SDN Journal Authors: Liz McMillan, Yeshim Deniz, Elizabeth White, Pat Romanski, TJ Randall

Blog Feed Post

Cisco’s less publicized switching strength

There’s a lot of talk in the switching space about both price (driven by bare metal switching) and capability (spawned from the rise of SDN). Around these topics, there is a lot of conjecture about how the competitive landscape will play out. Some argue about margins and business models. Others talk about the incumbents’ ability to really dedicate themselves to new technology. But it might be something else that really determines how the switching space plays out.

Before I get into the switching landscape, I want to talk a bit about AT&T. For years, people have predicted the demise of the telco giant. AT&T is verifiably slow. New product and technology rollouts are measured in years, while smaller players can be more nimble. The tech giant has a lot of business to protect, so adopting disruption is, in some ways, a form of proactive cannibalism.

But despite all of this, AT&T remains a giant. Why?

One of the most important strengths AT&T has is its customer touch. At the end of the day, regardless of everything else that goes on, AT&T owns the relationship with its customers. The simple fact that AT&T owns the bill that gets paid every month by millions of subscribers is immensely powerful.

In fact, one of the unspoken threats that faces AT&T from all of the over-the-top (OTT) players is the fight over who really owns the customer relationship. If that relationship tilts away from the service provider towards the content provider, for instance, then the interaction with the customer fundamentally changes. If this happens, loyalty shifts from service to content, and the underlying provider becomes a footnote in the overall value chain.

Taking this back to networking, perhaps the most difficult to counter strength that Cisco has in the switching space is the channel. Put simply, Cisco owns the channel. And because so much of the switching equipment goes through the channel, it means Cisco has a virtual monopoly over the customer relationships.

Consider for a moment the importance of the channel in reaching the mass market. It’s not about providing service and support. The real role the channel plays for Cisco is that of a recommendation engine. There are thousands of companies out there who basically outsource their decision-making to resellers. So long as Cisco owns these recommendations, they don’t even need to really play defense in 70% of the market.

So how does this impact the competitive landscape?

We are already starting to see companies align themselves to try to increase their channel presence. A partnership here, a product integration there. But as we look at channel presence, it’s less about technology and product than most of us would like to admit.

Ultimately, the channel will do what is best for the channel. That is to say that partners and resellers will push solutions that allow them to run a successful business. So long as Cisco is the most lucrative sale, their loyalty is strong. The challenge for would-be players in the switch vendor space is not to be better than Cisco from a pure capabilities perspective but from a solution reseller perspective.

This point probably seems fairly obvious, but the implications are significant.

If, for instance, the primary solution play is price, what happens? Well, first we need to understand that everyone is converging on more or less the same hardware. So the price differential between solutions begins to narrow quite a bit. In an environment where margins are under attack, even small markups are important. With this kind of sensitivity, it makes it extremely difficult for channel partners to get their piece of the pie. And if their piece of the pie becomes small relative to the amount of time it takes to close the deal, they are far more likely to prefer the better-paying incumbent solution.

This has the effect of limiting where pure price plays are effective to mostly direct sales engagements. The challenge here is that these direct sales engagements require sales teams, which means growing revenues has a direct dependence on a company’s willingness to invest in sales. If you want to get that kind of non-linear growth, this is a limiter.

That’s not to say that the channel ought to be abandoned because Cisco has it all tied up. But it does mean that using price as a primary differentiator is unlikely to yield the kind of huge growth that most people bake into their business plans.

Vendors need to find another angle in.

The next obvious place to look is at the services and support that surround a solution. If a vendor offers a platform that allows for value-added software to be built around it, the reseller can invest in building that scaffolding and then charge a premium. This is a big part of why SDN and DevOps are so interesting to the channel. They each provide frameworks on top of which resellers can develop and sell.

But those services are only useful if the underlying platform itself is salable. If the platform resembles too closely the incumbent equivalent, the reseller is left trying to justify the risk of change for an upside that might not be immediately obvious. This create sales friction, and that friction favors the incumbent in most cases.

Combining these—the value of a platform play and the need for clear solution delineation—is the best way for vendors to attack the channel and ultimately disrupt the market in a meaningful way. The overall industry climate is already teeming with the former (everyone claims they are building a platform these days). But the latter is in relatively short supply.

SDN has led the industry dialogue towards a general discussion of networking. The challenge is that people don’t buy “networking”, especially not when their primary business is not the network. They buy (and the channel sells) specific solutions to very narrow use cases. For vendors to crack the channel code, it means they need to offer something more specific than a general networking disruptor.

Oddly enough, it would seem that while SDN opens the door to some extent for would-be Cisco killers, it also has moved vendors towards a general-purpose networking value proposition that ultimately strengthens Cisco’s grip on the market.

[Today’s fun fact: The average person laughs 13 times a day. Count it for yourself and report back here.]

The post Cisco’s less publicized switching strength appeared first on Plexxi.

Read the original blog entry...

More Stories By Michael Bushong

The best marketing efforts leverage deep technology understanding with a highly-approachable means of communicating. Plexxi's Vice President of Marketing Michael Bushong has acquired these skills having spent 12 years at Juniper Networks where he led product management, product strategy and product marketing organizations for Juniper's flagship operating system, Junos. Michael spent the last several years at Juniper leading their SDN efforts across both service provider and enterprise markets. Prior to Juniper, Michael spent time at database supplier Sybase, and ASIC design tool companies Synopsis and Magma Design Automation. Michael's undergraduate work at the University of California Berkeley in advanced fluid mechanics and heat transfer lend new meaning to the marketing phrase "This isn't rocket science."

CloudEXPO Stories
Eric Taylor, a former hacker, reveals what he's learned about cybersecurity. Taylor's life as a hacker began when he was just 12 years old and playing video games at home. Russian hackers are notorious for their hacking skills, but one American says he hacked a Russian cyber gang at just 15 years old. The government eventually caught up with Taylor and he pleaded guilty to posting the personal information on the internet, among other charges. Eric Taylor, who went by the nickname Cosmo the God, also posted personal information of celebrities and government officials, including Michelle Obama, former CIA director John Brennan, Kim Kardashian and Tiger Woods. Taylor recently became an advisor to cybersecurity start-up Path which helps companies make sure their websites are properly loading around the globe.
ClaySys Technologies is one of the leading application platform products in the ‘No-code' or ‘Metadata Driven' software business application development space. The company was founded to create a modern technology platform that addressed the core pain points related to the traditional software application development architecture. The founding team of ClaySys Technologies come from a legacy of creating and developing line of business software applications for large enterprise clients around the world.
To Really Work for Enterprises, MultiCloud Adoption Requires Far Better and Inclusive Cloud Monitoring and Cost Management … But How? Overwhelmingly, even as enterprises have adopted cloud computing and are expanding to multi-cloud computing, IT leaders remain concerned about how to monitor, manage and control costs across hybrid and multi-cloud deployments. It’s clear that traditional IT monitoring and management approaches, designed after all for on-premises data centers, are falling short in this new hybrid and dynamic environment.
Most modern computer languages embed a lot of metadata in their application. We show how this goldmine of data from a runtime environment like production or staging can be used to increase profits. Adi conceptualized the Crosscode platform after spending over 25 years working for large enterprise companies like HP, Cisco, IBM, UHG and personally experiencing the challenges that prevent companies from quickly making changes to their technology, due to the complexity of their enterprise. An accomplished expert in Enterprise Architecture, Adi has also served as CxO advisor to numerous Fortune executives.
DevOpsSUMMIT at CloudEXPO, to be held June 25-26, 2019 at the Santa Clara Convention Center in Santa Clara, CA – announces that its Call for Papers is open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's largest enterprises – and delivering real results. Among the proven benefits, DevOps is correlated with 20% faster time-to-market, 22% improvement in quality, and 18% reduction in dev and ops costs, according to research firm Vanson-Bourne. It is changing the way IT works, how businesses interact with customers, and how organizations are buying, building, and delivering software.