Cisco has something to say about how Facebook elbowed its way into Cisco's turf, the $23 billion Ethernet switch market.
And it amounts to "we're ready to compete with you and all who follow you!"
To recap: this week a project led by Facebook, the Open Compute Project, introduced a radical new design for a network switch and is giving that design away to everyone for free. A switch is a special computer that connects PCs, servers, and devices to the corporate network.
Facebook's switch is called "the Wedge" and it will be heavily watched by Cisco's customers and competitors.
That's because it uses a new method for building corporate networks called software-defined networking (SDN). SDN makes it easier to expand a corporate network and move computers, devices, and apps around.
SDN is a threat to Cisco's business model of selling high-performance network equipment with high price tags to match. it takes the fancy features included in expensive equipment and puts them into software. Companies still need switches but they can buy less expensive ones and fewer of them.
Cisco isn't standing idly by. It recently introduced its own SDN products developed through a spin-in venture called Insieme. It named these products Application Centric Infrastructure.
But the Wedge has nothing to do with Cisco. It was designed from scratch using open-source software like Linux. Everything from the software to the choice of processor (Intel, AMD, or ARM), can be easily changed, Facebook says.
And the Wedge is being tested in Facebook's demanding data centers. If it does well there, enterprises will start to trust that SDN is a solid technology. They could start to experiment with SDN products from companies other than Cisco. In fact, two of Cisco's competitors are involved with OCP, newly public company Arista Networks and SDN startup Big Switch Networks.
Naturally Cisco has its own thoughts about the Wedge and the other SDN up-and-comers, especially the biggest one, VMware. Namely ...
- It plans to tell people how other SDN products have hidden costs that make them more expensive than Cisco.
- It will point out how Cisco is making its own products more flexible.
Here's what Cisco's director of corporate communications, John Earnhardt, told us:
It is our belief that the open source switch market, sometimes called the "white box" market, is largely only attractive to a small, highly-resourced subset of the overall I.T. market.
That's because the approach is loaded with hidden hard and operational costs. For example, networking capital equipment outlays typically constitute only 30% of the cost of running networks. Labor costs constitute 50%, and will increase with the white box approach as IT departments are required to install, integrate and update separate network operating systems and network virtualization software.
The largest hidden cost comes from network virtualization software licenses. VMware NSX, for example, charges a per-virtual-machine licensing fee ranging from $10-$50 per month. ... white box networking costs [can] be 75% higher than for Cisco networks.
While the open source switch approach is definitely not for everyone, I want to be very clear that we know this segment of the market (largest Internet players) very well. We intend to retain and grow these customers by addressing their needs for more programmable infrastructure with our Application Centric Infrastructure strategy.
For example, 7 of the 10 largest Internet companies in the world are Cisco customers. These include Alibaba Group, China's largest online retailer, OVH, Europe's largest hosting provider, and Microsoft, the operator of Azure and Bing.
Here's a closer look at the Wedge.
