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Greg Ferro
Greg Ferro
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Cisco Faces Make-Or-Break Week For SDN

Cisco is counting on ACI, its software-defined networking strategy, to keep its hold on the enterprise infrastructure market. We'll see how that plays out this week at Cisco Live.

Following a year of shrinking revenue and profits, Cisco told investors on its quarterly financial earnings call last week that the company's recovery depends on its Application Centric Infrastructure strategy. This week, the Cisco Live US customer event takes place in San Francisco, and the signs are that Cisco will be announcing much more around ACI and SDN. It's now been six months since ACI was announced, and the public release of the first-generation product was promised by next month.

ACI is a big vision
Cisco ACI is not a single technology or product. The basic strategy is to use software applications to manage and operate networks in completely new ways. Cisco ACI product announcements started in November around using custom silicon in Nexus 9000 hardware. Since then, a string of announcements has shown that Cisco intends to extend ACI into many areas of the product portfolio. Announcements on UCS Director, security, and the WAN have already come out, and it seems reasonable to expect that the service provider business unit will make announcements in the near future.

SDN products have already disrupted networking, and Cisco came late to the realization. In many ways, ACI is catching up to competing strategies from VMware NSX and HP VAN. A thriving and expanding startup scene has also emerged to offer competing visions. Cisco is feeling competitive pressure.

Acceptance remains uncertain
The big question around ACI is that of customer acceptance. Customers that are holding back on Cisco are reluctant to speak publicly, but internal sources talk about significant pushback against ACI on the basis of proprietary technology, complexity, and high pricing.

Many organizations perceive that deploying ACI will create a dependency on Cisco technology, not just for routing and switching, but also for UCS servers, firewalls and IDS, and Invicta storage. Logically, this could also extend to other Cisco products such as unified communications -- although Microsoft Lync remains the dominant IP telephony platform in the enterprise.

The recent standards and open-source initiatives around OpFlex, OpenStack, and LISP can be seen as reaction to this criticism (although it also encourages third parties to write for the ACI platform). Many companies -- such as AT&T -- have been highly vocal in advocating that SDN must be open and interoperable to avoid vendor dependency.

In a recent blog post, Cisco claims it has:

  • 70+ active ACI trials with customers and channel partners
  • An ACI ecosystem with 33 ecosystem partners leveraging the open approach and the policy model
  • 1000+ customers in pipeline
  • 175+ customers in its service provider, enterprise, and commercial divisions, with several in production deployments

Some critics make the point that Cisco has been promoting ACI to customers since mid–2013. Cisco has 75% market share, which makes these numbers seem low compared to the total number of addressable customers. And 33 ecosystem partners seems limited, when the opportunities for orchestration are so large. For example, consider Vnomic, a Cisco ACI partner that is providing application modeling to automate the deployment of SAP and HANA landscapes. This type of specific orchestration provides enormous opportunity.

On the other hand, slow uptake is to be expected because ACI is an early-stage technology, highly disruptive to IT operations, and the product is not yet shipping. The early-adopter model is well entrenched at Cisco to seed deployments for companies willing to take risks so that deployments are ready at launch. Cisco executives will, of course, assure you that they are pleased with the uptake and customer interest to date. The early marketing program has been as vigorous and comprehensive as Cisco can make it, and many customers are looking forward to ACI.

One final concern is purchase price. VMware NSX pricing has been widely criticized in recent months. This is in part because of its emphasis on rental licensing, but mostly because it is simply expensive and perceived as overpriced. Cisco is already known for high product pricing, but until actual ACI/APIC pricing is available, a proper evaluation cannot be made. Customers are looking to reduce their overall IT spend, and any attempt to increase top-line spending is likely to meet significant resistance.

Cisco financial struggles
Cisco has had a few quarters of poor business with mixed outcomes in different business units. In the last two quarters alone, profits and revenue have dropped by 5% or more, with the gross profit margin now reduced to slightly more than 60%. Most financial news suggests that Cisco's share price has remained flat due to huge buybacks of shares. Cisco has announced a $10 billion share buyback, funded by debt raising in the US and backed by $30 billion net cash in offshore funds. (Head to page 2.)

Greg has nearly 30 years of experience as an IT infrastructure engineer and has been focused on data networking for about 20, including 12 years as Cisco CCIE. He has worked in Asia and Europe as a network engineer and architect for a wide range of large and small firms in ... View Full Bio
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jgherbert
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jgherbert,
User Rank: Ninja
5/29/2014 | 9:34:30 PM
Arguments aside...
Let's go back to the start of Greg's article:

"Cisco is counting on ACI, its software-defined networking strategy, to keep its hold on the enterprise infrastructure market."

This, surely, rings true even if one disagrees with the analysis that follows. ACI and related technologies do appear to be core to Cisco's next generation networking platform. If the Nexus 9k with full ACI hardware in is (ASICs and all) is successful, they'll be in a very strong position to lead the data center market. If ACI isn't seen to bring benefits, or to fail to live up to its potential (the hype?) then it's going to be a very tough sell indeed, in an increasingly competitive market.

Susan Fogarty
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Susan Fogarty,
User Rank: Strategist
5/26/2014 | 6:20:02 PM
Editor's note
I'd like to reiterate again that the article written here by Greg Ferro is based on his professional opinion as an independent blogger. Network Computing welcomes differing and conflicting opinions and our goal is to foster a lively discussion, but we ask you to refrain from ever insulting any contributor or member of the community. Please take the high road whenever possible.
DAGS0
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DAGS0,
User Rank: Guru
5/23/2014 | 2:49:04 PM
Re: Another negative slant on a post by who, Greg - Surprise
Yes, check my profile on LinkedIn.  I am Frank D'Agostino, Senior Director at Cisco Systems who is responsible for product development and technical go to market for Application Centric Infrastructure (ACI), the Nexus 9000, and the Application Virtual Switch.

I was also formerly the VP of WW Technical Operations at Nicira Networks and left prior to the acquisition of Nicira by VMware because I knew ACI was going to go far beyond where SDN LAN Emulation - this decade's version of ATM LAN Emulation on x86, was going to end up.

Not trying to hide my profile, just try to spend as little time on worthless blogs as possible, except when the company makes significant investments trying to educate someone who puposefully twists information and misinforms the public community.

I realized I also lied, I said I wouldn't be back on this website.
Lorna Garey
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Lorna Garey,
User Rank: Ninja
5/23/2014 | 1:15:54 PM
Re: Another negative slant on a post by who, Greg - Surprise
DAG, Could you tell us something about what dog, if any, you have in this race? 
DAGS0
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DAGS0,
User Rank: Guru
5/23/2014 | 1:05:00 PM
Re: Another negative slant on a post by who, Greg - Surprise
It is easier to hide behind.... "the customer said" any bad journalist can say that.  Good journalists have validation - not conjecture that can be present on any slide or bad blog message.

Customers know best how to take a product to market - they have to install it...  If customers are your source, and an engineer is writing the blog who is not an expert at go to market - then how credible is your opinion.  In my view 0.  Leveraging a big name like network computing as a platform makes it all the more important to be credible.  In other words, if you don't know - don't FUD.

This is my last blog post here and my recommendation moving forward to customers, resources, and internal, is to drop this platform to a lower tier from credibility to variable rhetoric

The last thing I am going to do is send customers here.  Good luck.
Susan Fogarty
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Susan Fogarty,
User Rank: Strategist
5/23/2014 | 8:09:36 AM
Re: Another negative slant on a post by who, Greg - Surprise
Thanks for your response, that's interesting to read. Again, I need to stress that Greg is giving his opinion from the customer viewpoint. Customers will also have no knowledge about "taking a product to market" nor will they care about the details of that. They want to know this is going to work for them, and they may not want to have to learn all the extra skills to make it work well. 

If you have real live customers using ACI, feel free to point them here and tell us about their experience. The market (and our readers) needs to hear directly from them to validate ACI. I heard a lot of them talking at Cisco Live -- if they can get out in a more public forum, that would be great.
DAGS0
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DAGS0,
User Rank: Guru
5/22/2014 | 9:46:52 PM
Re: Another negative slant on a post by who, Greg - Surprise
BS#1 - ACI is catching up to competing strategies from VMware NSX and HP VAN.

Response - ACI is providiing far more than NSX will ever be able to do and a 7 year old company that cannot show 20 customers with full features at scale, they are incomplete also as you have to plug it into something and buy hw gateways for vxlan and cannot do network virtualization for any platform, nor can they even do it for VSS, VDS, or any other edge other than the NSX vswitch.  Greg knows better

BS#2 - Customers that are holding back on Cisco are reluctant to speak publicly, but internal sources talk about significant pushback against ACI on the basis of proprietary technology, complexity, and high pricing.  

Response - This is pure BS, Greg has no idea on pricing, how open the platform is and the fact that we can not only existing on existing infrastructure but ACI can be extended over competitive infrastructure.  Greg do your homework...

BS#3 - Many organizations perceive that deploying ACI will create a dependency on Cisco technology, not just for routing and switching, but also for UCS servers, firewalls and IDS, and Invicta storage.  

Response - Customers can run python scripting, puppet, chef, openflow, and ACI, with NXOS mode or ACI mode.  There is no dependency as Greg states - just another shovel full

BS#4 - Some critics make the point that Cisco has been promoting ACI to customers since mid–2013. Cisco has 75% market share, which makes these numbers seem low compared to the total number of addressable customers.

Response - This is a clear indication to me that the author knows nothing about taking a product to market.  Maybe we should be a 7 year old, agile software company, who cannot produce 20 referenceable customers at full features and scale.  Amazingly poor understanding of a market

BS#5 - On the other hand, slow uptake is to be expected because ACI is an early-stage technology, highly disruptive to IT operations, and the product is not yet shipping.

Response - Complete mis-information.  Greg has no idea what customers we have in production, it is not highly disruptive - maybe I should put a SDN LAN emulation model in place that forces me to have a bunch of x86 appliances recreating ATM LAN Emulation on x86, terrible traffic flows, having to build a separate network for management, vmotion - live migration, controllers, and have low scale, force a bunch of NAT domains, and oh, by the way, force to rip out ever vswitch, upgrade every vswitch from the new system to fix lousy performance of OVS, and not be able to accomodate any other platform because VMware is locking everyone out of the kernel.

BS#6 - The early-adopter model is well entrenched at Cisco to seed deployments for companies willing to take risks so that deployments are ready at launch. Cisco executives will, of course, assure you that they are pleased with the uptake and customer interest to date. The early marketing program has been as vigorous and comprehensive as Cisco can make it, and many customers are looking forward to ACI.

Response - Not sure what to say here other than your writer needs to put on an orange wig, red nose, and floppy shoes.

BS#7 - One final concern is purchase price. VMware NSX pricing has been widely criticized in recent months. This is in part because of its emphasis on rental licensing, but mostly because it is simply expensive and perceived as overpriced. Cisco is already known for high product pricing, but until actual ACI/APIC pricing is available, a proper evaluation cannot be made. Customers are looking to reduce their overall IT spend, and any attempt to increase top-line spending is likely to meet significant resistance.

Response - Do your homework Greg, others have and you clearly have not.

BS#8 - Cisco has had a few quarters of poor business with mixed outcomes in different business units. In the last two quarters alone, profits and revenue have dropped by 5% or more, with the gross profit margin now reduced to slightly more than 60%. Most financial news suggests that Cisco's share price has remained flat due to huge buybacks of shares. Cisco has announced a $10 billion share buyback, funded by debt raising in the US and backed by $30 billion net cash in offshore funds.

Response - Not only do you mis-reprsent technical data, you have no clear idea on how to do financial analyst.

Final comments - I realize after writing this that I am the fool for validating this comic book of pseudo-networking BS.

 

 
Susan Fogarty
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Susan Fogarty,
User Rank: Strategist
5/22/2014 | 9:14:57 PM
Re: Another negative slant on a post by who, Greg - Surprise
OK, I don't think there is any intent to misinform anyone here but I understand what you mean. If you can let us know what BS you are specifically referring to we could evaluate it fairly.
DAGS0
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DAGS0,
User Rank: Guru
5/22/2014 | 5:43:02 PM
Re: Another negative slant on a post by who, Greg - Surprise
Being technical is no excuse for puposefully misinforming people.  You want to be tough, be tough that is fair.  I also know the difference between technical people and journalist having built data centers and networks for more than 25 years and with a CCIE and various other certs.

Greg and I have had direct exchanges on this and BS is BS.  Journalist or rocket scientist, it all smells the same.
Susan Fogarty
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Susan Fogarty,
User Rank: Strategist
5/22/2014 | 5:36:47 PM
Re: Another negative slant on a post by who, Greg - Surprise
Thanks for chiming in here -- you bring up a recurring theme about customer loyalty vs misinformation.

I think comparing this article to the National Enquirer is quite a stretch, and as a long-time Cisco customer and user of their equipment, Greg is entitled to his opinion and to ask Cisco the hard questions that he and his peers need to find the answers to. None of us should just blindly accept what our vendors tell us when such large business and financial decisions are at stake.

I have a great deal of respect for Jim Duffy, but he is a journalist, not a technologist. So he is not qualified to judge the depths of Cisco gear the way Greg is, and Jim, as a reporter, should be more objective. Greg has a platform here because many people in the industry value his opinions and his courage to voice them.

It's great to be a tried and true Cisco fan. But if you love Cisco, IMHO, you should have your own good reasons for it -- not because they tell you to.
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