partner, or build to close the gaps. It’s clearly doing that, though, as the Force10 acquisition and others recently attest.

Taking Force10’s technology forward in alignment with its plans, Dell not only announced  a 40GbE-enabled blade server switch. It also introduced fabric- and network-management tools to simplify operations in the data center and the campus, and it announced data-center enhancements (stacking technology, L2 multipathing, data-center bridging, automated workload mobility through auto-provisioning of VLANs) to Force10’s FTOS for its S4810 10/40G switching platform.

Encompassing SDN

On the SDN front, Dell announced interoperability with Big Switch Networks’ Open SDN architecture and its OpenFlow-based Floodlight controller. That interoperability will be showcased next week in joint demonstrations at Interop, with the application emphasis on cloud multi-tenancy.

Regardless of where Dell goes with SDN, and regardless of how quickly (or slowly) SDN makes encroachments into the enterprise, Dell’s VNA model accounts for it and much else besides. Dell believes it can win in workload and network orchestration, with its Advanced Infrastructure Manager (AIM) providing virtual-network programming interfaces and doubtless with some forthcoming orchestration technologies it has yet to introduce (or buy).

Dell’s VNA seems a viable plan. But can the company continue to execute on it? Dell would have more focus and resources to do so if it jettisoned its woebegone consumer business, but that divestiture doesn’t seem to be in the cards.