- A source told Julie Bort that John Chambers asked his top execs to study the impact an all-out embrace of software-defined networking (SDN) would have on Cisco (CSCO) Their reported conclusion: Such a move would turn Cisco from a "$43 billion business into a $22 billion business."
SDN is a huge threat to router and switch makers because it moves the features built into the expensive hardware to software – allowing networks to run on cheaper hardware.
But, Cisco's plan is to overhaul its switch/router lineup to support SDN by offering controller software and APIs directly tied to its proprietary, ASIC-based switches and routers. If broadly adopted, Cisco's offerings wouldn't threaten its switch/router sales or the high margins attached to them.
Cisco dominated Enterprise Networking in 2012.
A full-year data report from Synergy Research Group shows that in 2012 the six main segments within the enterprise networking market generated $45 billion in revenues for technology vendors, with Ethernet switches now accounting for almost half of all spending. Cisco achieved an average 54% market share across these segments in 2012, ranging from a high of 68% share of routers down to a low of 27% share of UC applications
Cisco’s overall market share actually nudged upwards from 2011 to 2012, thanks primarily to maintaining its status in the switching and routing segments while increasing substantially its share of the voice systems segment.
The SDN Market Size is estimated by Infograhic to reach $35 billion by 2018 driven by Cloud Computing, Big Data and Mobility.
There is a spike in VC investment and all the big players are acquiring smaller SDN players.
Big Switch Networks, VMware/NIcira, and Facebook (among others) are pushing solutions enabling SDNs featuring commodity hardware based on off-the-shelf processors from the likes of Intel, Broadcom, and Marvell. Bort reports Cisco saw a $1B deal with Amazon fall through after the cloud infrastructure giant decided to opt for "cheaper hardware and SDN."
Cisco has had too much market share for too long. When transitioning to SDN and commodity hardware, customers are taking advantage of Independent Maintenance on their installed Cisco equipment.