 And we're back. Hi, this is Stu Miniman with wikibond.org, with SiliconANGLE TVs live continuous coverage of the biggest tech conferences in the industry. Here at the Open Networking Summit in Santa Clara Convention Center, unpacking the future of networking and joining me for this segment is the IDC networking team, the power play team from Canada. We've got NavTanler and Brad Casemore. Gentlemen, thank you for joining us here on this segment for theCUBE. Thanks very much Stu. We want to thank you for not discriminating and putting guys with radio faces on the air. Yeah, so in Canada do we have, you know, a different pronunciation of SDN or is it? We say A, right Brad? Yes, before we say everything. Thanks Stu, I'm glad to be here. By the way, I'm a transplanted Canadian, I'm living in Boston, so. We still say A. You know, home of the East Coast studio of theCUBE. So guys, you guys go to a lot of the shows, you've been looking at this technology just like we do on theCUBE. So I want to dig into it. Nav, if I can start with you, you know, last week you were at Mobile World Congress in Barcelona. You know, very different audience I think from this show. What can you bring back for us as kind of the key learnings from that event? Yeah, I was there and it seems like it's just blurring from one week to the other. You're absolutely right. Very different audience, big show, but guess what, it was all about apps and content. So the big news of course was Facebook's acquisition of WhatsApp, but what was even more surprising besides that was what WhatsApp CEO said he's getting into the voice business. So pretty significant, but in terms of SDN and NFV, a lot of buzz, a lot of activity actually, lots of NFV announcements, trials, HP announced their open NFV, number of other vendor announcements. So Mobile World is more than just mobile. It's content, apps and everything to do with networking. So I'm wondering if you could give us from just kind of a market standpoint. My take is that NFV solutions are probably a little bit further along. There's actually more different products I can point to out in the marketplace than adoption. Do you guys have any revenue numbers or just anecdotes that you can give us as to kind of NFV adoption? So good questions, Sue. I mean, NFV adoption will happen more quickly because service providers have formed the group, the standards group and have made significant progress in less than a year and a half. They've actually defined use cases and at Mobile World we saw, I saw many examples from Telefonica, from NTT, BT and others that were deploying it. Now in terms of revenue, one of these applications are yet going to hit the bottom line, but long term, I think NFV will have multiple orders of billions of dollars of impact in terms of value creation for the service providers. So Brad, you travel also, a lot of the networking shows, you look at inter-op, you look at this show, there's lots of other SDN shows. Wonder if you can, where does this show fit in the overall ecosystem of networking today? I think this show is an interesting one and a unique one in that it brings together so many aspects of the industry. We have, obviously NAV's here, but NFV it's rare actually that we're at the same event, but we're at this event because it does cover telco adoption, it does cover cloud adoption. 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. So it's a show I think that really is the biggest and the landmark SDN show right now. So you mentioned, there's a lot of vendors at this show actually. You've been walking around, you've been talking to a lot of people. I mean, are the vendors just coming together, drinking their own Kool-Aid and saying that this is how we finally topple the giant in the industry or what are you seeing out there? You mentioned financial services. There's a lot of variation in terms of solutions. There's a lot of variation in terms of approach, in terms of architecture. I mean, the SDN is an architectural model above all. It's, you know, and then products of course are built according to that model and they vary enormously. And I think the thing that I would say is that we're seeing 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 know, you've got guys like Goldman Sachs, for instance, and Fidelity. They're data centers, they have more than one data center and they're building skill out data centers to support their application workloads. You know, the morning keynotes, I think kind of had some of those big guys out there. If you look at NTT, it's making a big push into many different aspects of SDN and NFV. I mean, they made an acquisition. I heard it's hundreds of millions of dollars for that acquisition to get them into the NFV market. Most enterprise companies aren't going to make an acquisition to take advantage of that. Nav, I think, I know you were watching closely AT&T. Did I hear right that they spend $50 billion a year on capex? No, it's actually 20, they spent 20 billion a year on capex, which is still a huge amount of money. So let's give you a little insight. John Donovan was also at Mobile World and you think this is a person like John would have had a lot of prominence at a Mobile World show, but I think here today, and you're asking Brad and I have the same kind of view, this is a real melting pot. This conference, you got everyone from dev developers to VCs, CEOs here of startups, as well as larger companies. I'm pretty impressed. NTTN, AT&T are two of the early adopters in the large telcos, but both taking different strategies. 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 be the Cisco's and Alcatel's, Juniper's, et cetera. So I think that's a significant transformation point in the industry. Do you have some estimate? I mean, that 20 billion, are they going to save 10%, 30%, what's their expectation? Yeah, we as analysts, we've been asked that and I'm going to say that it's going to take, we probably see next year, even 5% of that capex really get impacted. One of the things that a lot of people don't realize is that the biggest cost is really in their Apex and what John pointed out, and AT&T and NTT are both focusing a lot also on Apex. So trying to do everything at once is not going to happen overnight. Yeah, I mean, I know what we've found talking to most CIOs today, maybe not at the 20 billion dollar level, but CIOs today, the capex gets the budget approved and then the Apex is where they have the huge savings. But what's different is, there's been competitors out there and networking that have said, oh, we might be able to save you on a capex 10, 20, maybe 30%. There's the potential here that we could be talking a significant more, I mean, just from old way versus new way, it might be 70% cheaper. And the operational expenses should be 10x better than what you were doing before. So I mean, do you think that's real and how long does it take for that to kind of percolate through the rest of the market? When you look at Apex and telecom service providers, it's anywhere from 60 to 80% of their overall budget. So it's huge and it's going to take, the capex savings part will happen with NFV first when we build virtual appliances, x86, that's where they want to go. And I think they'll start off in small steps. So the overall impact of capex is not going to be, you know, 10, 20, 30% year over year until we get some of the innovations from the community here at this conference, right? Open source, programmability, SDN and NFV are enablers. 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. I mean, now 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 that the Amazons, the Googles, the Facebooks are providing and telcos realize that if they don't make a move and begin to adopt some similar technologies and processes, they could lose this opportunity for good. And I think it's a significant impact this for them. Yeah, so Brad, going back to the comment you made about this being a real melting pot of, you know, various pieces, one of the critiques I've had on networking for a long time is it tends to be an isolated silo. You know, networking doesn't necessarily play well with others, you know, I lived at the intersection of storage and networking for many years and storage would say, I'm not performing well and, you know, can you fix this? And, you know, QOS was a four letter word for most of the networking guys. So, you know, do you see things changing or, you know, what needs to happen to really, you know, transform and get people out of that factor? I would say that it's already happening in the hyperskill world. I mean, that's happened, right? They have a more collaborative approach to IT, to how they use technology, to how, 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 is, what happens in the enterprises workloads move to the cloud? I think silos will persist in a lot of enterprises for, you know, years. And 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, you know, more applications, more workloads, will move to the cloud. And as enterprises adopt private cloud, they have to rethink how they deliver their applications. And once they rethink how they deliver their applications, they move to things like orchestration. And then they look at how their infrastructure aligns with that. So, once that happens, the silos break down. And some enterprises, it's going to take a long time. So, you know, you've been meeting with a lot of people at this event, you know, how are we doing? You know, you know, I'd like to use sports analogies here on theCUBE. You know, if we take, you know, maybe baseball is not the right one for you. We'll use hockey now. So, you know, hockey is the Zamboni clearing off the ice at the beginning and people are getting into their seats. Are we still in the first period? If it's hockey, you know, or is the game already won and we're just playing out the clock? I mean, where are we with, you know, kind of that transformation? Yeah, I think that some players again, I've been playing the game and continue to play the game. 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 and then there are a tier of cloud service providers who are still moving forward. Maybe it's the first period of intermission for them, but they've begun playing the game. And then you've got some who are clearly, you know, just getting their skates on and they're going to have a basically, try to get the 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. So in the telecom space, I mean, 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 in the, you know, halfway through the first period of a hockey game to use that analogy. I mean, there's a long, long way to go. The good news is that they need to learn how to try and fail. I think we heard Vinod Kosla and some of the other speakers of this conference say, telcos have to learn how to fail as well as be successful, but they have to do it fast because Google, Facebook, as Brad said, they're so far ahead that that race, if you're looking at a marathon, there's, you know, there's a lot of catching up these guys have to do. And I think the service providers have got to change their culture. And part of what's nice about this conference is that John Donovan made a recruiting pitch at the several times from AT&T, which is interesting because he's in Silicon Valley and AT&T is not obviously top of mind or any service provider, but they're going to, you know, I think they're sending a strong signal on, it's going to take time. And to continue the hockey analogy, we've even seen a few fights, which is... Absolutely. You know, the IT industry's, you know, not above dropping the gloves, you know, putting some people in the penalty box. So what are you looking at, Brad, over the kind of the next six to 12 months? You know, what kind of market indicators can people look for to see that this is maturing, that, you know, the ice is ready to go on and, you know, get involved? What should people be looking for over the next kind of six, 12 months? I think we're definitely watching the customer adoption rates and watching the size of companies and what those companies do, vertical markets, that's something that we'll be tracking closely. And we do expect the adoption is ramping up. There are various ways that this technology is cut, of course, we have network virtualization, we have, you know, in the telcos, we have NFV, we have, you know, open flow-based SDN, which the show is predicated on in the ONF, and we have network disaggregation also happening, you know, vendors like Cubilis and peak eight and Dell's adoption of Cubilis. These are all things that I think we're 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's still coming. So, Brad, I do have one more question for you. When we look at really the financials of, you know, the data center, if we go out a couple of years from now, is networking a smaller piece of the pie? Does it move over to applications, kind of that mix of hardware versus software? You know, what does it look like in a couple of years? I think increasingly, and people have said this for a long time, the skill set of network professionals has to be extended, has to be expanded. You know, they're trying to learn more about virtualization, more about server-side automation tools like Chef and Puppet and CF Engine. They are developing architectural skills, thought architect skills. And I think those changes are consonant with some of the changes we're seeing in 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. Mark Andreessen's running down the hallway to tell you it is eating the world. Now, my last question for you is, you know, the telcos, you know, in a couple of years from now, do we see them playing a much larger role? You know, one of the questions we've been posing is, you know, should you not build another data center? You know, should you just put everything into kind of the hostings, the clouds, the, you know, and the telcos, you know, providing that bandwidth? You know, how is this, you know, kind of mega trend? Yeah, that's, you know, Stu, that's exactly the right question. In fact, I'm working as part of my plans this years to look at the different business models because some telcos, like Take Verizon or even CenturyLink, say we're building out data centers, they have made acquisitions, we've seen that for the last few years, NDT, others telcos are going to be, we're going to be almost like over the top. They're 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, George Telecom doing in Europe with Spotify where there's revenue sharing deals, Cisco's doing it with AWS for VPNs. So I think you're going to see some very creative models. The key question I ask is not all of these telecom service providers are going to survive, you're going to see more M&A action over the years as wireless and wire line infrastructure also converges. So you've got lots of moving parts, and SDN and NFV are two of the, I call it two of the wheels of the gear of third one being orchestration that I like to draw that all three are really important for the telecom providers. You shouldn't have said M&A, I saw some investment dentures turn on. Oh, okay. Yeah, so rapid real quick, last question, NAV first and then Brad, coolest either startup or technology or project that you see at this show or in your recent travels that people should keep a close eye on? Whoa, that's an interesting one. I mean, I think I've seen, I've been really impressed with TLF, which has happened to be one of the companies that AT&T announced, and I got to meet them some time ago and I've seen and heard evidence of success. I mean, they're really opening up. I mean, their platform is completely open. It's northbound, southbound, multi-vendor. I mean, it has all the things. And it's not based in the US, which is interesting too, because you could think of everybody being here at Silicon Valley. So that's one of, that's an example. I think it's definitely a cool company. I've been watching them. Right, and Brad? Yeah, I think there's a number of companies that I think are very interesting. And I think there's beyond what we're seeing today, there'll be a wave of very interesting analytics that'll 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'd have to say Cumulus, mainly it's not strictly an SDN company. It's more about network disaggregation. But I think that announcement is very significant and it's indicative of the power of software in the network industry. Well, Brad and Nav, thank you for sharing with us everything that you think about SDN. So this is Stu Miniman with Silicon Angles, the CUBE live coverage from the Open Networking Summit 2014. We'll be right back with our next guest.