This was a presentation from 2006 where (starting on slide 30) I described how the way consumer networking vendors built their products would ultimately upend the way enterprise vendors built products. Today, the hype around SDN, commodity switching products, and linux based network operating systems is making much of this come true. This presentation was first given in May 2006 at the Interop trade show. Slide 30, is where I talked about how the networking market would split from vertically organized vendors to horizontally specialized vendors. I predicted this transition would take 10 years. At the time, the use of merchant silicon in datacenter and enterprise switching products was a rarity. Today, it is common. Then linux derivative network OSes were limited to consumer products, today they are taking over large scale cloud datacenters. The networking market hasn’t come as far as I expected in 10 years, but it’s pretty cool much of this either came true or is on the cusp of coming true. Much more change is under way.

1. www.idc.com
The State of Enterprise
Networking: Interop 2006
Abner Germanow
Director, Enterprise Networking

2. Agenda
• A quick refresher on disruptive markets
• The state of the enterprise networking market
• Solving the complexity and crisis
• Guidance
©IDC, 2006

3. A quick refresher
course
in disruptive markets

4. Sustaining vs.
Disruptive Innovation
Disruptive Innovation
ProductPerformance
Time
Source: The Innovator’s Dilemma

5. Interdependency Vs. Modularity
Beat competitors with speed,
responsiveness and standards
Performance
Time
Beat competitors
with complete solutions

6. Shifts in Interdependency and Modularity Has
a Long IT History
Equipment
Materials
Components
Product design
Operating system
Applications software
Sales & distribution
Field service
Intel, Micron, Quantum, Komag, etc.
Compaq, Dell, Gateway, Packard Bell
Microsoft
Word Perfect, Lotus, Borland
CompUSA
Independent contractors
Microsoft
1960–1980 1980–1990 1990–Present
Dell
IBM
ControlData
DigitalEquipment
Monsanto, Sumitomo Metals, Shipley, etc.
Teradyne, Nikon, Canon, Applied Materials, Millipore, etc.
Assembly
Compaq Contract Assemblers

7. Where are we today?

8. Gigabit is healthy, but 100 MB will represent
the majority of shipments for a while
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05
2002 2003 2004 2005
fix m - 100 MB
fix m - 1000 MB
mod - 100 MB
mod - 1000 MB
Layer (All) Vendor (All)
Sum of Ports
Year Quarter
Form Factor
Speed

9. 10 G Port Growth
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
1Q02 2Q02 3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05
2002 2003 2004 2005
fix m
mo
Layer (All) Vendor (All) Speed 10 G
Sum of Ports
Year Quarter
Form Fac

10. WLAN Market Share by Shipments
0%
20%
40%
60%
80%
100%
4Q
2004
1Q
2005
2Q
2005
3Q
2005
4Q
2005
Other
3Com
Aruba
Symbol
Cisco
WLAN Share of Shipments

11. 0%
20%
40%
60%
80%
100%
4Q
2004
1Q
2005
2Q
2005
3Q
2005
4Q
2005
AP vs Controller Share by Revenue
Controller
AP
WLAN Product Mix Shifted: Share of Revenue

12. Where are we going?

13. Core Enterprise Network Forecast
$0
$2
$4
$6
$8
$10
$12
$14
$16
$18
2003 2004 2005 2006 2007 2008 2009
Billions
LAN Switch Router

14. New Enterprise Markets Are Hot
$0
$5
$10
$15
$20
$25
$30
$35
$40
2003 2004 2005 2006 2007 2008 2009 2010
Billions
LAN switch Router IP PBX WLAN Application Networking

15. What’s on the agenda in 2006?
0% 5% 10% 15% 20% 25% 30%
Branch Routers
Compliance
Wiring closet LAN switch
Network Management
Core/Backbone LAN switch
Headquarters Routers
IP Voice
No major networking initiatives
Wireless LAN deployments
Security function / appliances
Source: IDC Enterprise Networks Vertical Views
Survey, May 2006 N=623 (Prelim data, unweighted)
Q: What are the top two upgrades or initiatives making up largest share of your
organization's data network equipment spending over the next 12 months?

16. Security
Problems:
1. Need to reduce response times, but security and
networking groups often have different priorities
2. Conga line of appliances doesn’t scale
©IDC, 2006

17. Security goal #1
Reduce response times

18. Network
Network identifies
suspect traffic

19. Network
Network identifies
suspect traffic
Security Function
Security product
analyzes traffic

20. Security Function
Network
Security product
analyzes traffic
Security product
issues mitigation
recommendations
to network
Network identifies
suspect traffic

21. Network
Network identifies
suspect traffic
Network takes
action to block,
rate limit, or
quarantine
Security Function
Security product
analyzes traffic
Security product
issues mitigation
recommendations
to network

22. Demand For Closed Loops Exists In All Hot
Markets
SecurityMobility
IP
Telephony
App
Networking
Enterprise
Network
Storage
Network
Compute
Storage

23. Common Themes In Hot Topics
A closed loop with the network is a win-win
Control may lie outside networking group
Web services standards
SecurityMobility
IP
Telephony
App
Networking
Enterprise
Network
Storage
Network
Compute
Storage

24. One End of the Solution Spectrum: Build It
Yourself
Acquire or develop technologies and integrate
in house
Pros:
 Grow revenues through growth in hot products.
 Development teams can be forced to work together
Cons:
 Assumes customer wants to buy everything from you
 Angry partners
©IDC, 2006

25. The Other End of the Spectrum: Play with
Others
Develop a set of APIs and use a standard platform build
links to secondary and tertiary technologies
Pros:
 Customers can use multiple vendors
 Vendors can specialize
Cons:
 Customers can’t exploit the value of the open platform until
the 2nd or 3rd application
 Multiple vendors blame others for problems
©IDC, 2006

26. Security goal #2
Consolidate conga line
of appliances

27. Classes of Appliances at the WAN gateway
•WLAN access point management
•Wide area file services
•WAN Bandwidth Management
•URL Filtering/content management
•IP PBX/PSTN Gateway
•Network access control/computer quarantine
•Intrusion detection/prevention
•Messaging Security
•Authorization/authentication
•Anti-virus/spyware

28. What platforms do customers want a VPN to
run on?
16%
43%6%
25%
10%
General purpose
server
Purpose built
appliance
Blade in blade server
LAN Switch or router
Managed Service
Q14. I am going to read a list of applications, and I would like you to indicate your preference of
five platforms for that specific application. You can select more than one platform for each
application. In other words, on which platform would you like … to reside?
Source: IDC Next Generation Network and
Security Special Study, May 2006 N=411

29. COTs Modularity:
Breaking Networking into
IT-sized Chunks

30. Shifts in Interdependency and Modularity Has
a Long IT History
Equipment
Materials
Components
Product design
Operating system
Applications software
Sales & distribution
Field service
Intel, Micron, Quantum, Komag, etc.
Compaq, Dell, Gateway, Packard Bell
Microsoft
Word Perfect, Lotus, Borland
CompUSA
Independent contractors
Microsoft
1960–1980 1980–1990 1990–Present
Dell
IBM
ControlData
DigitalEquipment
Monsanto, Sumitomo Metals, Shipley, etc.
Teradyne, Nikon, Canon, Applied Materials, Millipore, etc.
Assembly
Compaq Contract Assemblers

31. What will networking look like?
Equipment
Materials
Components
Hardware design
Operating system
Applications software
Sales & distribution
Field service
1990–Present
Assembly
Usual Suspects
Usual Suspects
The Future
3Com,Cisco,Nortel
Atheros, Broadcom, Intel, Marvel, ??
Contract Assemblers
Accenture, IBM, EDS, VARs, SIs

32. Accenture, IBM, EDS, VARs, SIs
Atheros, Broadcom, Intel, Marvel, ??
What will networking look like?
Equipment
Materials
Components
Hardware design
Operating system
Applications software
Sales & distribution
Field service
1990–Present
Assembly
3Com,Cisco,Nortel
Intoto? Nexthop? Level 7? Symbol?
Linux?, IOS? JUNOS? Others?
Cisco? Extreme? IBM BladeCenter? Bivio?
Contract Assemblers
Usual Suspects
Usual Suspects
3Com? Adtran? Cisco? Procurve?
The Future

33. Example: Intoto Ecosystem
Source: Intoto
OS Vendors
(BSP integration)
SnapGear
3rd-Party Apps
Antivirus
Antispam
Content
filtering
WLAN
autoconfig.
Hardware ODM
Semiconductor Vendors (Chip integration)
Service Providers
(Provisioning and certifications)
3rd-Party Certification Consortiums
(Industry Standard Certifications)
End-user Product
(OEM Branding + Channel + Support)
Networking OEM
Hardware ODM
Hardware Platform
(CPU/NP, coprocessors, PCBA, OS, and BSP)
Production-ready Security
Gateway Platform
(Intoto Network-centric Security Gateway Platform
Software + Integration + Certifications)
Software ODM

34. Modularity in Networking:
New Market Disruption
Example: Netgear
 Buy code from third parties
 Off-the-shelf silicon
 Off-the-shelf operating systems
 Integrate software and hardware
 ODM manufacturing
 Consumer & SMB Focus

35. Performance
Time
Three Strategies for
Market Disruption

36. Non-consumers or
Non-consuming
occasions
Time
Different
Performance
Measure
Performance
Time
Three Strategies for
Creating Growth
New Market Space:
Consumer & Security Products

37. Long-term Outlook for
Network COTs Modularity
Traditional
network
R&D
OS
ASICs

38. Long-term Outlook for
Network COTs Modularity
COTS model matures in consumer
and SMB markets
Traditional
NEM
R&D
Modular
NEM
R&D
OS
ASICs
Integration
Usability
Partners
Specialists

39. 3 Notes on Market Disruptions
 Disruptions in networking take a long time (10+ Years)
 Disruptive businesses are often lower margin than
incumbents
 COTS model comes with risk that incumbent and new
entrants fail

40. Networking Vendors:
Where Are They Headed?

41. Start-ups
Airspace, Andiamo (both acquired by Cisco,)
Aruba, NetDevices, Trapeze, many others
Develop on Linux
Off-the-shelf silicon
Consolidate
 Apps
 Functions
 Services
©IDC, 2006

42. Disruptors
Adtran, Dell, D-Link, Huawei?, F5, Linksys (Acquired by
Cisco), Netgear, ZTE?
Off the shelf silicon
(Broadcom, Intel, Marvel, etc)
Network device software
 Intoto, Level 7, Nexthop
Customer-defined controls (F5)
OS: Windriver, Linux, other COTS OS
©IDC, 2006

43. Challengers
3Com, Enterasys, Extreme, Foundry, Juniper,
Nortel, Procurve
Mix of custom ASICs and
COTS silicon
OEM or partner with specialists for security, voice, WLAN
Open APIs to internal developers
and/or partners
Modular operating systems
©IDC, 2006

44. Modularity in Networking:
Cisco’s Opportunity & Threat
Integration is a key value proposition for voice, security,
and mobility
Little to no incentive to buy COTs
IOS is now “internally modular”
Will Cisco’s ability to add, consolidate, and simplify new
features or even acquire and integrate become too slow?

45. Cisco
IIN: Intelligent Information Networking
 Technologies that produce a better network
SONA: Services Oriented Network Architecture
 An architecture and technology set that should enable
customers to virtualize and consolidate a set of infrastructure
services across an enterprise.
 The benefit of this consistency will be
to helping other parts of IT gain
efficiencies and increase the
network’s share of total IT spend.

46. Guidance For Vendors
1. The enterprise network market continues to grow, with
new access, WAN, and applications driving demand for
new functions, scale, and manageability
2. COTs does not equal commodization of network
equipment in the enterprise.
3. Enterprise equipment vendors need to use COTs in
order to shift and prioritize R&D, not to cut R&D spend
4. There is resistance to network service integration INTO
network equipment, but demand for integration with in
the near term WITH network equipment

47. Contact Info
Please email me at
agermanow@idc.com