Virtualization Demands Will Drive the Next Network Revolution

Whenever there are technology disruptions there is a period of time when smaller upstart companies and established giants are at a kind of parity. The premium on technology and speed is momentarily higher than the premium on stability, safety and size. Enterprises invest in upstarts (or even larger players) during this period because they can deliver sizable strategic advantages.

Today virtualization is creating new demands for yet another disruption. Perhaps the first shots in this revolution were fired last week at an all day working session of networking legends and “Young Turks” at the SRI Infrastructure 2.0 meeting. Time will tell, but the level of interest and discussion was exhilarating and timely. Vint Cerf, Bob Grossman and Dan Lynch did an incredible job setting up the session with the help of SRI.

Virtualization Demands will drive the next Network Revolution

My take on why we met: Because of the spread of virtualization the IT industry is already experiencing the effects of an increasing disconnect between system and network automation. Virtualization, for example, increases the rate of change and can create new levels of network complexity (see virtualization-lite) because of the proliferation of static vLANS (virtual network segments).

A participant in the SRI 2.0 session told me during the lunch break that vLANS are “ugly, necessary workarounds” (as they continue to spread through production data centers). That’s because the decoupling of application from hardware enabled by virtualization is still tethered by network shortcomings… the final frontier for cloud computing.

As automated systems multiply and move, static networks are increasingly taxed or disconnected by the costs and delays inherent with manual labor, committees and necessary approvals. Yet virtualization will continue, with or without the network team, because of its powerful initial ROI and the ability of the VLAN to restrict movement and allocate security and delivery policies to groups of virtual servers.

This kind of virtualization-lite (virtualization by VLAN segmentation) is powerful because it breathes more life into a tired, static network; it also demonstrates the power of automation. It is often the first phase of virtualization being deployed because it minimizes the network effects, at least initially.

Virtualization-lite is the “lightning in a bottle” that proved innovation in IT is still alive and can reap truly amazing payoffs. Yet over time it pushes the network envelope and experiences the same challenges it initially helped networks avoid.

Virtualization also represents a cultural shift in expectations and the emergence of early cloud computing economies. Yet more VMs and VLANs mean more complexity at some point; different sized networks will reach that point of obsolescence pain at different times.

When the Shift hits the VLAN

The initial period of substantial capex payoffs ultimately levels off and new opex burdens emerge as VLAN complexity replaces sheer endpoint complexity. VM sprawl becomes vLAN sprawl and ever increasing OPEX is required to service the existing architecture.

Increasing cost and complexity then sets the stage for the next tech revolution, centered in the network itself, setting in motion new network economies and new cloud computing potentials. Players to watch (including those who aren’t networking equipment vendors) include Cisco (CSCO), Citrix (CTXS), VMware (VMW), EMC, Oracle (ORCL), HP (HPQ), Juniper (JNPR), Sun (JAVA), IBM and F5 Networks (FFIV).

The first companies to drive expense out of the network will have a strategic advantage over those who simply rely on faster, cheaper (capex models) gear as the industry experiences disruptive new realities driven by rising complexity and movement.

Last week Mark Anderson’s paid SNS newsletter highlighted a few comments I made at the 2009 Future in Review Conference about the rising cost of complexity, and then made an interesting comment:

Complexity costs exponentially more, the more complex it gets.

So here is a pretty interesting question:

As we construct ever more complex systems, at what stage(s) do we encounter reverse economies of scale? And are we armed with any useful techniques or theories to assist us in overcoming this set of issues?

- Mark Anderson, The Cost of Complexity, SNS News, Week of Aug 31, 2009

Yet the next network revolution is about more than reducing complexity and cost, it’s about a new and powerful synergy between automated systems and automated networks. New applications, new economics, new potentials are unleashed by this synergy, transforming the IT industry yet again.

Those who view automation as simply labor replacement will again be left behind as automated networks find new missions and sell more gear and make those who run them ever more strategic to larger and larger networks. Companies who master the complexity and drive out costs are the future hope for new careers and innovations.

The Power of Stateful Live Migration

One of the promising new capabilities associated with network automation is stateful VMotion (or stateful live migration). Stateful, frictionless live migration of servers in pursuit of temporary operational advantages is a key factor in the future of cloud computing, especially private enterprise clouds. It will flip the economics of mainframe-era centralization strategies (even those in low cost areas) upside down as networks once again prove the power of the mesh over the isolated container.

The ability to shift processing cycles from one facility to another, for example, based on even temporary changes in expenses, users, taxes or disaster effects, etc. is infinitely more powerful than a one-time static decision made every 10-15 years supplemented by manual shifts and committees. We’ve seen this movie before and we’re about to see it again.

The Trigger Point

The emergence of larger and more complex vLAN empires will ultimately create enough pain and complexity to force the evolution of network infrastructure, in the same way that the static network created the massive production virtualization opportunity. Larger, more complex networks deploying increasing populations of VLANs will be the first to evolve. And thanks to some of my personal heroes in networking the effort may have just begun.

Disclosure: Long - VMware

Comments

[ray b:]

Thanks for the article. I cant wait til I have a Cat 12 cable running down to the sewer where an EMC/Cisco server gives me 100 Jigawatts of power.

Sep 10 09:24 AM

[Gregory Ness:]

Good luck! Let us know how it goes.

Thx
Greg

Sep 10 07:57 PM

[BigOlDave:]

Though "Long VMware", which do recommending as an investment to play this space?

Average P/E for this group is 33 (leaving out Sun with negative earnings), ranging from the long-in-the-tooth IBM and HP in the teens to VMware at 52 !

This is a nice recap of the SRI Infrastructure 2.0 meeting, but I'd have liked some investment ideas pro- or con- for these 11 companies, or others that might be big-time victims of the oncoming changes.

Dave

Sep 11 04:27 PM

[Gregory Ness:]

Dave:

I don't provide investment advice. Each of these companies has their own internal financial dynamics, etc which I don't track as I'm tech-foocused. I'm long VMW, SVVS, AMZN, SNDK and am watching CSCO as their UCS evolves. I'm not betting that they'll dominate but rather that as a set they'll have a disproportionate advantage based on their market positions and technology. I like SNDK because of the rise of flash memory; SVVS because of their cloud savvy and VMW because they seem to understand hte importance of the network and phase 2 virtualization. I think AMZN is also well positioned. Again, I'm looking at tech withj a 1-2 year horizon.

Thanks,
Greg

Sep 12 10:11 AM

[Wisdom vs. ...:]

Greg,
how will the cloud development impact the 'simpler' co.s (relatively dumb pipes?) like Q, LVLT and XOHO? will they simply move more traffic and/or contribute storage and processing by upgrading data center and network through software and faster equipment (ie, 100G optical modulators), or be bypassed completely by the likes of AMZN? i realize software is most interesting (and important), but i am trying to grasp how this is going to take place physically. there have been unresolved debates about how existing cores, data centers etc. will be effected; my assumption has been that all data centers will be effected b/c they need to work together, thus they will evolve (and be upgraded) together. thoughts?

Sep 12 02:06 PM

[Gregory Ness:]

Wisdom:

I think the network equipment vendors who focus on dumb pipes will face shrinking habitats and increased competition from the likes of Huawei and cloud providers. IMHO the second stage of virtualization will create more load requirements. The question would be the use of dumb versus smart beyond the enterprise network and the clouds.

G

Sep 12 07:52 PM

[Glenn Allison:]

Wisdom, I think it might be interesting to consider your question in terms of competitive advantage, company strategy, and the context in which the company is operating. Is the company selling a commodity service, or are they innovative and driving new increases in productivity?

Sep 16 12:28 AM

[jades123:]

There is a company that can deliver sizable strategic advantages. NetEx software. Their WAN/vLAN optimization software runs on VMware ESX/EXSi/vSphere platforms.
Entrance pricing for a T1 version of HyperIP for VMware is less than $2,000 per software license instance.
The software scales from 1.5 Mb/s to 800 Mb/s.
Having the software run on VMware negates the requirements of having specialized hardware appliances in the network for WAN/vLAN optimization. All a company has to do is install the HyperIP for VMware image on the VMware servers and they are ready to start optimizing their networks.
NetEx offers a 10 day FREE trial of HyperIP that is downloaded from their website. netex.com
So if your readers want to optimize their network, and increase productivity NetEx HyperIP for VMware may be a good choice to consider.

Sep 23 12:39 PM

[Gregory Ness:]

Jades:

You know... you should be paying me for these kinds of plugs tied to the column. :)

Greg

Sep 24 06:59 PM