Last week I was sitting in a cafeteria on Cisco’s San Jose campus drinking my morning Latte (tall with non-fat milk, in case anyone is running to Starbucks) when I had a chance encounter with a former colleague of mine. I asked the typical small talk questions about how he was doing and what he has been up to lately. Among the chit chat that ensued one word stood out; OpenFlow. Yesterday, Cisco announced it was developing an OpenFlow implementation for the Nexus 3000 and eventually the rest of the Nexus family.
It was easy to see this one coming as Cisco could only sit on the sidelines for so long. OpenFlow and software defined networks (SDN) have too much momentum for Cisco to ignore. When I recently heard the rumor that Tom Edsall (Cisco Fellow and my former CTO at Andiamo and Cisco) and Ned Hooper (SVP and Chief Strategy Officer at Cisco) paid a visit to Nicira I wasn’t too surprised. Since Tom’s return, after some time abroad, he has been teaching part time at Stanford, the birthplace of OpenFlow. No doubt Martin Casado, CTO at Nicira and fellow Stanford professor, has been planting the SDN bug in Tom’s ear.
So what does this really mean for Cisco, OpenFlow, SDN and potentially Nicira? At this point I think Cisco is hedging its bets. Merchant silicon combined with SDN has the ability to seriously erode Cisco’s hardware value and famous (or notorious depending on your point of view) 65%+ margins. That means Cisco will have to unlock the value of it’s software, possibly by developing IOS and NX-OS based SDN solutions, coupled with its recent management technology from its acquisitions of LineSider.
Cisco could take the pressure off by snatching up Nicira or Big Switch Networks before they get too far along. This would give them some quick IP but more importantly buy them time to develop a Cisco implementation of an OpenFlow ‘like’ solution. Let’s face it; OpenFlow is too ‘open’ for Cisco. They have a history of developing technology (great technology to be sure) and opening it up to the industry only after they can deliver hardware and software value on top of it. One thing is clear; Cisco now recognizes the threat to its business and won’t allow others to grab more than crumbs of market share without a fight. The next twelve months should be interesting in the networking space.