I had the great fortune of attending Cisco’s exclusive Internet for the Future event held on December 11th in San Francisco. During the event, Cisco announced a number of new products and technologies, as well as an expansion of its business model that enables customers to consume technologies that were previously available only through the purchase of integrated systems. There was a lot to unpack from the event, but here are some of the highlights.

Silicon One
Cisco announced Silicon One, the architecture that the company will use to design, develop, and manufacture ASICs for routers and switches. The new architecture is a departure from their previous practice of having different silicon architectures across their router and switch portfolios. One of the key elements of the architecture is that it enables Cisco to scale ASICs up or down in terms of both bandwidth and networking features and services. This is a reminder that networking isn’t just about speeds and feeds, but also the capability to create and deliver services across network topologies and use cases.
The first ASIC based on Silicon One architecture is the Q100 routing ASIC that Cisco claims have the highest throughput on the market today at 10.8 Tbps.

8000 Series Routers
The new 8000 Series was introduced as the first router to use the Q100 ASIC. Several modular and fixed-configuration systems that support high densities of 400 Gbps and 100 Gbps Ethernet interfaces were announced, and overall system capacities are the highest in the industry. All models are currently shipping to customers for trials and are slated for general availability in the first half of 2020. The 8000 Series is positioned for core network applications for Telecom service providers and Cloud operators. In my conversations with Cisco executives, I was told that some customer trials have been ongoing for at least six months, which is a strong indicator that the 8000 Series is not far from generating revenue.
To complement the new hardware, the 8000 Series will be sold with a new version of Cisco’s network operating system, dubbed IOS XR7. XR7 is a lighter weight operating system that can be enhanced in a modular fashion to meet a wide range of use cases. This is different from previous versions of IOS XR where many features and functions were integrated, whether a customer needed them or not. I was told that XR7 will be used across a broad range of products, and in fact, has been available on the NCS 500 series since August.

Technology Consumption Model
And finally, Cisco announced that they will offer their new ASICs and IOS XR7 as independent products. This is a significant change from their traditional business model where silicon and software were only offered as part of a complete system. Earlier this year, Cisco said that they planned to sell optical modules to third parties, but the addition of the ASICs and IOS XR7 creates a broader business case for the new consumption model that thrusts Cisco into entirely new markets.

We will be watching all of these developments with great interest over the coming years.

An increasing amount of publicity is shifting to user applications, and away from the network. Enabling the user to extract more value out of the network is the topic of acquisitions and new product launches. For example, Arista recently acquired Mojo Networks not for its wireless LAN technology, but for its ability to deploy network intelligence; Cisco launched greater levels of security and troubleshooting enabled by its new DNA licenses; Juniper acquired Mist Systems which boasts its cutting-edge location Wi-Fi services. Yet, a closer look at companies such as Alcatel-Lucent Enterprise (ALE) and Extreme Networks, we observe these folks have been laser-focused on user applications all along. Let’s first discuss ALE.

ALE recently celebrated its centennial with a conference including some 1,000 partners, as well as 100 industry members of the press and analysts. Enthusiasm and energy levels were high.

Here’s what I think is important:

ALE has a long-running subscription-based business. As the networking industry incorporates applications and network intelligence via subscription-based services, this experience on ALE’s part will be a definite asset. In 1919, ALE founder Aaron Weil launched a subscription-based private telephone business, “Téléphone Privé,” as a productivity enhancement tool targeting enterprises.

ALE’s near-term strategy will be to target select vertical industries focusing on applications specific to customer operations.  ALE’s focus on customer applications is the likely explanation as to why its customers place a high value on ALE’s products. For example, in Campus Ethernet Switching, we observed that ALE’s average prices for the past few years have been the third highest, well above many other larger vendors.  Figure 1 shows how ALE’s average sales price per port compares with that of the largest vendors in the most popular segment of the Campus Ethernet Switch market (Fixed Managed 1 Gbps switches). ALE senior management explained that the customer interaction process has included building custom applications by vertical industry. Whenever ALE could not on its own deliver the application, it brought in a partner that specialized in the operations of businesses in that particular vertical industry. This high-touch approach to service helps explain ALE’s ability to maintain high perceived value as reflected in its average prices.

1 Gbps Campus Ethernet Switch Fixed Managed

ALE’s networking business (Campus Ethernet LAN in particular) was challenged in 2017 and 2018, which we attribute largely to Huawei’s expansion in Europe, the Middle East and Africa (EMEA), the region representing ALE’s stronghold. During the past two years, Huawei has run aggressive promotions with new channel partners it added in 2016.  As the honeymoon period for these engagements comes to a close, we suspect the longer-term relationships with its new partners will change. Looking at the Campus Ethernet market on worldwide units (port shipments) basis, the performance was flat during the past two years, with the exception of China-based vendors, as well as vendors such as Ubiquiti that are targeting the low end of the market. The challenges ALE experienced on a unit basis was similar to the experience of other Western vendors focusing on the high-end and midrange segments of the market.

Dell’Oro Group believes that enterprise campus networks are entering a refresh cycle that will enable users to run new applications (click here to learn more about Dell’Oro Group Ethernet Switch Campus Network market report). This refresh of the installed networks, which will unfold over the next several years, will be the most significant upgrade during the past two decades—and many will be seeking high value from their networks, not the cheapest price.

Read articles Tam Dell'Oro has written or been featured in…

In March, I attended the 2019 Open Compute Project (OCP) Global Summit at the San Jose Convention Center. The event is growing with 3,600 participants this year, including a broad representation of vendors and end users who make up the OCP community. We continue to see innovation in the server rack for hyperscale Cloud, edge computing, and enterprise environments for OCP-based designs.

Following are three key takeaways in server network connectivity:

 1.  OCP NIC 3.0 (Network Interface Card) specification continues to evolve and is Smart NIC-ready.

The OCP NIC 3.0 specification addresses shortcomings of the OCP NIC 2.0 specification in the areas of the thermal and mechanical profile, connector placement, and board space. Key members, including Broadcom, Facebook, Intel, and Mellanox, contributed to the 3.0 development process. As it currently stands, the OCP NIC 3.0 specification is defined in two form factors: SFF (small form factor) and LFF (large form factor). The LFF form factor is designed to accommodate accelerated processors, such as an ARM SoC or FPGA for Smart NIC applications.

A Smart NIC designed for OCP is a wise future-proofing strategy. In Dell’Oro Group’s 2019 Controller and Adapter Market 5-Year Forecast January report, I projected that Smart NIC will become a $500 M market by 2023, representing 20 percent of the total controller and adapter market.  Furthermore, most of the earlier adopters of Smart NICs are hyperscale and telecom data centers are also expected to widely deploy OCP-based designs within the server rack.

2.  The introduction of 56 Gbps PAM-4 NICs enables server connectivity to 400 Gbps networks.

Another important development is the availability of Ethernet adapter products with 56 Gbps PAM-4 SerDes lanes by Broadcom (NetExtreme), Intel (800 series Columbiaville), and Mellanox (ConnectX6). All are available in the OCP 3.0 form factor. The SerDes lane transition from 28 Gbps NRZ to 56 Gbps PAM-4 will enable Ethernet connectivity up to 100 GbE (based on 2 SerDes lanes) or 200 GbE (based on 4 SerDes lanes). We see strong demand for server connectivity at 100 GbE and higher speeds, especially by Tier 1 Cloud service providers, as this segment transitions to 400 GbE networking at the top-of-rack (ToR) switch over the next one to two years. (See Dell’Oro’s press release,“Cloud Service Providers Drove Demand Volatility of High-Speed Network Adapters”)

3.  Multi-host NICs have the potential to streamline and densify server connector connectivity.

It is exciting to see multi-host NICs gaining additional support from vendors. This technology has the ability to streamline the network by reducing ToR connections while providing a dense compute rack architecture. Mellanox was first to market with multi-host NICs for Yosemite servers, which provide 50 Gbps Ethernet connectivity to four server nodes. At OCP, both Broadcom and Netronome announced network adapter products supporting multi-host connectivity for the Yosemite platform. Broadcom’s announcements are based on the NetExterme series with the Thor chipset, which provides single and multi-host connectivity for up to 200 GbE with a PAM-4 solution. Netronome’s solution, the Agilio CX, is also a Smart NIC that provides connectivity up to 50 GbE.

I believe that OCP will continue to grow in strength as the industry transitions from off-the-shelf equipment to open designs optimized to end-users’ technical and cost-of-ownership requirements.

Read articles Baron Fung has written or been featured in…

China Market to Decelerate and Grow at Pace with the Rest of Asia Pacific

The latest Dell’Oro Group Wireless LAN (WLAN) 5-Year Forecast report (2018-2023) indicates that the Enterprise WLAN market will slow as it approaches $9.6 B over the next five years. The China market is expected to decelerate and grow at pace with the rest of the Asia Pacific region.

Chinese service providers are no longer deploying WLAN equipment in mobility environments, resulting in 2018 as one of the slowest growth years to date.  Despite the slowdown, we expect the WLAN market in China to grow over the forecast period. We anticipate wireless expansion and transition to new 802.11ax (Wi-Fi 6) technology in the enterprise segment as key growth drivers for the China market.

While 5G will enter the market during the forecast period, we maintain our position on its impact on WLAN.   As discussed in our report, we do not recognize cellular (including 5G) and private LTE networks as drivers for enterprise customers to substitute WLAN for in-building connectivity. Following are additional key takeaways from the WLAN 5-Year Forecast Report:

  • Demand for WLAN equipment and an increase in average selling price will move the WLAN market to approach $17.6 B in revenue over the next five years.
  • In comparison to previous technology (802.11ac), we expect 802.11ax to sustain a price premium for a longer period.
  • The revenue contribution from licenses is expected to exceed the contribution from access points for the Enterprise Cloud.
  • In the SOHO market, wireless router shipments are projected to surpass 50 million.

About the Wireless LAN 5-Year Forecast Report

The Dell’Oro Group Wireless LAN 5-Year Forecast Report offers a complete overview of the industry, covering Enterprise Outdoor and Indoor markets, SOHO markets with tables containing manufacturers’ revenue, average selling prices, and unit shipments by the following wireless standards: 802.11ax, 802.11ac Wave 1 vs. Wave 2, 802.11n, and historic IEEE 802.11 standards.

Last week, I attended Extreme NOW Forum 2018, Extreme Networks’ customer and partner conference in San Jose California, the first in a series of events to be held around the world—more than 50. What impressed me was how familiar the senior staff were with individual customers. This clearly was not the first time interacting.

A few items caught my attention:

  • Senior staff knew many of the customers by name and there was a joviality and friendliness indicative of familiar relationships. Clearly the priority is on tight customer relationships, and this is coming from the top.
  • Software application development consumes over 95% of research and development spend—led by customer requests and use cases.
  • Two use cases amused me:
    • The first one was a large retail customer which deployed security cameras throughout its stores—monitoring theft was not its primary purpose! Instead the shop managers used technology to identify facial patterns—sadness or happiness. If a shopper was sad, an assistant would be immediately dispatched to offer help.
    • The second use case was a firm in the education sector which used security cameras in the classroom—not to just monitor cheating, but whether or not students were falling asleep during lectures. This monitoring allowed management to evaluate professor performance.

Certainly Extreme has its work cut out to harmonize the technologies and operations of its recent acquisitions, but its steadfast connection with its customers creates a lasting loyalty.

NBASE-T technology is significantly impacting the market with the biggest transition we’ve seen in campus switching since 2000.

That’s a bold statement backed up by data and trends we’ve noted in our extensive research in the campus network market. With the new generation of 802.11ax access points supporting NBASE-T ports, this trend will only accelerate. At Dell’Oro Group, we predict a major refresh of the Ethernet Switch Campus market as 802.11ax shipments ramp up, taking NBASE-T to 20 percent of campus switch ports by 2022.  This transition will enable enterprises to transform their networks, support new high bandwidth devices, and provide the “always on” network experience expected today.

One clear example of this growth is in the education market. One administrator we spoke with said they are seeing big differences in their freshman class use even from one year to the next. Each incoming class is taking a step up. They use to plan their network needs based on 3 devices per student, and that has jumped to 5 devices per student in just the past couple years. Devices like Amazon Alexa and gaming devices have become even more prolific, and the number of users has also jumped from 10K to 22K in that same timeframe.

Members of the Dell’Oro Group team including Tam Dell’Oro, Ritesh Patel and myself, recently discussed these findings in a webinar with Peter Jones of the NBASE-T AllianceNBASE-T Campus Network Market Update from Dell’Oro Group includes significant data points, price trends and discussion on the mix between 2.5GE/5GE. Decision makers can use this information to inform their strategic infrastructure plans and purchases.

Dell’Oro Group reports provide more in depth findings on Campus Networks – Wired and Wireless reportEthernet Switch – Campus report, and Wireless LAN report.

We see 802.11ax driving the continual growth and expansion of NBASE-T adoption in a vast range of markets. From the high end to the low end of the market, there is a broader range of product offerings happening in a shorter time frame than with most previous technologies. Across the industry, NBASE-T technology is clearly powering a major inflection point in campus networking.

Last week, Dell’Oro Group hosted a webinar with the NBASE-T Alliance about recent Campus Network updates.  Spearheaded by users’ need for mobile connectivity everywhere, wireless LAN deployments are heralding in NBASE-T, particularly with the availability of the newest 802.11ax access points. Yet early indicators reveal that 802.11ax adoption is not following historic patterns.

Three disruptions are unfolding:

  • 802.11ax access points will have an amplified impact on the Ethernet network as they connect into the Ethernet network with two ports rather than the traditional one port. One of the Ethernet ports will be either 2.5 Gbps or 5.0 Gbps. This will have a cascading effect through the network.
  • The price premium for 802.11ax will be significantly lower than previous technologies. This suggests that adoption may be faster.
  • China may not lag adoption.

Enterprise class 802.11ax access points with NBASE-T shift wireless LAN from being cannibalistic to Ethernet Switch market sales

The rate of migration of enterprise users away from desktop PCs to laptop and/or tablets has slowed. Some applications and functions, such as CADCAM, and laboratory work are most efficient on desktop PCs. Annual desktop PC shipments appear to be stabilizing.

Most Wireless LAN deployments now expand, rather than replace, the Ethernet network. Through our end-user interviews, Dell’Oro Group learned that the majority of wireless LAN deployments are in areas where Ethernet never existed, such as common areas in the Education sector, public areas in government buildings, museums, and shopping malls.

Wireless LAN access points have reached a significant level—annual shipments worldwide are in the tens of thousands of units—and they all need to connect to the Ethernet network.  This has driven Ethernet switch port shipments. Previews of 802.11ax access-point configurations indicate that a single port of NBASE-T will be incorporated at all price points, from the highest end to the lower-mid-range products with one port 5.0 Gbps at the high end and 2.5 Gbps into the lower-mid-range products.  We estimate that these segments capture approximately 50% of the market volume.  1 Gbps Ethernet will be the secondary port on high- and-mid-range product, and will dominate the low-end access points.

Wireless LAN will become an accelerator

As wireless LAN access points connect into the network at 2.5-and-5.0 Gbps, switches in the next layer of aggregation will likely need to be replaced with higher speeds.  This will cause a cascade effect through the network.  NBASE-T currently commands a price premium over 1 Gbps, which will have an accelerating effect on switch sales.

The penetration rate of 802.11ax will be much faster than previous technologies

Manufacturers are launching mid-range to lower-range 802.11ax products in addition to high-end.  This contrasts with the product launch plans of previous technologies such as 802.11ac and 802.11n.  The implications are much wider range of products will be available and price sensitive users will enter the market sooner.  The price premium will be lower on the 802.11ax technology vs. 802.11ac.  As a result, we predict 802.11ax will have a faster market penetration.

In our next blog, we’ll continue to explore another disruption – China may not lag adoption.

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The Huawei Connect 2018 was held in Shanghai on October 10 to 12 and over 20,000 attendees from different countries were at this event. It was a fascinating week led by Huawei key leaders sharing their Artificial Intelligence (AI) strategy along with its vision of an AI powered intelligent world.  For this event, I was looking forward to seeing how Huawei is transforming itself from primarily a provider of IT hardware solutions, to a provider of full-stack cloud services and applications.

Given that my interest lies in the areas of compute, server network connectivity, and cloud data center infrastructure, here are my main takeaways from the event:

AI Chips: Huawei launched the Ascend 910 and Ascend 310 at Huawei Connect 2018, aimed at accelerating AI workloads. The Ascend 910 is designed for the core data center, whereas the Ascend 310 is suitable for low-power edge computing. Both chips are designed by Hisilicon, a company owned by Huawei.  The Ascend announcement is groundbreaking because this is a rare instance in which a manufacturer is able to launch a viable alternative to accelerated processors, such as the GPU from NVidia, or FPGA from Intel or Xilinx, for AI workloads. Google, through its huge engineering resources, have also deployed its own accelerated processor, called the TPU, in its data centers. However, Huawei claims that a cluster of Ascend 910 can even outperform a comparable pod of TPU3, by a factor of 2.5X in floating point operations. More importantly, this is the first time in which a Chinese manufacturer has developed a seemingly competitive accelerated processor, and is aligned with China’s long-term goal of becoming self-reliant in the IT hardware market.  I believe the inclusion of another silicon vendor for accelerated chip sets, especially a foreign one, will drive additional innovation and adoption for AI technologies.

Smart NIC: Huawei announced a Smart NIC with an ASIC, also powered by Hisilicon, for applications such as offloading TCP/IP from the CPU. Initially this Smart NIC will likely be deployed in Huawei’s own cloud servers, but could eventually be sold alongside Huawei’s compute and storage portfolio to Huawei’s enterprise customers.  The Smart NIC market started to heat up in 2018 with no fewer than six major network adapter vendors, such as Intel, Broadcom, Mellanox, announcing or qualifying new products.  Smart NIC deployment is currently still fragmented and limited only to several hyperscalers.  I question whether or not the benefits Smart NICs could outweigh its high price premium and power consumption, which are factors inhibiting more wide-spread deployment of Smart NICs in the data center. However, Huawei’s vertical integration efforts might justify the economics of deploying Smart NIC in its cloud data centers.

Cloud Infrastructure: Huawei has been ramping and advancing its infrastructure to better compete against other public cloud providers, such as Alibaba Cloud. Currently, Huawei operates data centers worldwide, and is in the process of developing state-of-art modular data centers with redundant availability zones, and to optimize utilization and improve efficiencies.  In terms of absolute scale, Huawei has a long ways to go before catching up to other hyperscalers in terms of capacity.  However, I believe that Huawei is in a strong position to grow its public cloud business given the company’s penetration in enterprise accounts, and the only vendor to have an integrated cloud platform, from accelerated processors, to a global network of cloud data centers.

While the adoption of AI technologies is still nascent, its growth has been explosive with numerous potential applications that could change our daily lives.  Smart NIC is another area in which I am closely tracking.  It remains to be seen whether or not Huawei’s internal development of its Smart NIC will pay off and drive a strong use case.  For the next Huawei Connect event, I am looking forward to advances in the development and deployment of Huawei’s own silicon solutions in the fabric of Huawei’s future generation of data centers.

To learn more about my current market research coverage:

Read articles Baron Fung has written or been featured in…

I attended the MEF18 conference this week in Los Angeles and had the opportunity to meet and interact with key industry stakeholders and experts.  I was also a judge for the 2018 MEF Awards.  This year, MEF announced the availability of a draft technical specification for SD-WAN service standardization. Through my SD-WAN market research, I have seen the SD-WAN ecosystem expand so rapidly over the past several years. On one hand, SD-WAN’s popularity is driving great innovation, but on the other hand, it is creating an overcrowded and confusing market place. It is good to see MEF getting behind SD-WAN service standardization, as this is the type of work needed to smooth out the challenges of deploying SD-WAN services and to accelerate the service adoption. There is a lot of work to be done on SD-WAN service standards, but we will be watching the progress with great interest.

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On Tuesday, June 26, I presented a webinar introducing the 802.3bt™ Power over Ethernet (PoE), hosted by Dell’Oro Group and Ethernet Alliance.  Chad Jones with Cisco and David Tremblay with HPE were my partner speakers at this webinar.

PoE has already become the go-to for devices requiring low-voltage power. Coupled with emerging Internet of Things (IoT) devices like security cameras, medical devices, LED lighting, and more, the PoE application space is booming. With the ratification of IEEE 802.3.bt™ getting closer, the “Introducing IEEE 802.3bt™ Power over Ethernet” Webinar offers clarity on what to expect from this innovative technology.

To recap this webinar, we talked about:

  • What is Power Over Ethernet?
  • What are the different classes and types and how they all work together?
  • What are the different applications and devices driving PoE requirement?
  • How big is the PoE market opportunity from a device perspective?
  • How big is the PoE market opportunity from a switching perspective?
  • How many PoE switch ports do we expect over the next five years?
  • What are the new PoE requirements of new devices and how are the PoE requirements of traditional devices changing?
  • What are the new features and the new power levels of IEEE 802.3bt™?
  • Importance of interoperability testing and certification

Need a refresher?  Missed the webinar?  Click this link to watch the webinar recording.

I hope you can find this webinar valuable to you and get a lot out of it.