After returning from a recent trip to Europe, I had the chance to dig a bit deeper into service providers' visions and economic views. There are changes, perhaps even massive ones, on the horizon in both areas.
There has been a dramatic shift in the way service providers' senior-management teams view technology tools. The idea that the network is a profit center is quickly eroding in Europe, where competition, regulation and economic conditions combine to make traditional network services less profitable than they are worldwide.
Operators' chief technology officers (CTOs) were focused entirely on network technology five years ago. A few years later, they began to focus on servers. They now see servers and software as the crux of their future, with the network serving only as the connecting tissue.
Are vendors ready for the shift to software?
This strategic shift won't bode well for network equipment vendors whose futures were already in doubt last quarter. It's obvious -- at least in the privacy of their planning sessions -- that none of the major vendors are optimistic.
Then again, they have no reason to be confident. As revenue-per-bit has deflated over the years, it should come as no surprise that bandwidth and the equipment that creates it has become commoditized. But software-defined networking (SDN) and the OpenFlow model now afford providers the opportunity to make the network a slave of the cloud. It's even possible that SDN and OpenFlow have catalyzed the cloud's momentum.
The network vendors, however, are not in immediate jeopardy. So far, our spring survey shows there is no evidence of any massive net loss of strategic influence among the network vendors, but there also aren't any significant gains among IT giants.
Those vendors with the biggest focus on servers and software -- Cisco Systems, followed perhaps by Alcatel-Lucent -- have an opportunity to position their assets around SDN and OpenFlow, but it's not clear whether they wish to go that route. Alcatel-Lucent, after all, announced its plans to enter the core-router market, which suggests that it's still slugging it out with Cisco and Juniper Networks (and Huawei, to some extent) for a cut of the bit-pushing market. Cisco's comments over the last couple of months suggest it might be seeing the light in differentiating the network based on how well it supports software apps, but it has yet to release any product or strategy that backs this up. Cisco also issued its all-too-regular prediction of congestion doom, suggesting operators buy routers even if they can't make a profit.
Alcatel-Lucent's announcement may be categorized more as a public-relations failure than a product-strategy failure. The operators perceive the new 7950XRS as being aimed at the interconnect points and even metro networks (more on this later). While the press release does say that the new router is targeted at boundary points and the cloud, Alcatel-Lucent's positioning around entering the core-router market makes it hard to see past the hype.
Cisco's delay in making its SDN/OpenFlow position clear may be due to the fact that it knows the announcement is important and its strategy shouldn't be sloppy. In fairness, the theme of this column is partly that operators have suddenly transformed their view of the future. Vendors can be excused for taking some time to catch up, but they should use this time wisely. Cisco will need to sing better if it sings later.
OpenFlow in metro, MPLS networks
Meanwhile, operators have made a lot of revolutionary comments -- even in public -- about their network strategies. Vodafone said that its CTOs are likely to be more computer experts than network pros. Verizon says that scaling Ethernet is its main reason for increasing the use of MPLS in the metro network.
What vendors have failed to see is that the real value of MPLS, even of IP, has to come in the metro network because that's where profitable traffic is located. The IP core is a revenue sinkhole, so investments should be minimized. This is why it's critical for operators to understand how OpenFlow fits; it may be the alternative to both Ethernet and MPLS in the metro networks, particularly if that elusive link between user experience and OpenFlow can be found or created.
Patent-free APIs = cloud innovation
The European Union's (EU's) recent court decision that application programming interfaces (APIs) cannot be patented may have significant ramifications in this area. Before the ruling, some said they believed the EU's position meant that it had developed a more software-friendly attitude and might become the software-innovation center for the future.
With the US following a similar path (pending inevitable appeals), the question now is whether the fact that APIs are open by definition means that we might see more cloud competition. Google won with Android APIs but could still lose in the long run because it may find it impossible to prevent others from duplicating its cloud-service interfaces. The case is the same with Apple. This is good for the market, because it would prevent any giant from stifling innovation by locking up key service practices in the form of copyrighted APIs.
About the author: Tom Nolle is president of CIMI Corporation, a strategic consulting firm specializing in telecom and data communications since 1982. He is the publisher ofNetwatcher, a journal addressing advanced telecom strategy issues.