Friday, July 28, 2017

Cisco observations – Moving towards software on a subscription model

Will large enterprises and Service Providers customers embrace Cisco's high-performance networking platforms built with its own ASICs and OSx, or continue to push for white box platforms based on merchant silicon and fully open software? Will the global ransomware outbreaks of the past two months play to Cisco's advantage as enterprises re-evaluate their security posture and perhaps adopt a more core network-centric approach?

Cisco provided an update on its strategic vision at its recent Cisco Live! customer event in Las Vegas. Materials from this event can be found on the company's Investor Relations web page.

Cisco currently is in an enviable market position. It holds the leading market share in at least 10 market categories; it has 20,000 people working in sales and perhaps 60,000 erstwhile partners around the world. For its most recent fiscal quarter, ended April 29th, Cisco reported revenue of $11.9 billion, GAAP net income of $2.5 billion, or 50c per share, and non-GAAP net income of $3.0 billion, or 60c per share. Sales fell by 1% compared to a year earlier but the company deliver a 5% growth in net income, thanks to cost-cutting measures. Cisco's balance sheet most recently showed $125.950 billion in cash, cash equivalents, and other assets, clearly a mountain of gold that could be used for strategic acquisitions or simply returned to shareholders. Cisco's market cap stands at $160.4 billion. Compare all of this to its nearest rivals, especially the big European concerns, and Cisco’s position is quite strong.

Mergers and acquisitions strategy

Cisco's management perpetually faces the question of execution in a market that overall has been pretty flat and declining in many sectors and geographies. With a gross margin consistently in the mid-60 percentage range, the company is vulnerable to lower cost competitors. Huawei and ZTE, in particular, deliver highly competitive products at lower cost. Cisco is also known for making a lot of acquisitions. Over the years some have been hugely successful for the company, such as the Ethernet switching acquisitions (Crescendo, Grand Junction and Kalpana), while others were huge failures (e.g. Scientific Atlanta).

During briefings at Cisco Live!, Chuck Robbins said the company remains open to strategic mergers and acquisitions that are capable of augmenting and accelerating its core innovation. The company has 160 staff members dedicated to M&A integration. Over the past four years, 80% of the acquisitions have been software related- this is a trend likely to continue. The Meraki and Sourcefire acquisitions were called out for delivering double digit returns.

The differentiated vision of intent-based networking

Cisco new intent-based networking vision, which includes a new DNA Center for orchestrating control over networking traffic, the new ASIC-powered Catalyst 9000 series switches, and a unique ability to analyse encrypted traffic, is already being tested by 75 global organisations. Naturally, Cisco finds measurable improvements for customers testing the new solution, claiming: a 67% time savings for network provisioning, 48% reduced security breach impact, 61% reduced opex. It is too early to see how premium the customers are willing to pay for better management capabilities.

Better security is perhaps the stronger argument for Cisco to make for its silicon-differentiated platforms. In his talk to the investment community, David Goeckeler SVP/GM, Networking and Security Business, argued forcefully that effective security requires a network that can find threats, containing threats, and delivering automated remediation. This depends on leveraging network data, a resource that new ASIC-driven switching platforms can deliver in abundance. When you put together deep analytics and machine learning in an automated policy enforcement system, you have the fundamentals for intent-based infrastructure. Software-defined access can be used to limit the lateral movement for threats. Automated responses mean that human management of network is replaced.

Moving to a recurring revenue model

Perhaps the biggest change in direction for Cisco is that it is actively moving existing offers to subscriptions. In other words, software that used to be consumed on a perpetual basis will now become recurring revenue. Already, more than $2 billion of revenue that could have been recognised under the old model is not being collected on a recurring licensing basis. Over the FY17-20 timeframe, Cisco expects this to grow to 2-3% of total revenue. When factoring in other services already on a recurring model, such as Spark/WebEx, Meraki software, Jasper and Cisco ONE, the total percentage of recurring revenue is expected to grow from 26% in FY 14 to 37% in FY20. The security offers are expected to drive the subscription business. The net effect is improved predictability of future revenue.

Financial guidance for the next 3-5 years

Given its size, Cisco can hardly expect to grow much faster than the market. Overall, the updated financial guidance calls for revenue growth of 1-3%, stable margins, and EPS growth in the mid-single digits. Cisco said it aims to return over 50% of free cash flow to shareholders. Over the past ten years this has been the case. Approximately 50% of cash has been used for share repurchase and about 15% for dividend payments.

The 3-5-year growth forecast is also broken down by segments:

Technology;                Revenue growth

1.  Infrastructure platforms                 flat

2.  Security                              low to mid-teens

3.  Applications                       high single digits to low teens

4.  Services                              mid-single digits


To summarise, Cisco is betting that differentiated innovation will pay off because customers value the deeply embedded security and automation. Though revenues will only grow in the 1-3% range, earning per share should continue to expand as the company moves to a recurring subscription model for up to 37% of its revenue. Cisco promises to return 50% or more of free cash flow to shareholders, and the probability of further mergers and acquisitions remains strong, especially for networking software and service start-ups.

Huawei reports H1 revenue of CNY 283.1bn, up 15% yr/yr

Huawei announced business results for the first half of 2017, including revenue for the first six months of CNY283.1 billion (approximately $41.83 billion), up 15% compared with CNY245.5 billion in the first half of 2016.

Huawei noted that during the first half of 2017 it achieved growth across all three of its business groups, and expects to maintain the current momentum over the remainder of the year.

For its business groups, Huawei reports that:

1.         In the Carrier Business, it continued its focus on supporting global carriers with their digital transformations across all industries, delivering business solutions designed to help carriers lower the cost of end-to-end network construction.

Huawei noted that it is collaborating to lead the development of 5G and is continuing to develop 4.5G technology, as well as supporting carriers' efforts to create all-cloud networks and leverage their existing infrastructure.

2.         In the Enterprise Business, Huawei stated that major companies worldwide are increasingly electing to partner with the company to implement the digital transformation leveraging solutions including cloud computing, all-cloud networks, enterprise wireless, IoT, big data, storage and servers, across sectors including government, finance, electricity, transportation, manufacturing and safe city initiatives.

3.         The Consumer Business maintained its focus on addressing user needs by working with global partners to enable the delivery of smart gadgets for consumers worldwide, and continued to build its global position as a premium brand.



ECI launches Hybrid Virtualization Platform for the edge

ECI, a global provider of Elastic Network solutions for service providers, critical infrastructures and data centre, announced the launch of its Hybrid Virtualization Platform, designed to support multiple NFV-based use cases to help communication service providers simplify operations, reduce opex and enhance SLAs.

By supporting delay-sensitive services and enabling improved security and termination of flows at the network edge, the new ECI platform is designed to support a variety of applications including modernised business services, as well as future Internet of Things (IoT) and 5G services. The platform features ECI's vE-CPE family, which is set to provide virtualisation across customer premises (uCPE) and service provider Edge PoP (MEC).

ECI noted that modern networks feature a complex array of customised hardware, making it potentially costly for service providers to maintain. In addition, launching new services may require significant investments in planning and provisioning hardware and infrastructure. The adoption of virtualised infrastructure, where key network functions run as software (VNFs) on commercial computing platforms, addresses these issues.

The Hybrid Virtualization Platform comprises the Mercury NFVI platform, open source NFV management and orchestration (MANO), which runs ECI's carrier-grade PaaS system, and a suite of virtualised network functions (VNFs) that includes edge routing, session border control, WAN optimisation, LAN monitoring and caching functions.

ECI's new hybrid solution is designed to offer service providers the following capabilities:

1.         Flexibility via support for application delivery on fixed, mobile and converged networks, with ability to evolve to address the future needs of IoT and 5G backhaul.

2.         Agility, with the ability to mix and match multiple functions on the same platform to create new service packages delivered in pay-as-you-grow models.

3.         Faster time to market via the Mercury NFVI solution that allows remote service life cycle management, from provisioning to turn up.

4.         Reduced opex by streamlining service creation using software-driven processes.


ECI's Mercury platform is designed for fixed, mobile and converged networks, and alleviates the demands on the network core by increasing the capabilities and intelligence of MEC (Mobile Edge Computing) to the customer premise via uCPE or to the eNodeB. The Mercury NFVi platform is available as both a stand-alone appliance and as a blade that can be integrated into ECI's Neptune packet-optical transport system.

Big Switch secures $30.7m in capital funding

Big Switch Networksof Santa Clara, California, The Next-Generation Data Center Networking company,

a.         Founded in 2010 having originated from the original Stanford research team that invented software defined networking (SDN) technology.

b.         Began shipping its platform-independent open SDN product suite, featuring a controller, virtual switch and network monitoring application in 2012, and in 2013 started packaging its technology components into bare metal SDN fabric solutions.
c.         In January 2016 closed a Series C, $48.5 million funding round with participation from both new and existing investors, including Morgenthaler Ventures, Silver Lake Waterman, Index Ventures, Khosla Ventures, Redpoint Ventures, Accton, CID Group and MSD Capital, and bringing total funding at that time to $94 million.

Has announced it has secured $30.7 million in new financing to support further sales and product expansion as organisations continue to adopt next-generation networking solutions to modernise data centres.

Big Switch stated that the latest financing involves the participation of Dell Technologies Capital, Silverlake Waterman, Index Ventures, Morgenthaler Ventures, MSD Capital, Redpoint Ventures, Khosla Ventures, Intel Capital and a strategic investment from a Tier-1 service provider. The company noted that total funding raised to date exceeds $120 million.

http://www.bigswitch.com/press-releases/2017/07/27/big-switch-networks-secures-307mm-in-incremental-capital


  •  In January, Big Switch announced new capabilities for its Big Cloud Fabric (BCF), including comprehensive networking support for hyper-converged solutions powered by VMware vSAN and virtual desktop and application solutions with VMware Horizon, as well as multi-container networking support for Mesosphere DC/OS and Kubernetes container orchestration platforms, including Red Hat OpenShift Container Platform.

NTT Com launches international network services, build 2 data centres in India

NTT Communications (NTT Com), the ICT solutions and international communications business within the NTT Group, announced the launch of international data network services in India through its affiliate NTT Communications India Network Services (NTTCINS).

NTT Com stated that the acquisition of its licence in India follows the launch of construction of two new Indian data centres in Mumbai and Bangalore, through subsidiary Netmagic, a provider of managed hosting and cloud services in India. As a result, NTTCINS will be able to offer infrastructure services and management and security services designed to meet companies ICT outsourcing needs.

NTT Com plans to invest $160 million in building the two data centres, which are scheduled to become operational by April 2018. The new data centres will add nearly 500,000 sq feet of gross floor space at full build out, increasing NTT Com's total gross footprint in India to 1,100,000 sq feet. The new data centres in Mumbai and Bangalore will accommodate 2,750 racks with 22 MW of power and 1,500 racks with 15 MW of power, respectively.

NTT Com noted that it became the first Japanese service provider to be awarded a Virtual Network Operator - International Long Distance (VNO-ILD) network licence for India in March. In addition, NTT Com provides Arcstar Universal One international network services in partnership with local carriers. The company also implements value-added services such as network virtualisation functions (NVF) utilising the infrastructure of its partner carriers in India.

Netmagic provides colocation service via a global network of data centres operated by NTT Com under the Nexcenter brand, as well as managed hosting, cloud, network, managed security, disaster recovery and software-defined storage services. NTT Com leverages global network infrastructure including its Tier-1 IP network, the Arcstar Universal One VPN network that reaches 196 countries/regions, and 140 secure data centres.


Commenting on the launch, NTT Com president and CEO Tetsuya Shoji said, "India has been a key strategic market for NTT Com with the accelerating shift of IT services from traditional enterprise data centres into the cloud-based services… for the past few years the business in India has consistently grown over 35% annually… with the expansion of the data centre foot print and new international data network services NTT Com aims to meet the growing market needs for mobility, e-commerce, IoT, cloud and big data".


BT to offer Ixia security and monitoring to customers worldwide

Keysight Technologies company Ixia, a provider of network testing, visibility and security solutions, announced a new global reseller agreement with UK telco BT, under which BT will be able to offer Ixia's product portfolio to customers in 180 countries worldwide.

BT provides managed services to 6,500 customers worldwide, including major global multinational companies. With an advanced product portfolio supported by a team of more than 2,500 skilled security specialists, consultants, partners and vendors, BT delivers flexible end-to-end security capabilities to private- and public-sector organisations worldwide.

Through the agreement, BT customers will have access to Ixia's comprehensive solution portfolio including:

1.         Security and test products including BreakingPoint, which simulates real-world legitimate traffic, distributed denial of service (DDoS), exploits, malware and fuzzing to validate an organisation's security infrastructure.

2.         Network visibility solutions, which include its network packet brokers Vision ONE to help ensure all security and monitoring tools have visibility of the required data, as well as real-time application and threat intelligence, network TAPs and bypass switches to help improve resiliency and minimise downtime during deployment.



  • Recently, BT announced the launch of BT Managed Endpoint Access Security, a new security service designed to protect organisations from cyber threats and malware through greater visibility and better monitoring of devices connected to the corporate network.


  • The new service is based on technology from ForeScout Technologies, an Internet of Things (IoT) security company, to provide real-time agentless visibility and control of devices connected to corporate networks, including managed and unmanaged, private devices, Bring Your Own Devices (BYOD) and IoT.

ExteNet to acquire Axiom Fiber Networks

ExteNet Systems based in Lisle, Illinois, a provider of distributed network systems (DNS) enabling cellular, wireless and broadband connectivity, announced it entered into agreement to acquire New York-based MetroFiber, d/b/a Axiom Fiber Networks, on undisclosed terms.

Axiom Fiber Networks is a telecommunications infrastructure services provider operating in the greater New York City metro area. The acquisition by ExteNet will increase the company's fibre footprint in the New York City metro area.

In 2016, Axiom Fiber announced it has entered into a technology alliance with LightRiver Technologies, the company delivering Factory Built Network design and commissioning services. By partnering with LightRiver, Axiom Fiber, which delivers telecom infrastructure services over its fibre network to carrier and enterprise customers across New York City, expands its ability to provide flexible and scalable networking solutions that leverage its fibre infrastructure.

Axiom Fiber offers dark fibre and custom networking solutions, with a focus on providing efficient solutions with flexible business terms. In 2015, the company established a PoP at Sabey Data Centers' Intergate.Manhattan facility, located at 375 Pearl Street in lower Manhattan, and with Telx at its three New York City facilities, 60 Hudson, 111 8th Avenue and 32 Avenue of Americas.

ExteNet Systems designs, builds, owns and operates distributed networks (DNS) for use by wireless carriers, broadband providers, IoT companies, property owners and communities across the U.S. The company provides scalable infrastructure designed to enhance wireless and broadband services in both outdoor and indoor environments using fibre-based distributed antenna systems (DAS), remote radio heads (RRH), small cells, WiFi and virtualised EPC (vEPC) technologies.

ExteNet's outdoor distributed networks are deployed in urban, suburban and rural environments, while its indoor distributed networks are deployed in property verticals including sports and entertainment venues, hotels and convention centres, commercial office space, healthcare facilities and transit systems.


Sonus intros cloud-based Incident Management-as-a-Service

Sonus Networks announced the introduction of a new offering, Incident Management-as-a-Service (IMaaS), which, in conjunction with its maintenance and support offerings, provides oversight of Sonus network elements and helps speed the resolution of network anomalies that can affect IP-based communications.

Sonus noted that network downtime and degraded performance can reduce an organisation's productivity, customer satisfaction and revenue, and the new IMaaS offering is designed to address these factors by assessing the availability and performance of Sonus devices to ensure they are performing as expected.

In the event of an issue, IMaaS notifies the problem resolution resources supporting the Sonus devices, providing monitoring across areas including incident characterisation, customer notification and initial triage to help speed time to incident resolution.

Specifically, IMaaS provides secure surveillance and monitoring to support proactive/early incident detection and alarm acknowledgement, with incident logging and investigation, assessment, escalation and reporting. The solution works by measuring the response from Sonus elements to verify connectivity, measuring the availability of elements and performance of network interfaces, delivering reports on the capacity and availability of individual ports, and measuring the performance of applications running on the elements.

Sonus IMaaS is the latest addition to the Sonus Global Services portfolio that also encompasses offerings for cloud scale-out, predictive services, network survivability, bandwidth optimisation and security.

The company noted that in the latest Cost of Server, Application, and Network Downtime: North American Enterprise Survey and Calculator from research firm IHS Markit, aggregate, information and communication technology downtime costs North American organisations an estimated $700 billion per year, with equipment problems responsible for around 40% of the total sum.

See also