Martin Hingley's Blog

There’s no question in my mind that we’re in the middle of a network war. It’s been caused by a number of factors. In particular:

• Cisco has a significant lead in the equipment market – especially for core switches. As the recession has made all suppliers more competitive Cisco launched its Unified Computing System (UCS) to attack the server suppliers. They reacted by investing in stronger network equipment strategies.
• The ITC down turn has badly affected all hardware. We seen a major decline in the networking area, especially as these devices are sold to business and enterprise customers. I estimate that the equipment market was down 11% for the year to the end of September in comparison with the previous year (see Figure 1).
• Because most players are very small in comparison with the market leader they have been acquisition targets for the systems suppliers. HP’s proposed acquisition of 3Com is perhaps just the first of a number of similar moves by systems companies looking to expand in this area.

Historically high revenue growth rates in the network area have made it even harder for suppliers to adjust to declining sales in the last year. I’ve shown the quarterly growth rates for a number of suppliers in Figure 2. The two companies beating the market are Brocade (which is very small) and Huawei, which interestingly is based in China. HP indicates that the joint venture between Huawei and 3Com will give them better access to this relatively immature market.

What Are They Key Network Armies Doing?

I’m going to write more about a number of these players over time – mainly because networking is an essential component of the development of modern data centres and is a necessary backbone for Cloud Computing. They have been some interesting developments. In particular:

• Cisco’s launch of its UCS products in March was a shot over the bows of the system vendors. It demonstrated the company’s intention to compete for the first time in the server market and has made most decide to update their approach to networking – an area previously de-emphasised. It has also decided to partner with EMC and its subsidiary VMWare to form Acadia, which will help in the development of data centre Virtualisation.
• HP enhanced its Procurve offerings by buying Colubris Networks in August 2008. However its network devices mainly are for edge applications; it currently lacks core networking equipment. As a result almost all large HP server sites use Cisco products. These include HP Enterprise Services (ex-EDS), which must be one of Cisco’s largest customers. Hardly surprising, therefore, that HP has decided to buy 3Com, which has core switches.
• IBM has reacted by firming up its network offerings, which it provides through partnership. It has OEM agreements with Brocade and Juniper networks and a reseller partnership with Cisco. There are no signs yet that it wants to design and manufacture its own switches, although I wouldn’t be surprised if it decided to in the future.
• Fujitsu (like IBM) has a strategic alliance with Cisco and will (no doubt) add it to its ‘Tight Alliance’ plans to join NetApp (se my recent coverage).

Other server vendors are no doubt deciding whether to join the battle or continue in a co-existence strategy. Whatever they decide, it looks as if the networking area is going to be very interesting to watch for the foreseeable future.

Filed under: Enterprise/Consumer, Networking, Service Provider Tagged: | 3Com, Acadia, Alcatel Lucent, Brocade, Cisco, Colubris, EMC, Fujitsu, HP, Huawei, IBM, Juniper Networks, UCS, Vmware