Earlier this month I wrote a story about how Aruba and Meru were both claiming second place in the 802.11n enterprise wireless LAN market based on the same numbers from Dell’Oro Group. There were a variety of claims made by the vendors over the issue, but the central discrepancy appeared to be how OEM sales were counted towards market share. Aruba has a significant OEM channel through Alcatel-Lucent. Dell’Oro reports market share based on brand, so Aruba wasn’t getting credit for the sales Alcatel made.
Today Dell’Oro sent a letter to Aruba, which I peeked at today. In it, Tam Dell’Oro wrote that her firm will “add a section to our Enterprise WLAN Vendor Tables with our 2Q09 report which reflects the data by manufacturer. That is, those shipments that are produced by Aruba, regardless of which distribution channel it flows through, will be reflected as Aruba.”
Based on that, Aruba’s market share in 802.11n access points appears to be significantly higher than Meru. Aruba moved 15,000 802.11n APs in the first quarter of this year (both Aruba and Alcatel-Lucent branded products) versus Meru’s 10,000.
It’s not clear to me at this time wheter Dell’Oro will start reporting OEM sales data in this way for other markets beyond wireless LAN.
The needs of the network are changing in 2009 as enterprises centralize their data centers, rely on fluid storage sources and depend more and more on wireless LANs instead of wired Ethernet. At this year’s Catalyst show in San Diego, I spoke with senior Burton Group analyst David Passmore, to grasp what trends will directly impact enterprise technology and what IT professionals need to prepare for in both the short and long term. Here is what Passmore had to say:
1. As the networking track chair of Burton Group’s Catalyst conference 2009, what major themes will you be addressing this year?
David Passmore: From a networking standpoint, there were four areas we thought would be of most interest for our enterprise IT clients:
- Wireless is one because there’s an increased use of mobile phones for both data as well as for voice. We’re also seeing enterprises using wireless LANs (WLANs) often as a substitute for wired Ethernet.
- The second focus is on wide area networking and what’s happening in the telecom industry, with particular emphasis on what enterprises can do to save money. If you’re a large enterprise, your phone bill, for example, is the second largest recurring expense after salaries. Obviously, if there’s any way for large enterprises to save on their telecom costs, then that’s going to be of interest.
- A third area that we wanted to focus on is unified communications, which essentially is an outgrowth of phone systems — where most large enterprises over the last couple of years have been migrating over to VoIP and IP telephony. Now what they’re doing is trying to figure out how to combine these systems with instant messaging and presence and email, and other forms of communication.
- The fourth area is data center networking: most enterprises have in recent years, consolidated their datacenters: So they’ve gone from a large number of smaller data centers to a small number of larger datacenters. In doing so, now they’re beginning to implement server virtualization. They have these large storage arrays. And essentially, they need a new network that can support the IT requirements in a consolidated datacenter. So we’ll be talking about — for example, how to have your network work well with virtualized servers, and with storage area networks based on Ethernet, and trying to reduce cabling costs — a lot of the issues that affect networks in large enterprise datacenters.
2. How have these themes changed since Catalyst two or three years ago?
Passmore: Each of them has their own specific changes. A big emphasis this year given the economic environment is saving money or cost avoidance. So a lot of the discussion is around initiatives that provide a near-term economic payback.
3. Are the trends this year something we can apply to today, or something to think about for the future?
Passmore: Actually, it’s a combination of both. One of the things we always try to do at Burton is to avoid just telling people what’s worked well in the past. We tell large enterprises what they need to pay attention to or what needs to be on their radar screens as they go forward — such as wireless. The fact that, increasingly, communication is migrating from wired infrastructures to wireless infrastructures, and that includes, not just the use of WLANs within the enterprise, but more use of cellular, data and voice networking.
At some point this might actually make the [networking professional’s] jobs easier, because they might find that more and more of their enterprise’s communications is actually flowing over a wireless network operator[‘s] network. There will be less of a need for enterprises to have to run their own circuits to manage their own networks for connectivity between or within their sites.
Right now, it’s more of a burden because enterprises have to worry about both wired and wireless communications, and people will look at that as doubling their expenses.
In the near term it, it may be doubling the expense, especially because enterprises are interested in how they can get those to work together. For example, [users] have a single phone number that works for both your desk phone and your cell phone; [they] have a single voice-mail box that works for both their desk phone and their cellular phone.
So that’s the near-term goal, but longer term, we expect that a lot of the enterprise equipment will go away in favor of people making use of mobile devices and using the cellular network operator services.
To learn more about these trends, Passmore speaks particularly about how to overcome the challenges storage and server virtualization puts on networking pros, in this Q&A.
In the early days of Barack Obama’s presidency, a new meme emerged among the pundits who make their living assembling straw men and tearing them down again on the various cable news networks. Is Obama trying to do too much? Shouldn’t he be focusing on the economy and leave things like health-care reform, etc., to another president?
I found this collective hand-wringing about a president working too hard kind of laughable. So, perhaps I will be guilty of doing the same thing when I ponder here whether Cisco is biting off more than it can chew.
Earlier this year CEO John Chambers made it clear that Cisco plans to move into 30 to 50 new markets over the next year or so. Chambers has preached that smart companies set themselves up in economic downturns to take over market share in new and existing markets when the economy rebounds. There is plenty of truth to that notion, I have no doubt. But I also wonder how much Cisco’s ambitions are driven by stock price.
The heady days of the dotcom boom, when Cisco’s stock price reached past $77, are gone and might as well be forgotten. The tech bubble overvalued even the best companies back then. But in more recent years, Cisco’s stock price has been rather stagnant. It passed $33 a share back in late 2007, but it has been hovering around $18-$23 since then. The best way to put some momentum back in a stock price is to grow revenue and increase profitability. Cisco is well into its campaign to reduce expenses by $1 billion this year. But, as Chambers noted, it is also moving rapidly into new markets, both adjacent and not so adjacent.
Unified Computing, Cisco’s foray into servers, has the potential to make Cisco a lot of money in an adjacent market, but it also puts it in direct competition with old friends like IBM and HP. Some experts have speculated that Cisco’s move to compete with IBM and HP in the server market could hurt it’s bread & butter switching and routing business, since HP and IBM’s consulting divisions have often resold quite a bit of Cisco’s networking gear.
Acquisitions like Pure Digital, maker of the Flip video camera, have pushed Cisco into new, not-so-adjacent markets. The Flip camera is a consumer device, and most analysts will tell you that Cisco has not quite found the recipe for success in the consumer market. Perhaps that’s why Cisco is trying to position the Flip as an enterprise device, talking up the notion that video is the future of enterprise communications and that consumer and enterprise technologies are converging. Cisco went so far as to hand out a free Flip to every channel partner who attended the recent Cisco Partner Summit in Boston.
And this brings me to my central question about Cisco’s future. How will Cisco’s ambitious plans to expand affect its ability to maintain its strong, often dominant, positions in the core markets it sells into? For instance, I am struck by this passage from colleague Michael Morisy’s analysis of Cisco and Juniper’s recent struggles in the WAN optimization market. When asked why Cisco and its WAAS product have slipped against competition from Blue Coat, Riverbed and Expand, a Cisco representative had this to say:
“It’s partly due to the fact that the UCS [Unified Computing System] platform was announced [that quarter], and a lot of our sales teams have been focused on that,” said Michael Leonard, a marketing manager with Cisco. “WAAS is sold by the same data center sales teams that sell Nexus and UCS, so that’s part of what we figure it is.”
Leonard said he was optimistic that, with the sales teams seeing the drop in an otherwise fast growing segment, Cisco would continue to remain a strong player in the WAN optimization market.
“That’s something we’re addressing. How that will turn out, I guess we’ll see,” he said. “I expect WAAS to come back. We have a lot of customer demand, and I’m seeing a lot of deals.”
This is an extraordinary statement. Cisco has stumbled in WAN optimization, in part, because sales resources have been focused on selling Nexus (a new line of data center switches that Cisco has positioned as a cousin to, not a replacement of, its venerable Catalyst switches) and the Unified Computing System, a new product line that Cisco announced just a few months ago. Now Cisco will no doubt tell you that this is just a hiccup, that Cisco has plenty of resources available to tackle all of the markets it competes in today or will compete in tomorrow. But the company is also trimming $1 billion from its operations and laying off a hundreds of employees. Is Cisco stretching itself too thin? Its competitors argue that is the case. But it’s really up to customers and channel partners to make that determination for themselves. They will speak with their wallets.
I have been informed that in the quotes by Cisco’s Leonard above, he is referring to an overlay sales force that is responsible for kickstarting new Cisco products, not the company’s general enterprise sales organization.
IBM veteran exec Mohamad Ali will leave IBM after more than 13 years and join Avaya as a senior vice president of corporate development, focusing on M&As, he told his contacts in a personal email over the weekend.
Ali’s transition to Avaya is especially noteworthy now that Avaya intends to acquire Nortel’s enterprise business.
Ali said he will lead Avaya’s M&A activity as the company angles to gain market share on Cisco in the enterprise communications market, according to Xconomy, a Massachusetts business and technology journal that interviewed him over the weekend. Avaya, Nortel and Cisco have long battled for the top three spots in the Voice over IP market, with Nortel holding ground even amid its bankruptcy proceedings.
There appears to be a clear alignment between Ali’s new role at Avaya and Nortel’s current customer base. Ali said in his email that Avaya offers “an opportunity to participate in and shape a whole new era of intelligent communications for healthcare, financial services, government and other services.” Nortel counts numerous government and healthcare agencies among its largest customers.
Ali led IBM’s worldwide M&A activities and was behind IBM’s 2007 acquisition of Cognos. He also said in his email that he has joined the board of Ember Corp. a Boston-based ZigBee wireless technology company that enables smart meters and building systems for energy efficiency.
Ali did not respond to emails regarding his new role at Avaya.
After months of rumors, Avaya has finally struck a deal to buy Nortel Enterprise Solutions, the bankrupt Canadian company’s enterprise division whose assets include its voice and unified communications portfolio and its Ethernet enterprise networking business. Avaya has agreed to pay $475 million for the division. It had been rumored to be offering $500 million. Siemens/Enterasys was another rumored bidder for the business.
Nortel, despite the bad press surrounding its financial collapse, remains one of the leading global vendors of enterprise networking equipment. It has a significant install base and access to those customers is appealing to other network equipment vendors. Avaya, however, is a leading vendor of enterprise voice and unified communications with no history of being in the enterprise networking business. It remains to be seen what Avaya will do with Nortel’s networking business. I hope to get someone from the Avaya on the phone today.
As E.T. would say, “Ouch.”
Nortel received another black eye this week when the organizers of the 2012 London Summer Olympics announced that it has replaced the bankrupt Canadian company with Cisco as technology sponsor and official supplier of network infrastructure for the games. The move will cost Olympic organizers $20 million in revenue because Cisco is signing on as a lower-tier sponsor. Nortel was replaced because of the uncertainty surrounding the company.
Nortel has a similar deal in place with the 2010 winter games in Vancouver, but that deal appears to be safe because buildout of the network is 85% completed.
Looking at last week’s wireless LAN adoption news…
Ruckus took the opportunity this week to announce that 24 colleges and universities have decided to install Ruckus’ 802.11n wireless LAN technology over the last 90 days. The most recent school to sign on is Benedict College in Columbia, S.C. Benedict will run campus Internet radio and television over the networks, as well as IP video surveillance.
The rest of the schools that have signed on with Ruckus include Temple University, the University of Pennsylvania, the University of Virginia at Wise, Carleton University, Emmanuel College, the University of Toronto, Lake Superior State University and an assortment of international schools in Switzerland, Canada, Costa Rica, Indonesia, India, and Malaysia.
Meanwhile, Aruba Networks announced that French logistics company Groupe FM Logistic has bought Aruba’s AirWave Wireless Management Suite to manage its heterogeneous wireless LAN network in warehouses spread across 12 countries.
Group FM Logistic will use AirWave’s role-based administration and its fault and management reporting features to consolidate management of its Cisco and Motorola Wi-Fi hardware.
UPDATE: Ruckus’ original press release on its higher education customers mistakenly identified Temple University as a customer. Temple University is actually a Meru Networks customer.
The rivalry between HP ProCurve and Cisco continues to heat up. According to a leaked email from ProCurve, Cisco has been telling its channel partners to match any price that ProCurve offers.
ProCurve appears to be welcoming this. According to the email, ProCurve will publicize Cisco’s pricing scheme. The rationale? ProCurve figures that as more Cisco customers hear about this tactic, more of them will come to ProCurve for a price quote. At the very least, this will give ProCurve a chance to show Cisco customers what it has to offer. It will also cost Cisco a lot of money, since ProCurve generally offers much lower prices.
So the key takeaway here is – if you’re a Cisco customer and you’re looking to refresh part of your network, go talk to ProCurve and see what kind of price it can offer. Even if you decide to stick with Cisco, you’ll at least have a chance at getting a better price from your incumbent vendor.
If you think Cisco has grown too large, too unwieldy, too fragmented in its offerings, guess what? Cisco may agree with you. Or at least the company wants to be sure it doesn’t live up to these criticisms.
According to an internal memo from Cisco vice president of worldwide operations Rob Lloyd examined by SearchNetworking.com, Cisco is launching an immediate reorganization of its sales and channel-facing team to streamline it around specific architectures and work toward “One Cisco.” This includes the launching of new sales theaters and a partner organization offshoot.
The memo, dated June 30, begins as follows:
“Team, as we prepare the sales organization for FY’10 and plan for renewed growth in the upturn, it’s time for bold moves, breakaway strategies and transformation. Our vision for Worldwide Sales is to create a next generation sales experience …
“To realize our vision, we need to think and act as ‘One Cisco’ — embracing our collaborative business model to deliver an experience that’s seamless, global, faster and virtual.”
Wow, Cisco even speaks marketing gobbledygook to its own kind. I thought they only fed that stuff to the press! Shwoo, what a relief!
Now down to the changes:
1. Cisco will launch three new sales theaters (in addition to the current five geographic theaters) to represent its largest market segments in the U.S. and Canada. The new theaters will be: U.S. Enterprise, U.S Commercial and Canada Market Segment Theater, led by SVP Chuck Robbins; U.S. Public Sector Market Segment Theater, led by SVP Bruce Klein; and U.S. Service Provider Market Segment Theater, led by SVP Nick Adamo.
Externally, the company will still report financial results according to the five existing geographic theaters.
2. Cisco will launch a new Global Enterprise Theater. This move is part of an effort to broaden Cisco 3.0., a 2-year-old strategy to globalize Cisco’s U.S. corporate culture and better reach emerging markets by placing top executives throughout the world. SVP Nick Earle and VP Woody Sessoms will jointly lead that theater.
3. Cisco will also align sales around six architectural plays: Service Provider IP, Collaboration, Data Center, Borderless Networks, Small Business and Consumer. Sales and services teams will work in teams to support these architectures.
4.Look out solution providers! There will be a realignment of the Worldwide Channels organization with an effort to recruit more partners to the already mammoth Cisco channel as it focuses on selling whole architectures. The restructuring also includes a new Strategic Partner Organization that will “manage specific accounts from both our Worldwide Channels and Strategic Alliances organizations.” This is apparently another move by Cisco to place specialized care on its largest and most sought-after deals and the partners that serve those accounts.
5. Finally, the company will capitalize and provide support and consultative services for new solutions, including Smart Grid, Smart Connected Communities and managed and cloud services. The company will focus on tighter integration of product and services sales teams. It is unclear where, if anywhere, channel partners will fit into that services play.
So what does all this mean for end users?
As administrators, managers and engineers in Cisco shops work to ready the network to connect storage, data center and the core, it could mean the sales and services process will be simpler and more clearly directed.
But there are critics.
As one Cisco channel partner put it: “I don’t hear any big blow ups, I hear window dressing.
“Basically, they’ve got 30 days to reinvigorate and refresh everybody to get them on board in time for Q1. This is one way to do that.”
He tempered the statement by saying Cisco’s sales team is “aligning” with the company’s technology strategies, which is now focusing on architectural plays and borderless networks.
In a new semi-regular feature on The Network Hub, I’m going to provide a quick run-down of newly announced wireless LAN projects. I get a lot of press releases from WLAN vendors about customer wins. I don’t get to write about all of them, but I can at least offer you a quick summary of the latest decisions your peers have made.
First up is John Marshall Law School, which is deploying an 802.11n wireless LAN network from Aerohive Networks on its Chicago campus. The school is replacing a legacy WLAN from Airspace (acquired by Cisco in 2005). The old system was presenting interference and attenuation problems within the school’s century-old buildings. Centralized management was also an issue. The school chose Aerohive from a short list that also included Aruba, Meru and Xirrus. The school chose Aerohive for its ease of deployment, controllerless architecture and wireless mesh capabilities, according to the case study.
Also this week, Aruba Networks announced that Virginia Union University has chosen their 802.1n wireless LAN to retrofit the wireless network on its 84-acre campus in Richmond (Click on this link for more information on Aruba’s specific solutions for the education market). The school had a network of independent, “Fat AP” access points that lacked centralized management capabilities and performance. Robert Gray, the schools IT director, said he chose Aruba’s AP-125 access points for their coverage and range. He is also using some of Aruba’s advanced management technologies, such as Adaptive Radio Management, Aruba’s policy-enforcement firewall and the AirWave Wireless Management Suite.