Holy mother of Network Function Virtualization (NFV). Are people really such big suckers? Are they that naive? Yesterday, AT&T and Cisco jumped on the marketing bandwagon to pile on thsoe neat new tech buzzwords of NFV and Software-Defined Networking (SDN), with the tech press just gobbling them up.
But I’ll tell you want it really means: Eveybody wants cheaper networking gear.
The headline for AT&T was “AT&T Lauches Supplier Domain Program.” And Cisco announced a new Network Convergence Systems (NCS) platform. Both of these announcements are allegedly about fancy new architectures and time-to-market.
There are subleties to these announcements that I won’t get into, like the fancy specs on all of Cisco’s new gear. But I’ll tell you what it’s really about: Money. Lower costs. Lower capital spending. it’s like everything these days: People getting cheaper. And Cisco responding to pressure from service providers to open up and lower costs.
The news has in common the trend toward NFV and SDN in service provider networks. For those of you not familiar with SDN and NFV, I’ll boil it down for you. They are all about “virtualization,” or separating network hardware from software. This has already happened in large data centers such as those built by the likes of Amazon (AMZN), where the resource providers realize it’s more efficient if they can separate hardware and software resources through the process of “virtualization,” which allows the service provider to split up the resources on one system and parcel them out to different customers.
Now this concept is moving to larger service-provider networks in the form of NFV and SDN.
Here’s another way to think of it. In the telecom world, which seems to be perenially behind the rest of the world, everybody is asking for a more “open” platform, so that you could mix and match boxes of hardware and the software packages that control them. Right now, telecom equipment is more vertically integrated. Cisco boxes come with Cisco software, e.t.c.
Want another analogy? Android vs. Apple. Lots of manufacturers make mobile devices that can run Google’s free, open, Android OS. Apple remains a closed system, permanently coupling its OS with its hardware.
Service providers like the concept of “open” becuase equipment vendors such as Cisco build in a huge premium on the software side, because they can. The software is where all the money is, not the hardware. The service providers want plain vanilla routing and switching hardware that can be controlled with any software. This, in essence — though certainly over-simplified — is the spirit of SDN and NFV.
Okay, back to announcements. Funny. What does AT&T say? It says Domain 2.0 will trigger a “swift and broad move to a modern, cloud-based architecture that is expected to significantly reduce the time required to pivot to this target architecture while accelerating time-to-market with technologically advanced products and services.”
Hmm. Fancy. “Swift and broad.” Does that sound like AT&T to you? Just asking. But to sum it up, they want to move to an open, data-center model for networking. They like the concept of SDN in spirit, because it is more flexible. And cheaper. And they say the are working with equipment vendors to:
- Separate hardware and software functionality;
- Separate network control plane and forwarding planes; and
- Improve management of functionality in the software layer.
One key? AT&T said in its announcement that these moves will reduce capital spending (capex) over time. There you go, in the end. That’s the bottom line. They think this means less cost for them — and less margin for equipment vendors.
What about Cisco? Cisco said that by introducing the NCS line of routers and the Cisco One Service Provider Architecture, it is embracing and extendsing SDN/NFV. “The Cisco NCS family can help network operators reduce total cost of ownership by 45 percent while consuming 60 percent less power,”
Okay, so Cisco wants to reduce your cost too. It says it’s got big service providers such as KDDI, Telstra, and BSkyB to deploy Cisco’s NCS.
So, AT&T and Cisco are both moving toward a virtualization architecture. They are both talking about lowering cost.
This is what it is all about. The cost of the network. This is going to be a huge threat to equipment suppliers.
Rayond James analyst Simon Leopold said it best in a research note issued yesterday. “Fears regarding the effects of NFV and SDN could have on equipment suppliers ae not new, but the accouncement will bring the concerns front and center…. over the next 5 years AT&T expects this program to refeflect a downard bias toward capital spending.”
AT&T is going to push equipment vendors such as Cisco and Juniper into SDN kicking and screaming. The days of the fat software premium are over, so Cisco and Juniper investors should buckle down for a long, hard battle to protect their margins.
They will eventually lose, unless they come up with entirely new products geared toward this new world.