 Welcome back everyone, we're live here in Silicon Valley, this is SiliconANGLE's theCUBE, our flagship program. We go out to the events and extract the signal from the noise. This is ONS 2014 Open Networking Summit. This is the future of networking. This is where all the actions happen under the hood, lower end of the stack. This is some of the activities being forced onto the industry to keep up with the growing change of cloud. I'm John Furrier, the founder of SiliconANGLE. I'm John McCose, Dave Vellante of theCUBE. Days back on our special guest, it's Scott Reinovich, the publisher of the ReinoReport.com industry analyst and new member of our CUBE team. We'll be doing some CUBE commentary with us here in the networking. We've been following network for multiple years. Obviously now we're in an inflection point where we want to bring in more analyst coverage, senior analyst commentary to break down the old incumbents, the new incumbents, the startups, why this is so important and the impact to the market, the business models, the technology and ultimately to customers. So Dave, welcome back, Kate, where I was just once, Stu. Thank you, John. I was in San Francisco earlier this morning on that Oracle Roadshow, hanging out with a bunch of practitioners and we got one going on in San Jose tomorrow. So luckily I was able to stop and hear him. Great to have you on. Scott Reinovich, you've been an analyst in the telecom sector for many, many years. Let's get your take on it. I mean, this is not a new market for you. You're looking at the landscape. The hands are being forced from the old incumbents, these new incumbents, some have gone public, some are tooling up, you've got VMware out there and you've got startups now turning into a little bit older companies like Big Switch and you've got new venture capitals funded, some of these like Q-list networks out there funded by Andreessen Horowitz. What's your take of the landscape and then what's this business model impact? It's pretty interesting, John. It's like a mini version of the optical bubble that I went through in 99, 2000. Only I think this is even more chaotic because this is a generational shift in technology. You were talking about tearing down all the proprietary operating systems, replacing them with open technology, rip and replace all the switches, routers. I mean, it's a huge shift. How are these guys going to adapt? So let's talk about Cisco, because obviously Cisco is the biggest gorilla in the planet right now in networking. They've had that position. They've had that essentially, you know, monopoly, if you will. But they have a huge customer base. How do these guys move the battleship to be a disruptor rather than being disrupted? Well, it's interesting. They did make the acquisition at the right time because everybody was starting to come up with the questions. They pulled the trigger on NCME. They're coming out with a new Nexus Switch. So that's going to have to get traction. I think for Cisco, the key is getting the timing right. They can't move too fast or they risk cannibalizing everything they've built and they can't move too slowly or they miss the whole boat. So how fast do they move? That's the question. Okay, what's your take on that? Scott, I wonder if you could take us back here, a networking expert. I want you to take us back to sort of Cisco's ascendancy. I mean, you had obviously all the proprietary guys, IBM, Digital, all doing their thing. And then sort of Cisco, you know, grew up. How did Cisco do it? Obviously they made a lot of acquisitions at the right time. But what got Cisco to where it is today, which is about what? Two thirds of the market. And how is it that they were able to maintain such a high market share? Whereas in other markets, servers, you know, storage, other software markets, you're not seeing that kind of dominance. So how did Cisco get there? And why have they been able to keep it so much? And then the obvious question we'll follow on is, you know, can they keep it? But how'd they get here? And how were they able to keep so much of the share? Great question, Dave. What we all know, the Cisco is known and strengths are sales and marketing. Building the sales channel, building the market channel. And they're an acquisition machine. Cisco has a thirst for acquisitions. That's how they rolled up the Ethernet market in the late, late 90s. They rolled up all of the hot Ethernet startups. And that's how they acquired their market share. I think they got distracted for a little while after they kind of had so much success. They got distracted by the, you know, the scientific Atlanta acquisition they thought set tops. And I think they got away from their roots. They got away from the core switches in the boxes. But now they're making these acquisitions again. The NCME is probably their most important deal in the last five years. So they're going to sink or swim in this market on that deal. With the scientific Atlanta, it's interesting you bring it up. Like you said, they're more focused now. But in a way, is that sort of a way too early harbinger of Internet of Things? Is that what they were thinking at the time? It just didn't come to fruition. And what do you think about the Internet of Everything strategy? Yeah, that's a good question. I've always thought that they got too pulled into consumer. You know, remember they bought Flip Video? Yeah, right. So they were going to become a kind of a radio shack more. I don't know what they were thinking with the Flip Video, but their roots are in network administrators, CTOs, service providers. So I always think you should stay to your roots. Scientific Atlanta, you're selling, you know, consumer boxes, and it's with cable companies. Sure, they have a big cable business, but they drifted a little. So now I think they're going back to their roots. A telepresence? You would sort of put that in the same category, or is that a different story? Well, it's a communication application, so I think that's in their roots, communications. And so how is it that nobody was able to knock them down? I mean, two-thirds of the market is pretty good. I mean, there are other companies that have sales and marketing machines, certainly IBM, guys like EMC. None of them have been able to command and hold as much of the market as Cisco. Why do you think that is? That's a great question. I mean, history has shown when you have that kind of market share, you know, 60 plus market share, it's very hard to knock you off with the pinnacle. Look at Microsoft. I mean, we're still using Excel, even though they're pushing Google spreadsheets on us, right? Well, they had a monopoly though, right? Well, Cisco has a monopoly, and Ethernet switches basically. I mean, they own, I don't know what it's at these days, but it's a vast majority of the switches out there. So what's the source of that monopoly? I mean, with Microsoft, it's the binary code. With Intel, it's, you know, the microprocessor running the code. What is it with Cisco? Is it the affinity that the network administrator has with the Cisco devices and the interfaces? Hey, you can speculate. I heard one theory which was really good at a certain point, it's the training certification. Okay, think about, you're an IT manager, and you've invested your career in Cisco. What's your, why would you get rid of Cisco? It's a self-fulfilling property. Your entire resume is, I do the Cisco CLIs. I've been certified on this, this, and this. I knew the insight and out of a Cisco router. Why would I want to rip and replace that? It's been amazing to me, John, to watch that, and, you know, you think they can hold the job. Well, no, here's the thing about Cisco. I've been following Cisco for a long time, almost two decades. Cisco has great competitive strategies, and they're nested in all the accounts. You can't just unwind Cisco. It's not like a firewall, swap out one box. It's a huge undertaking, so the switching costs are very, very high. But what's happening now in the destruction of the cloud is there's now a viable path with cloud and cloud services to start chipping away at some of that market share. So, Cisco is on notice, and I think the Nasir acquisition was a wake-up call. We all talked about that in great detail at VMworld, Dave, and that's key, so I think Cisco's fine. I mean, no problem with Cisco. I think very slow, you know, the innovation strategy has always been M&A. Organically, they've been challenged, but of recent, we've been hearing, as Scott pointed out, there's some innovation there. The issue that I have is, how do they work with the ecosystem in the cloud, is you have an open source confluence with scalable DevOps culture. That's a cultural shift, where they can be disrupted, where the personnel being disrupted is the old school, like the mainframe guys, so the new school DevOps guys can come in and say, hey, I've got this factory wave with SDN, all this stuff with virtual machines, I could potentially put a threat there. So, you have an interesting community culture clash there. So that's one thing. The other issue is the other legacy vendors, like Juniper and HP, great networking strongholds, HP in particular, with their enterprise sales force. Juniper, with the management changes, is not even here at the show, so that to me is a big issue. What does HP do and what's going on with Juniper? So Scott, give us some insight into what's going on with Juniper and how does HP fit into all this with Bethany Mayer now taking on a new role? You made a great point, which is why aren't they at the show? I think actually more people should be at the show, obviously, but because we're here, right? So I just rolled in, so who's not here? Juniper's not here? HP? HP is here. HP is here, but just kind of a watered down. So the whole networking world is here, except for Juniper? Well, HP's kind of watered down. I talked to their people, I haven't heard back from any of them over there, so like, but they have some organizational changes. As you know, Bethany Mayer's no longer in charge. No one really kind of knows what's going on there, so I think it's just more of better not to say anything at this point. Anyway, Scott, sorry. It sounds like, it looks like indecision. If you don't show up, the market perception is going to be either indecision or we don't know what we're doing, we don't know where story is. The negative gesture. So you got to come up with a story, right? The crowd's watching and they're talking about it, so we have to talk about it. I think Juniper is pretty clear, right? Turmoil at the top, they have management change, so they're rebooting management, and they're just trying to figure that out. SDN, they've had a lot of people leave the company late but still get some great talent there. Also got Carl Ikan breathing down your neck, that's never fun, right? Yeah, I mean, that's why Gellwan privates, just to get that mucky up your back on the public market. So what about, let's go back to, you brought up Nicera, I know Martine is coming on. Scott, you mentioned NCME. So what did you make about, take, let's go back to that whole Cisco or VMware acquisition of Nicera. VMware donating the code to OpenStack, to try to get some traction. Is there traction with Nicera? Is the NCME move going to allow Cisco to maintain its 66% stronghold? Yeah, there's absolutely traction. I think VMware is in as good a position as anybody. I think the way to look out of it is, Nicera, VMware is coming from the server software side. Cisco is coming from the networking hardware side, right? So completely different perspectives in terms of who you're talking to, who you're selling to. What's interesting, the story of the SDN market is, we're told is that these markets will eventually merge into one, right? The networking boxes will be servers and the servers will be networking boxes. I think the question- And storage will be in there too somewhere. Exactly, you're breaking down and integrating the silos. So who's best position to do that? I don't know. VMware and Cisco have most of those tools. The question is who gets there faster? Well, I wonder if you could comment on this. From a practitioner standpoint, from the end customer, the organization is really not converged, right? There's still silos of compute and storage and networking guys. And given that Cisco has such a stronghold with the network folks, is that an advantage or is it a liability in your view? Great question. I hear more about this DevOps movement, right? So these people seem to have more power, the DevOps people. Who are the networking guys reporting to? They're reporting into the CTO, and the DevOps guys are reporting into the CTO. Who has more power these days? The DevOps guys are the rock stars now, right? I feel like it's gravitating towards them. And again, this movement, the whole movement is about a full view of everything, all of your resources, which is what DevOps is about. So I think that plays a little bit into VMware's strength more than Cisco's strength. John, you were referencing that before, the whole DevOps crowd as a lever. It's a disrupting opportunity, so I just posted on Twitter our commentary on Cisco and certainly Juniper and HB. Will they be disrupted or be the disruptor? Will they take offense or will they take defense in this market? Obviously, I would take the offense, I would suggest that, just from a market observation standpoint. But really ultimately, it comes down to the business model, Dave. And Scott mentioned the cannibalization, a huge, huge issue. At what point do you eat your own to bring in the new? And at what point do you play offense on your own self just to preserve future growth? That's innovation strategy that's what these guys are thinking about. So Scott, you wrote a blog post on your blog about the business model. What are some of the conversations you're hearing? Sorry, you mentioned last night you were getting some scuttle butt and some commentary from the folks there. What's your analysis tell you about the business model of SDN? And you mentioned SDN starts going through the series D, that's a later stage financing. And they haven't made it yet. So will they implode or are they going to find some beach head? What's your take? Well, I mean, you see this already in the market. I hear a lot of people talking about 2014 is the reality check for SDN startups. You got companies like Big Switch and Plexi and Kimulus. All these guys are out there, they're into their second, third round of financing. This is when the VCs decide whether to double down or pull the plug. This is the year. So you have a company like Big Switch which could be called Big Marketing Switch now because they've changed their story. They've got change at the top and people are scratching their heads. That's what, I mean, this isn't my opinion. This is what people tell me. And then you have a company like Kimulus which is super hot right now. Everybody's got great bugs. It's got IPO potential. So there's going to be a real shake-up. How's their revenue? What's your take on Kimulus? Are they actually booking revenue? Are they have traction or is it manufactured? I don't know their revenues, John. But I know they're hot and I know that people are investing in the concept. I know that the Dell partnership is huge for them and there will be revenue attached to that, right? If you're partnering with Dell and you can plug your OS into all the Dell equipment, it's got to be a good story. We had the CEO of Kimulus on theCUBE and it's basically a sales deal but you've got Marius Haas at Dell who knows what he's doing. He came from HP, he did the three-com acquisition. Michael Dell's sharpening the pencil, going private. They're not going to fool around. So I think that is a good deal. Dianna, find out what some of the results are from now. Scott, I wonder if you could talk about, maybe we could look at it from a practitioner standpoint. I mean, I'm a network neophyte. So I'm kind of a sponge. So I'm asking you all the Colombo questions but you always hear people talking about the architecture shifting from North-South to East-West and presumably that relates to cloud and hyperscale but when you're all talking to customers and observing what's happening in networking trends, what does that mean and who's in the best position to capitalize? That's a great question. I mean, the startup that best reflects this concept is a startup called Plexi. Is the one with them? And that's an interesting story too because like I mentioned earlier, a lot of this is reminiscent of the optical bubble. The optical technology is now being pulled into the data center, right? So you have, the whole East-West thing is about, you have all these racks of servers and communication and data flying around the data center. The machine has to get more intelligent about instead of just randomly switching stuff when it comes, figuring out where these East-West connections are, you know, is Amazon talking to Facebook more than somebody else and then connecting that with optical and that's what kind of what that movement is about. That movement is about the split between the optical and the electrical because optical is always a cheaper way to move traffic. So if you can figure out how to not switch in electrical and move stuff optical, that's a big deal. It's going to save a lot of people money. And so you're talking about a threat to ethernet or not necessarily? Well, it's a threat to ethernet switches or if somebody comes out with a more efficient switch, let's say that's half optical and half ethernet, sort of all ethernet, because electrical is always more expensive than optical, remember? And figures out that, okay, half of this traffic is just going between these two guys. We put it on an optical link and it just goes back and forth all day and we're not spending all that money on all this expensive electronics. That's, you know, and that's Plexi's play, as I explained. There's also, you know, optical incumbents such as Infanera and Sienna, which see this as an opportunity. So they're going to be playing at it too. Optical is back. Optical is still a very valuable technology, right? The bubble burst, but it's reformed, right? And so it's not game over ethernet has won. Maybe these hybrids have a place in the market. Is that what I can infer from your comments? Absolutely. I mean, optical is going to, like it's a cheaper technology. So it's going to continue to creep down into the market. Like at one point during the optical bubble, you know, somebody told me that someday your computer will have optical interfaces. So just think about that. It started in the service provider from LA to New York because that was big honking bandwidth and then it's creeping into the data center. It's going to be in the enterprise eventually, but at what point do you need, you know, 100 gig optical links in the enterprise? I don't know, not soon. I don't think. And what about a Fitiband? Is that just an HPC niche? It'll stay that way or? You see, you brought these guys. Yeah, so that's it. I'm not as much of an expert on sand technology, but you have all these specialized, storage has a lot of different specialized optical technologies versus DWDM, which is traditionally service provider. Scott, talk about the optical comment you made on the intro around the bubble or the common you meant. This looks like the optical industry from before. What do you mean by that? I mean, there was an explosion of height, explosion of interest, explosion of capital. Funding, right? Explosion of startups. But I personally, I like bubbles, John. I don't know about you, bubbles are kind of fun. Innovation bubbles. Right, and they create something in the end. There may be carnage and a shakeout, but at the end, look at the internet bubble, right? There was massive carnage, you know, our stock portfolios went up, our stock portfolios went down, but now everything's on the internet. It built this fabulous system of everything. I think that's what's going to happen through this year. So the bubble was actually a harbinger of what was to come, but so are there, so before the internet was this big, broad bubble, right? It was everywhere. I mean, even the legacy guys were benefiting. You know, Son was the dot and dot com, and so everybody benefited from the internet bubble. There seem to be, we sometimes use this term, John, bubble-licious, there seem to be parts of this industry that are frothy right now. Where do you see the bubbles? Well, I mean, not to pick on big switch, well, maybe I will pick on big switch. We have this hype about the controller market, right? And, you know, VCs move like lemmings in packs. They see a shiny piece of paper, and they all have to fund the exact same- Mike, Mike, Mike. Shiny piece of paper. So they all, you know, thought controllers were SDN, and so, and then Open Daylight came out and kind of has changed. So you're going to see kind of shakeouts like this. You know, I, you know, it's going to be interesting what happens with Cumulus, too, because, you know, Linux is open source, so it's to stop somebody else from throwing out a Linux open source operating system there. But, you know, some people are going to move faster and gain competitors and lock them in. I wish I could tell you how it's going to work exactly, but I know it's going to be interesting. Well, let's talk a little bit more about open source, because open source is such a wild card. I mean, who, very few people, and maybe one that I know predicted open source might take down, not take down, but neutralize Microsoft's monopoly, which is so huge at the time. So it's a real wild card. How does open source fit into the networking world? What do you see as the major trends, and it makes it very difficult to predict, I agree, but open source as a concept has taken hold, it's a major force. How does it impact networking? Well, at the fundamental level, it's hard to describe exactly what software-defined networking is, but at the fundamental level, the big brains here describe it as separating the operating system from the networking hardware. So you have, and traditionally, the market has been proprietary operating system, proprietary networking hardware. So that's at its most basic level, that's what it is, which shows you how chaotic it is. Because what do Jinnoper and Cisco sell? They sell their operating system. So if I can go on the internet and download an ethernet operating system tomorrow for free, it changes the game. So John, what are your thoughts on openness impact on the market and general and networking specifically? Well, I think Scott brought up some of the business model issues that I think is relevant out to the incumbents, old incumbents, this new incumbents. I mean, if you're in your series D financing, you're basically a new incumbent that's groping for a position. You hope that you hit lightning in a bottle before the clock expires, so to speak. And that either is going to come from the VC or just market evolution and you're extinct at that point or you've made it, you've got to cross over. But I think fundamentally looking at all the data from the research we've done and looking at the crowd and also looking at all the different shows like Open Compute, OpenStack, the number one force that I see, Dave, is the DevOps cloud model is forcing function to the networking world where it's predicating movement. You have to move or you will die. So you're seeing the applications growth, driving that the diversity of endpoints, the internet of things, forcing what was traditionally an edge of the network concept to be application specific. Virtualization enables that. So I see that as a driver. Two, you're seeing an operating system software mindset coming into networking, which is interesting because you have kind of system guys and network guys are CS guys, double E majors kind of culturally blending together. You're seeing three tiers of thinking. Everything's as a service. There's a network service, service endpoint, security endpoint. That's an operating, that's a principle, design principle that you got to get your arms around. Logical design with virtualization, mapping it to physical infrastructure. That's one. Two is what I call the operating system software that's combination of open source, ecosystem collaboration, open systems model. That is an operating, it's a coding concept. That's a CS less of a get in the trenches with packets, packet design and electrical engineering kind of thinking. And then three ultimately is the cloud operating deployment model or operating system. So design principles, getting into the network OS, cloud operating system model within the data center networking and then ultimately cloud deployments. So Dave, that's what I'm focused on and it comes back down to everything as a service, security services, networking services, north, south, east, west, API management and just the confusion of Martin Casada's keynote summarizes that. He's trying to talk at a high level without going in the weeds because there's so many different dimensions. So to me, I think the cloud drives this whole new fundamental network approach. Well, and I think the other piece and it's sort of inside plumbing, but the whole metadata, right? We talk about metadata, NSA, you know, let's put this metadata. There's all this metadata that's locked inside of all these hardware devices, whether it's networking or compute devices or storage devices and this whole software defined meme starts to bubble that metadata up and once you have that, you can start to do interesting things with it. And I think that's where a lot of value is going to be driven. Okay, well, we got a break for our next segment. Great conversation with Scott Rainow-Vitch, lead analyst at Rainow Report, senior analyst Dave Vellante here, two great analysts and a lot of experience. And ultimately, this is about cloud scaling, applications scaling and the rest is about networking under the hood. And that is the real activity. This is the future of networking. This is theCUBE covering ONS 2014. We'll be right back with our next guest.