The Open Networking Summit is a conference that brings together the entire networking ecosystem each year to discuss advances in Software-Defined Networking (SDN) and Network Functions Virtualization (NFV). The fourth annual Open Networking Summit was held March 3-5, 2014 at the Santa Clara Convention Center and Hyatt Regency in the heart of Silicon Valley. theCUBE broadcasted live from the Summit. Wikibon’s Senior Analyst Stu Miniman interviewed IDC Research Manager Nav Chandler and IDC Research Director Brad Casemore.

The three analysts discussed the hot topics at the show and in the networking industry including, of course, SDN and NFV. Minivan started off by asking Chandler what he thought about NFV solutions from a market standpoint. Minivan observed that, in his view, NFV solutions are further along than actual adoption. He asked Chandler if he had any revenue numbers or predictions about NFV market adoption. According to Chandler, NFV adoption will happen more quickly because service providers have formed a standards group and have made significant progress in less than a year and a half. “They’ve actually defined use cases,” Chandler said.

In terms of revenue, Chandler admitted that he thinks none of these applications are hitting the bottom line yet. “But, long term, NFV will have multiple orders of billions of dollars in impact, in terms of value creation for the service providers,” he predicted.

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The landmark SDN show

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Minivan then asked Casemore where he thinks the Open Networking Summit fits in the overall ecosystem of SDN and networking today. Casemore said he thinks it’s the landmark SDN show right now and that it’s a unique show that brings together many different aspects of the industry. “[It covers] telco adoption…cloud adoption,” he said. “There’s more and more discussion of what enterprises of varying sizes—starting with the largest and starting in verticals like financial services—will do with SDN. Of course, the vendors across all those markets are here.”

Chandler observed that the show is a real melting pot. “This conference, you’ve got everyone from [developers] to VCs [to] CEOs here…startups as well as larger companies,” he said. “So…I’m pretty impressed.”

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SDN variation at show

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Minivan asked Casemore for his take on the vendors at the show and what they were offering. Casemore said there’s a lot of variation in terms of the solutions, approaches and architectures showcased regarding SDN. He said SDN is an architectural model and products are then built according to that model—and they vary enormously. “The thing that I would say is that we’re seeing tremendous disparity in how the market is reacting,” Casemore said. “It all started with hyperscale and it’s working its way through to very large cloud service providers and then, of course, the very large players in the financial services who, from a data center standpoint, look a lot like hyperscale.”

Casemore pointed to companies such as Goldman Sachs and Fidelity who have more than one data center and who are building scale-out data centers to support their application workloads.

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NTT and AT&T: Transforming industry

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Miniman and Chandler then discussed AT&T and NTT. NTT is making a big push into many different aspects of SDN and NFV. NTT spent hundreds of millions of dollars on an acquisition in order to get into the NFV market. “Most enterprise companies aren’t going to make an acquisition to take advantage of that,” Minivan observed.

John Donovan, Senior Executive Vice President, Technology and Network Operations at AT&T, delivered one of the show’s keynotes. Chandler said AT&T spends $20 billion a year on CAPEX. “NTT and AT&T are two of the early adopters in the large telcos but [are] taking different strategies,” Chandler said. “AT&T made a significant announcement that they’re going to revamp their whole procurement. That $20 billion CAPEX is not going to be guaranteed to the Ciscos and the Alcatels and Junipers, etc. So I think that’s a significant transformation point in the industry.

“We’ll probably see next year, even five percent of that CAPEX really get impacted. One of the things…that a lot of people don’t realize is that [AT&T’s] biggest cost is really in their OPEX. And what John [Donovan] pointed out [is that] AT&T and NTT are both focusing a lot also on OPEX, so trying to do everything at once is not going to happen overnight.”

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Watch the keynote by John Donovan, Senior Executive Vice President, Technology and Network Operations at AT&T:

 

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Networking’s future: Sans silos

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Miniman said that one of the critiques he’s had about networking for a long time is that it tends to be an isolated silo; it doesn’t necessarily play well with others. He asked Casemore if he sees things changing in networking, if the silos are vanishing. “It’s already happening in the hyperscale world,” Casemore pointed out. “They have a more collaborative approach to IT to how they use technology to the processes to how they build their networks to how they deliver their application workloads and how they develop infrastructure for that.”

The big question, he said, is what will happen in the enterprise when workloads move to the cloud. “I think silos [will] persist in a lot of enterprises for years,” Casemore said. “Certainly there are a great number of vendors who would tell you that and some who will argue otherwise. But there’s no question that…more applications, more workloads [will] move to the cloud. And as enterprises adopt private cloud, they have to rethink how they deliver their applications. Once they rethink how they deliver their applications, they move to things like orchestration and they look at how their infrastructure aligns with that. So once that happens, the silos break down. In some enterprises, it’s going to take a long time.”

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The industry as a hockey game

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Minivan then asked both of them about the state of the industry, likening it to a hockey game. “Is the Zamboni clearing off the ice…[are people] getting into their seats? Are we still in the first period? Or is the game already won and we’re just playing out the clock?”

Some players have been playing the game and continue to play the game, according to Casemore. “So you look at, obviously, Google, Facebook, Microsoft and the data center side, Amazon and those sorts of companies. They’ve been playing this game for a little while,” he said. “And then there [is] a tier of cloud service providers who are still moving forward. Maybe it’s the first period intermission for them but they’ve begun playing the game. And then you’ve got some who are clearly…just getting their skates on and they’re going to [have to basically] try to get a feel for the ice and figure out exactly how far they’re going to play the game. I think it’s very early for some companies.

Chandler commented on the industry, focusing on the telecom space. “This is mind-blowing because, getting all the telecom guys to get together in such a period of time to do NFV and get people to actually develop this—we’re not even…halfway through the first period of a hockey game…there’s a long, long way to go,” he said.

The good news, Chandler said, is that they need to learn how to try and fail. “I think we heard Vinod Khosla [founder of Khosla Ventures, who, in his keynote, discussed SDN as a disruptive innovation and the role of disruptive innovations in the high-tech industry], and some of the other speakers at this conference say, ‘Telcos have to learn how to fail as well as be successful but they have to do it fast.’ Because Google and Facebook…they’re so far ahead that that race, if you’re looking at a marathon, there’s a lot of catching up these guys have to do. And I think the service providers have got to change their culture.”

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Watch the keynote by Vinod Khosla, founder of Khosla Ventures:

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SDN and NFV: The next six to 12 months

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Miniman then asked them what market indicators can people look for to see that this technology is maturing? What should people be looking for over the next six to 12 months? Casemore said that he is going to be watching customer adoption rates, as well as watching the size of companies grow, taking note of what those companies do. He said he expects the adoption rate to grow. “There are various ways that this technology is cut, of course,” Casemore said. “We have network virtualization, we have in the telcos…NFV. We have open source-based SDN, which is what this show is predicated on and the ONF [Open Networking Foundation].

“And we have network desegregation also happening, vendors like Cumulus…Dell’s [adoption of] Cumulus. These are all things that I think we are watching very closely. We expect this to be an eventful year but somewhat of a bridge year, if you will. I think there are bigger developments coming, but this year will be a year of laying some significant groundwork and seeing some inroads made in certain parts of the market. The broader market is still to come.”

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Software is changing the industry

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When looking at the data center, going out a couple of years from now, will networking be a smaller piece of the pie? What will it look like in a couple of years? Will skill sets need to change? Casemore thinks so. He thinks the skill set of network professionals will have to be extended and expanded. “[People are] trying to learn more about virtualization, more about server-side automation tools like Chef and Puppet and CFEngine,” Casemore told Miniman. “They are developing architectural skills, cloud [architecture] skills.

“And I think some of those changes are consistent with some of the changes we’re seeing on the technology side. Obviously, if software will not eat the world, it certainly is recasting it. And I think this is a significant—it’s going to be with us to stay. Software is changing the industry.”

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Telcos’ role in the future

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As for the telcos, Miniman asked Chandler if we will see them playing a much larger role in the future. Miniman asked him whether or not companies should even build another data center? Why not just put everything into the cloud and have the telcos provide the bandwidth? He asked Chandler how this mega trend is impacting the IT space. “Part of my plans this year is to look at the different business models,” Chandler replied. “Because some telcos, like…Verizon or even CenturyLink, say, ‘We’re building out data centers’ and they have made acquisitions. We’ve seen that over the last few years. Other telcos are going to…use other infrastructure and sell services and value.

“And then you have the content itself. So one of the things that I think you’re going to see is a lot of partnering between content providers, like what Comcast did with Netflix, Deutsche Telekom [is] doing in Europe with Spotify (where there’s revenue-sharing deals). I think you’re going to see some very creative models.”

Chandler added that he thinks not all of these telecom service providers are going to survive. He said we’re going see more M&A action over the years as wireless and wire line infrastructure also converge. “So you’ve got lots of moving parts,” he said. “And SDN and NFV are two of the, I call it, two of the wheels of the gear—the third one being orchestration, but I like to [say] that all three are really important for the telecom providers.”

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Coolest companies at ONS 2014

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Miniman wrapped up the interview by asking both of them what they thought was the coolest startup, technology or project that they saw at this show or in their recent travels that people should keep a close eye on. Chandler replied that he’s been impressed with Tail-f Systems. “They are really opening up. Their platform is completely open: it’s northbound, southbound, multi-vendor,” Chandler said.

Casemore said that he thinks, beyond what was at the ONS show, that there will be a wave of very interesting analytics that will come about in the next stage. “But, right now, I’d have to say, the company that’s made some significant strides, and I think the recent announcement that they had with Dell, I would have to say Cumulus [Networks]. It’s not strictly an SDN company; it’s more about network desegregation. But I think that announcement is very significant and it’s indicative of the power of software in the networking industry right now.”

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Watch the entire interview between Miniman, Casemore and Chandler below:

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