Techaisle Blog

The Quotes

In a recent Techaisle depth-interview, the CIO of a Network Dependent (Techaisle’s proprietary Segmentation) Mid-Market business with 950 employees, 110 servers, 50 percent of servers virtualized, said, “Yes, I have heard about SDN. It’s a service where the architecture can be dynamically reconfigured or driven by a software personality layer as opposed to being hard-wired. Yes, we are planning to invest in it. Today the trend is towards intelligent networking. Software defined networking is something that can be used to automatically handle the traffic in the network. So, we can expect reduced costs from this type of a service. Brocade and Cisco are the two companies that have good solutions about these services.”

Although the awareness starts to fall rapidly for lower employee sized businesses Software Defined Networking (SDN) holds promise within the SMB and Mid-market business segments.

The IT Manager of a 70 employee size business with 4 servers using cloud, virtualization and managed services belonging to Network Increases Efficiency segment (Techaisle proprietary networking segmentation) said in another depth interview, “Yes, I have heard about SDN. I think it probably has an advantage of being much more flexible because of the different approaches that it has to dynamic network management. It has certain development tools that can be used to operate different network services. We, first of all need to investigate more about this technology and then see how well it fits in our infrastructure and only after we find enough information of it fitting the bill, should we implement it.”

The Opportunity

Techaisle’s research finds that 3 percent of small businesses and 11 percent of mid-market businesses globally have heard about Software Defined Networks. In the US the awareness jumps to 19 percent among mid-market businesses. SMBs that have some knowledge about SDNs, exhibit enhanced interest to adopt them in next 12-18 months with the objective of reducing their network related CAPEXs and managing their growth in cloud, mobility, big data technology usages.

Techaisle’s market sizing estimates that the SMB market for SDN will be US$204 million in 2016 growing at CAGR of nearly 81 percent. The market could open up more once the awareness and use cases increase.

The Concept

Software-defined networking (SDN) is a new approach to building computer networks that separates and abstracts the underlying networking elements thereby making the network more agile. SDN allows system administrators to quickly provision and program network connections on the fly instead of manually configuring policies. Administrators have programmable central control of network traffic without requiring physical access to the network's hardware devices.  Some even call this 'virtualizing the network', in the sense that each individual hardware switch may be part of multiple Layer 2 and Layer 3 networks and have its configuration and traffic management policies dynamically changed by the master network controller.

The Strides Made

Most of the large IT vendors have made very strong commitments to providing SDN solutions. Prominent among the larger IT vendors are:

• Avaya with its Application Development Network (ADN)

 

• Brocade with its Vyatta acquisition

 

• Cisco with its Open Network Environment (ONE) and Cariden acquisition and funding of Insiemi

 

• Dell with its Virtual Network Architecture (VNA)

 

• HP with its Virtual Application Networks (VAN)

 

• IBM with its Distributed Overlay Virtual Ethernet (DOVE)

 

• Juniper with its Contrail Systems acquisition

 

• VMware with its Nicira acquisition

Then there is OpenFlow, closely associated with SDN, an industry consortium of about 70 members, much like the Wi-Fi Alliance, a non-profit group that oversees development of the OpenFlow protocol. Both Google and Facebook have adopted OpenFlow (ONF) protocol within their data center operations. And most of the new switches from networking vendors like Arista, Brocade, Dell/Force10, Extreme, Huawei, HP, IBM, Juniper, NEC, and Pronto are OpenFlow compatible.

‘OpenDaylight’ Project which includes Big Switch Networks, Brocade, Cisco, Citrix, Ericsson, IBM, Juniper Networks, Microsoft, Red Hat, NEC and VMware, aims to provide an open-source software-defined-networking (SDN) controller, with vendor-agnostic interfaces thereby accelerating innovation around the SDN controller itself.

All of the above points to tremendous jostling for leadership roles and confusion in the market place. In spite of the confusion, SDN will continue to gain acceptance as enterprises will develop proof of concepts and the market itself will shake out the true leaders in the next 3-4 years.

The Promise for SMBs

SDN is ideally suited for the SMB segment with its promise of reducing complexity, costs and management along with easing implementation of cloud, mobility, social and big data connectivity.

Specifically within the mid-market segment, SDN will begin to pop-up in conversations among CIOs and IT Directors when they find their businesses faced with:

• Increased public and private Cloud adoption

 

• Network's inability to provide flexibility required to support virtualization, cloud, and mobility

 

• Inefficient network and traffic management with the explosion of devices, worker locations and applications

 

• Deployment of ultra-low latency networks to effect real-time transactions especially for the financial services vertical and those working on big data analytics

Announcement from HP

However, it must be said, that SMBs will look for product solutions with embedded SDN. We are already starting to see some solutions for the SMB market segment along the same lines. A new BYOD solution bundle was announced at HP’s recent Global Partner Conference. The solution includes end-to-end management software, switches with integrated wired and wireless capabilities, and is extended with a software-defined security solution. Ever bullish on the SMB market, HP believes this is an easily deployable, complete solution for a small to medium sized-business, very cost-effective and that provides investment protection with free switch software upgrades for OpenFlow support. Not only does it mean lower capex, but also less maintenance and less complexity.

Indeed, there’s a viable play for SDN for SMBs. A perfect use case could include implementation of virtual routed network on hypervisors, a web-based unified management application for provisioning, monitoring and control of the entire distributed network.

Technology complexity is continuing to increase for SMBs. And Techaisle is finding that majority of SMBs are required to re-architect and re-configure their networks to make a move to cloud or virtualization. Most of these SMBs take external assistance either from an IT Consultant or their channel partner. Nevertheless, they all have one refrain that reconfiguration is extremely complex, time-consuming and resource intensive.

Final Remarks

SDN is yet very complex even for the most cutting edge and aggressive technology adopter SMBs. It requires tools and structures that are still evolving. Managed services was introduced into the market several years ago but the RMM, PSA and other tools are still being refined so one should not expect the channels or the SMBs to jump onto SDN immediately.



There will be a lag between the enterprise and the SMB adopters. However, once products are available with SDN capabilities, SMBs will adopt SDN faster than enterprises. The SMBs that have virtualized their servers and storage will be the early adopters. Looking at potential savings SDN will a difficult opportunity to pass up on by the SMBs.

One of the areas we watch most is the evolving needs of the SMB customer, who is being consistently pressured to speed up all core business processes while simultaneously reducing costs, generally  through the introduction of new technologies and specifically by adopting Cloud Computing approaches.

Looking Forward to SDN and SDDC  

Among Mid-Market companies (between 500 and 999 employees) recently interviewed, over 75% described their business being completely “Network Dependent” with a large share planning to move beyond Virtualization to Software-Defined-Networking (SDN) and Software-Defined-Data-Centers (SDDC).  Almost all had implemented Remote Managed Services (RMS), Cloud Computing, and Server Virtualization or VDI.

“Yes, I have heard about it (SDN) and we even tested it on one of our servers. We can get the software easily but we need to get proper hardware implementation as well and that too keeping our costs in control. So, both the things need to be evaluated. Yes, probably we would be investing in it, in the coming future. There are many things that are a concern for us right now, like cost, space and efficiency. So we need things that could help us in these areas.” - 900 Employee SMB IT Decision Maker

Mid-Market Reliance on Outsouced  IT Support

As we have written in the past, the larger SMB customers are more likely to rely on channel partners or vendor direct relationships to free up lean SMB IT departments and allow them to do more with less by supporting the research and selection process, and then testing and implementing the solutions, especially for those solutions involving a high level of configuration and remote management capabilities. The speed that specialists bring to the configuration, testing and implementation tend to outweigh the costs and speed up the decision cycle.

“Yes, the channel partners had a huge role. I sat down with their Cisco engineers and we looked over the changes we were going to make, then we did put together a business case, as to why we needed to upgrade or make changes to the system and what benefit it would result in. They were helpful and they made things look easier for us.” - 750 Employee SMB IT Decision Maker

New Functionality is driving Adoption

As we move into the Late Majority of SMB Cloud Adopters, there is less perceived risk and enough pressure to move companies toward implementing the architecture, if only to remain competitive.

"Now there are products available with better features and are cost effective. Earlier the cost of moving to the cloud was higher. Now because of the tough competition, the costs have marginally decreased. So, these things are enticing to look at different solutions. When we moved on to the cloud there were various benefits like cost effectiveness, in terms of IT management perspective. Previously it required 10 people, but now it can be done with 2 people. Previously the concept of datacenters was not that…important…, but now people are getting rid of the existing hardware and are moving towards datacenters to host most of their things that are in their offices. The datacenter costs are also competitive. If we look at any datacenter today and what they used to offer 5 years back, there has been a significant drop in prices due to the competition in the market.” - 500 Employee SMB IT Decision Maker

Budgets Continue to be Tight

We also see a significant effort on the part of customers to extend the life of the existing equipment and upgrade only the parts that are needed to achieve specific objectives such as 10GB capacity, which may require more robust firewalls, routers and switches, especially in those moving to VOIP. Typically we saw a reluctance to spend until it was necessary.

“Management here is very price conscious; they did not see the value of doing these things in the first place. The major factors were to increase speed and the reach of the network. So by these upgrades, we were able to demonstrate increased speed and increased network segmentation.” - 750 Employee SMB IT Decision Maker

Brand Importance Increases with Size of Company

While in certain areas such as SaaS, SMB end customers tend to be less likely to consider Brand as the key decision criterion, in the area of Networking among Mid-Market firms, virtually all said Brand was very important in their decision, mostly because of the expected service level associated with larger vendors but also to provide cover in a crowded market:

"There are a thousand solutions available in the market, but we had to ensure that what we chose was the best solution available and were cost effective. The new technology and the need to expand our business base were the main factors that drove the change.” - 900 Employee SMB IT Decision Maker

“Brand perception is very important because the management is not very technology minded, so to have a big name like Cisco was important to them. We depend on our channel partners for networking support or for help with windows server and Citrix products. They are our trusted partners.” - ~1,000 Employee SMB IT Decision Maker

Re-enforcing this tendency to Brand, the majors in the market were cited repeatedly as go-to Vendors. Cisco got the most mentions by far, followed by Citrix, Microsoft, HP, Juniper and Dell. As seen in the quote on outsourced support above, the vendors can also help in creating a business case.

“Well, I guess some of the ones (increase share) would be Cisco, HP, Dell and Microsoft. The major ones I know are trying to get there, if they are not close. It’s very hard to say who is going to lose much (share), but probably Microsoft or Apple are going to lose some. ~800 Employee SMB IT Decision Maker

We believe these attitudes represent some evolution that is becoming more pronounced as the market matures and intelligent networking becomes increasingly important to SMBs in general and Mid-Market companies in particular.

Announcement

Cisco has announced a new Cloud and Managed Services Program (CMSP) that integrates its currently existing Cloud Provider, Cloud Services and Managed Services Channel Programs (MSCP) into one. Besides streamlining incentives, discounts and payments for its partners, the program also aims to simplify pricing for Cisco-based cloud and managed services offerings. The program will also enable collaboration and sharing of complementary opportunities between partners through a microsite via Cisco’s partner portal. All partners are expected to transition to the CMSP by August 2013.

Techaisle Take

We believe that with one master move Cisco is strategically addressing the US$94 billion global SMB opportunity by 2016.

Techaisle’s global channel surveys have shown that Cloud, Mobility, and Managed Services Solutions together are changing the SMB channel landscape as these solutions are revolutionizing IT utilization by SMBs. The new paradigm would be the "3-in-1" Channels offering Mobility, Cloud, and Managed Services as a single offering. We first wrote about the 3-in-1 channel here. And now Virtualization is quickly becoming a potent arsenal in the SMB channel partners offerings.

Techaisle’s corresponding SMB research has consistently shown that SMBs want mostly integrated solutions to limit complexity and therefore seek partners that are capable of such deliverables but very few partners currently do so as they are all camped in either one or two solution corners and few seem to embrace a holistic solution view - and this is making SMBs unsure of overall benefits and desire to spend.

With its current announcement Cisco is removing some of the barriers by bringing channel partners serving managed services and cloud needs of SMBs under a common cluster. Since many SMBs want to obtain all services from a single provider, it is important for broad product/solution vendors to evaluate all their partners, seek and cluster partners based on where they are with regards to capabilities of delivering complete solutions and introduce programs to support development. As the dividing line between cloud and managed services is becoming thin, Cisco has just done it, that is, created a single program that should:

• Enable channels to build more dynamic and serious partner-to-partner collaboration to collectively address complementary opportunities


• Enable Cisco partners to add capabilities, such as, managed services to an existing cloud services


• Attract newer partners to join Cisco program


• Help current channel partners qualify and move up Cisco’s channel partner pyramid

The data on the right from Techaisle’s channel study (N=2851) shows that channels that serve the SMB segment are keen to offer multiple services that straddle cloud and managed services. Cisco’s new program should open up opportunity for its channel partners to offer both cloud and managed services using Cisco platforms.

If we look at the survey data at micro-level, we find that is a higher percentage of Channel Partners that are offering some type of Managed Services Solutions than they are offering Mobility Solutions or even Cloud Computing. The channels falling in the green columns will benefit immediately, those in the blue columns will find the program attractive but those within the red columns in the chart would be of immense importance.

It is clear that Managed Services has been the most important offering for Channel Partners, as they evolved from a typical value added channel to offering break-fix services and remote managed services.



The path being chosen by Channels to move from one offering to the next is strongly dependent upon their current offering. Those that are in the mobility space are moving to cloud, while those in the cloud are moving to managed services.

Understanding the channel dynamics and current offerings gives clues in the direction they will move. For those that are offering only one of the services there is a clear path to adding services. In fact Techaisle survey shows that the channels have chosen their path of selection.

Channels are also interested in offering mobility solutions, however, it is also clear that mobility has become possible due to cloud and managed services allowing employees to work from anywhere, anytime and from any device.

 

The responsibility now lies with both the channel partners and Cisco to make the program a success. However, there some other steps that Cisco needs to take as well.

• Extend the reach of its Smart Care to cover cloud based services


• Develop capabilities that not only work with Cisco's networking devices but also with client devices. Although it must be said that Cisco is addressing some of those needs through its partnerships with other vendors


• Further the agenda on not only BYOD but also just BYO


• Market the program aggressively. Channel partners are being courted and trained by many other vendors


• Use the program to establish a strong presence in the datacenter space

With the latest move, Cisco may have begun to shift the tide in its favor more decisively.

Anurag Agrawal
Techaisle

While unveiling a very lucid product and service strategy today, Citrix announced several significant products and alliances that fill gaps in the SMB Cloud Computing marketplace. These include:

• An expanded Me@Work mobile applications suite, with new and improved apps,
• A strategic alliance with Microsoft to distribute Windows and Office365 as Cloud Services through XenDesktop,
• A VDI-embedded and secure Ultrabook Client,
• Next generation Gateway and next generation cross-cloud bridge,
• A certified cloud platform developed in collaboration with Apache CloudStack,
• Improvements to the NetScaler line.

And the most consequential announcement of the day - a wide and deep strategic alliance with Cisco that if well executed, will offer a true 1+1=3 result for both sides and have a major impact in the industry.

As the Cloud matures, Techaisle believes that integration is key and the market will coalesce around virtual versions of the client and server concepts – with communication at the core of the client suite and a collaborative, front office multi-user suite in the middle of the Server environment. With today’s announcements, Citrix moves us closer to this concept.

We will focus on three of the announcements with a point of view on how we consider them to be both strategic and timely, and finish up with huge potential impact of the slew of new alliance announcements.

Part of the achieving the vision is to ensure collaboration is possible across all hardware environments, that application objects can be executed regardless of proprietary operating systems and formats. By supporting all the formats shown here through their Receiver, Citrix already enables apps and data on three billion devices, which is expected to grow to ten billion in the next five years – Like many Korean manufacturers, Citrix is thinking in terms of screens, and knows that consumers are driving adoption of connected screens as part of the lifestyle – my teenage daughter has a MacBook, iPhone, and Satellite TV running all at the same time, each screen running multiple applications. When selecting a workplace, surveys show this generation would rather give up a more lucrative employment opportunity than give up their devices or right to use social media. As Kevin Kelly observed in his visionary work, New Rules of the New Economy, back in 1998:

“Because communication—which in the end is what the digital technology
and media are all about—is not just a sector of the economy. Communication is the economy.”
- Kevin Kelly, New Rules for the New Economy, 1998

We could not agree more, and the ME@Work announcement shows Citrix is taking the long view.

The ME@Work mobile app suite includes several productivity and collaborative applications, including the #1 web-conferencing solution, GoToMeeting. We found it interesting that Citrix is simultaneously introducing some competitive products in conjunction with the partnership; an email client – most important component of the collaborative desktop – as well as strong offers in file sharing, personal collaboration, and web conferencing. It is a bold move; for those of us who have been watching the industry for a while,  we remember when there was a triumvirate – Windows, Intel and Novell - and then there was NT with OS-embedded LAN capabilities - and then there were two. And then Netscape came out swinging with a better web browser that seriously pressured Microsoft - and then there was Windows-embedded Explorer - and then there was one.

But Microsoft gets a lot out of these announcements, especially if execution can follow strategy. Microsoft revenue is over 25 times that of Citrix, but they can use the excitement brought by a fast-growing, deeply technical, and cloud-focused next-generation partner. Especially in the SMB space - the 100-249 & 500-999 segments of the mid-market are a real sweet spot for this partnership.

By partnering with Microsoft to bring Windows, Office365 and the SkyDrive to market, Citrix benefits from the practically ubiquitous Windows installed base and opportunity for widespread adoption of Office365, (which we expect to have a banner year in 2013). And access to the most mature global software distribution ecosystem in the world. Microsoft gains an ally that provides substantial support and momentum against Google Apps, a catalyst to move away from packaged software,  additional credibility in collaboration, and adds 10,000 channel partners at the same time.

The Ultrabook client is a strategic offer because it supports the tide of BYOD and it is another route to market for XenDesktop VDI. It also aligns Citrix with Intel and the major OEMs who are looking for returns on large investments in the Ultrabook line.

While the Microsoft news is a big deal, the even larger news was a strategic alliance with Cisco that involves major commitments of joint R&D, integration of product lines and joint manufacturing in the future. Key Points:

Citrix and Cisco announced broad cooperation in three major areas: Mobile WorkStyles, Cloud Orchestration and Cloud Networking.

Mobile WorkStyles
The big idea here is any data on any device (the billions of screens mentioned above) to support the growing BYOD wave, and leveraging joint strengths to deliver a unified secure environment for applications, data, voice and collaboration. Cisco contributes Jabber and substantial collaboration expertise gained from the Webex acquisition, Virtual Experience Infrastructure (VXI) technology, and MediaNet Technology. For Mobile WorkStyles, Citrix brings a new and improved CloudGateway and Receiver, a new and improved ShareFile service and XenApp & XenDesktop. The alliance aims to bring a richer experience with seamless security and a leveraged support infrastructure than covers the entire stack 24x7 on a global basis.

From a business perspective, Citrix can ride on the back of the 800 pound gorilla straight into the Enterprise, leveraging the industrial-strength performance of Cisco’s premium product lines at a reduced price point. As with Microsoft, Citrix is aligning itself with an old-guard industry titan, in this case, one whose revenue is 16 times that of Citrix. And as with Microsoft, the deal looks like a win for both sides. Our opinion is that it could help revitalize Cisco, whose foray in to software based business created some great products in Webex, but the model was different enough to shake them up. We continue to write on the rise of the digital channel at the expense of a traditional HW VAR Channel. When Cisco acquired Webex they entered a software-based, inbound sales, price sensitive, online-marketed, sold and delivered, six-week sales cycle, user-configured business model that was almost the antithesis of what they were best at: premium quality enterprise hardware-based solutions that are differentiated by making the value of the whole network exceed the sum of its’ parts - sold by an enterprise sales force and delivered by top shelf VARs and SIs. Especially within SMBs, the right combination of price and SLA to solve business, not technical problems, are overriding criteria when buying, and traditional hands-on VARs might not even be called - cut out by online marketing and inbound sales teams. In hardware, it is more about scale economies, quality engineering and brand management - software is all about market share and developing accelerating returns and an ecosystem of fellow travelers.

Cloud Orchestration
The second key area of cooperation is in what is being called Cloud Orchestration, where the objective is to manage the traditional data center functions of computing, network, storage, security, and management, delivered across physical, virtual and cloud environments using Unified Computing, Unified Management and Unified Fabric. This is clearly Cisco’s home territory and they bring expertise and technology including Unified Computing System (UCS), Open Network Environment (ONE) and the Nexus Series of switch technologies to bear on these challenges. Citrix contributes the newest CloudPlatform, a new open source CloudStack and the XenServer to this effort. Using Cloud Orchestration, the alliance aims to deploy Public, Private and Hybrid Cloud environments with unified management that reduces complexity and improves agility, something SMB customers will be happy to see. Embracing Open Source is also a good move for Citrix to increase the footprint.

Cloud Networking
The third leg of the alliance is centered on the Citrix NetScaler Cloud Networking Platform. Here the objective is to adopt NetScaler as the go-to technology and jointly develop the next generation through the alliance. This will be accomplished by offering NetScaler as a strategic component within the Cisco Cloud Network Services Architecture, with seamless integration at the product level in areas including Security and WAN optimization. The order of implementation is that Cisco will adopt, sell and market the NetScaler, it will be manufactured according to a certified Cisco Design specification followed by a joint road-map for product interoperability, development and go-to-market strategy over the long term.

Through these announcements, Citrix has taken several steps to advance Cloud-based services and fill gaps in the market; they have introduced a new channel for Windows and Office365, brought to market their own collaborative suite, and a VDI-embedded client to further the VDI and BYO trends in the SMB space. Other technology announcements were also significant but for reasons of brevity we have not covered them in detail. One thing is for sure - no one can accuse Citrix of being timid. Of course, when snuggling up with the big guys the way they are, Citrix themselves said it best in the announcement: "POs are better than PR". It all falls on execution at this point.