It’s fashionable today to say you are working on an “open system.” Large companies and startups alike are embracing the software defined networking (SDN) and open source movements to deliver that promise more interoperability and flexibility.
Recent announcements reaffirm this trend. Cyan just last week announced the optical industry’s first “white box” — its N-Series gigabit-speed optical platform will run on merchant silicon and commodity hardware. Meanwhile, Cisco said that it is committed to keeping Tail-f, a prominent SDN orchestration startup that it bought last year, as an open and multi-vendor platform.
This brings up many questions about business strategy. The smaller vendors obviously have more motivation to be “more open,” as that’s their differentiation in the market. Larger vendors such as Cisco and others have less motivation to open things up, because they risk losing their dominant market share to the insurgents. This is why the market was asking lots of questions about what Cisco would do with Tail-f and why Cisco is responding to these questions.
So far, Cisco — and other larger vendors such as HP and Alcatel-Lucent — appear to be talking the SDN talk and have real plans to open up. How far they go will be determined in the market. But assuming everybody gets more open — and the utopian world of vendor interoperability arrives — that leaves yet more business questions. Such as, how do you differentiate yourself in an open world? How do you keep customers? Preaching less “vendor lock-in” sounds great to customers but it scares the heck out of OEM shareholders.
Because I like industry analogies, I tried to think of industries that have been rapidly commoditized and how products are differentiated. For example: Whose refrigerator did you buy and why? Refrigeration is a commoditized thing, but clearly some brands stand above others. Viking refrigerators aren’t cheap. If you look around you, this happens nearly every day in many different product categories. Business is a cutthroat world and people need to stand apart.
I think these will be the big factors in differentiation in the coming SDN world. Here are my key differentiators along with their real-world analogies:
1. Customer Service
I still love my local Ace Hardware store. It’s hard to think of a market more commoditized than the retail hardware market, which is not only under assault by the big boxers Home Depot and Lowe’s, but the Internet as well.
My local Ace Hardware is more convenient (it still has a Main Street location close to my house) and easier to access (parking lot within 20 yards of store, and somebody always helps me within five minutes if I need it). Recently, I was on the hunt for a rare and exotic screw, a problem that the the local Ace Hardware man helped me solve in a matter of minutes.
Great customer services will be a differentiator in any market. And as networking hardware becomes increasingly commoditized, it will also become more about software integration and customer touch points. The companies that provide consistent customer service at scale will set themselves apart.
2. A Strong Brand
Google fascinates me as the most valuable one-product company in the history of technology. The company is regularly cited as one of the strongest global brands. Yet, 80 percent of Google’s revenue comes from its first product, its core digital advertising products and search functions. Despite lots of fanfare about Google’s adventures in communications services, business suites and exotic automated car projects, it’s really mostly about Adwords and search.
One could argue that search is a commodity product, because regular tests and reviews show that consumers, when tested with equivalent tools in an unbiased way, often prefer search alternatives such as Bing, to Google.
So why is Google still perceived as such a massive leader? Its brand and position in search have remained remarkably dominant despite the competition in its core product areas.
It comes down to number of factors that have reinforced Google. These include fawning press coverage and the ubiquity of free Google products that feed the search and Adwords machine. Things like Google Drive, Google Docs and Google Maps, which may not make money unto themselves, consistently drive users back into the Google universe, making users acolytes and reinforcing Google as a “way of doing things.” This has built the Google brand and helped defend the Google profitability fortress, despite rising commoditization and competition around its core product.
3. Performance and Quality Control
Former GE CEO Jack Welch was famous for building intense organizational discipline, including the Six Sigma approach to operations.
Six Sigma is about quality control — building an operations and manufacturing process that turns out remarkable consistent quality. I find these traits lacking, in general in the technology industry. In fact, if you combine quality control with my mission No. 1 — customer service — I bet you cannot think of many technology companies that consistently deliver these attributes. Radio Shack, anyone?
As the networking world moves into open systems, it has the potential to create an even more complicated and error-prone world of software. The companies that step up and provide a quality, tested product and operational method for doing this on a consistent basis are the ones that are going to survive.
Time to queue up the generic mobile-phone analogy. What built Android and Apple into the mobile OS powerhouses they are today? Applications. Why did the Wintel computing platform become the most dominant installed base in business? Applications.
If you look at two of the most successful companies in the past three decades of tech — Microsoft and Apple — they have spent an inordinate amount of energy on developing their developers. This is because in the end, if your platform has no applications, you might as well be wandering around in an empty field. The apps drive the platform.
The most promising aspect of SDN and NFV is the potential for an explosion of new applications. Once these networks are really connected and opened up, it will unleash a trove of data never seen before. This data will be used for all sorts of applications, including applications monitoring, automated traffic engineering, business intelligence, and security. The companies that pay attention to the way their new SDN or NFV product can enable and deliver new applications will be the ones that have the most market success.
That’s my summary of how companies will be differentiated in the market. It won’t be much different from any other market — whether you are talking about refrigerators, hardware, or mobile phones. It will come down to executing on these basic business principles for business success.