UPDATED 14:16 EDT / MARCH 26 2014

Time for telcos to evolve data centers | #ONS2014

Brad Casemore, IDC, #ONS2014, #theCUBE interviewsOpen Networking Summit 2014 (#ONS2014) was quite a successful event for an often overlooked sector of a rapidly evolving industry. The landmark show for software-defined networking (SDN), #ONS2014 is definitely underrated, and the amount of attention squarely focused on networking proves an exciting time for technology. SDN is an architectural model above all, and ONS2014 was the melting pot. From IDC, theCUBE welcomed Nav Chander, Research Manager and Brad Casemore, Research Director,  joining Stu Miniman to share their analyst views on the event, current happenings and projections in the networking space.

“We’re seeing a tremendous disparity in how the market is reacting. For instance, this all started, look at the board of directors here at the ONF, it all started with hyperscale. And it’s working its way through to very large cloud service providers and then of course the largest players in the financial services who from a data center standpoint look a lot like hyperscale. You’ve got guys like Goldman Sachs for instance, and Fidelity. They’re data centers, they’ve got more than one data center and they’re building scale-out data centers to support their application workloads in SDN,” said Casemore.

Telcos in particular was a hot topic. The large telco companies are being forced into massive mindset changes and are being forced to rethink operations because of the SDN. NTT and AT&T are two of the large telcos that are early adopters in completely reworking their operational expenditures (opex). AT&T for example, is going to revamp their entire procurement process, which is a $20 billion a year capital expenditure (capex).

Chander had this to say about capex and opex for telcos:

“We’ll probably see next year, even 5 percent of that capex ($20B) really get impacted. One of the things that a lot of people don’t realize is the biggest cost is really in their opex. What John pointed out from AT&T and NTT are both focusing a lot on also opex so trying to do everything at once isn’t going to happen over night.”

For most telcos, opex is between 60-80 percent of overall budget, according to Chander. The first change to capex savings is going to come from virtualizing the network. Building virtual appliance x86s is where the industry wants to go, and how network functions virtualization (NFV) will disrupt telcos operating budgets. The transition will happen in small steps though. Chander and Casemore agreed that overall impact to telcos capex isn’t going to get big until we see innovations from the companies that were attending or presenting at #ONS2014. Open source, programmability, SDN, and NFV are the enablers.

To steal words from Chander, It’s all about programmable networks and open APIs.

“It was very interesting to see some of the vendors and to hear some of the Telcos talking about this issue, Nav covers this full-time, but I’m fascinated that how much of this has come from the pressure that they’ve seen from the OTT cloud service providers. There’s a lot of higher value services, the Amazon’s, the Google’s, the Facebook’s are providing and telcos realize that if they don’t make a move and begin to adopt some similar technologies and processes then they could lose this opportunity for good. And I think it’s a significant impedance for them,” said Casemore.

 

What happens in the enterprise as workloads move to the cloud?

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Nav Chandler, IDC, #ONS2014, #theCUBE, #theCUBE interviews

A big question posed by Miniman to the two guests from the IDC is, what happens in the enterprise as workloads move to the cloud? They believe that silos will persist for years, as vendors are slow to change. However with more applications that are built the more workloads will be moved to the cloud.

Casemore offered some context, saying, “As enterprise move to the private cloud they have to rethink how they deliver their applications they move to things like orchestration and then they look at how their infrastructure aligns with that. Once that happens the silos break down. In some enterprises that will take a long time.”

Google, Facebook, Microsoft, Amazon … they’re all data centers. Telco’s are going to have to learn to fail like a start-up, and fail fast. They have a lot of catching up to do, as they’re far behind the other players. Service providers are going to have to change their cultures, and Chander even gave an example how AT&T’s Senior Executive Vice President John Donovan made multiple recruiting pitches at Mobile World Congress 2014 #MWC2014 just prior to #ONS2014.

Market indicators to watch for the next 6 to 12 months

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Miniman got both gentlemen to give some market expectations for the next year. Casemore lead off by saying that we’ll continue to see network professionals expand their skill sets. From virtualization to server side automation tools and even architectural skills in the cloud … software might not be eating the world, but it’s certainly recasting it.

Chander focused on telcos every-changing role in technology. There isn’t a silver bullet for telcos either. Some, like Verizon, are building out data centers. Others are wanting to be over-the-top (OTT) and use existing infrastructure. In both cases, Chander says we’re going to see lots of partnering between content providers. He gave some examples too: Comcast and Netflix, Deutsche Telekom and Spotify in Europe, and Cisco with Amazon Web Services (AWS) for virtual private networks (VPNs).

A good indicator for the network market is to follow the customer acquisition rate of those involved, both big and small. The size of the company, what they do, how many different vertical markets are they in — again, there is no silver bullet. The IDC, by way of Casemore and Chander, doesn’t expect this to be an eventful year, but more like a bridge year. Bigger developments are coming, so hold onto your horses.


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