There's a shake-down coming to the $23 billion networking equipment market currently dominated by Cisco. On the one side is Cisco and its traditional competitors like Juniper Networks. On the other is an odd assortment of players including Cisco's close partner VMware, a string of startups and, most recently, Facebook.
In 2013, Kumar Srikantan left his role as vice president and general manager of Cisco's Enterprise Networking Group after 14 years to become CEO of one of the competing startups, Pluribus Networks.
The industry is fighting over something called "software-defined networking" (SDN) which is a new way to build corporate networks. With SDN, the fancy features included in high-end networking gear is moved to software running on a lower-cost computers. Companies still need network equipment but they need less of it, and less expensive varieties. Using SDN makes the network easier to change and manage and better for cloud computing data centers.
SDN has also been a hot market for VC investment because a whole bunch of SDN startups were acquired for huge sums of money, sometimes when their products were barely shipping.
"I've been around the block across Cisco in routing and switching. It was nice and was comfortable, but there was so much action going on in terms of software-defined architecture and the market. I was being approached by VCs for months," Srikantan tells Business Insider.
While no one believes that this new technology will wipe Cisco off the planet, it could eventually hurt the fat ~60% profit margin on network products that Cisco has enjoyed for years. Cisco isn't standing still. It developed its own SDN technology by funding a spin-in company called Insieme then purchasing it for $863 million. No doubt a lot of Cisco's customers will want that product.
But Facebook recently filed a big shot at Cisco by introducing a SDN switch of its own called "The Wedge." Facebook isn't selling the switch. It is giving the design away for free as part of its bigger open source hardware project called Open Compute Center.
Facebook's switch could prove the promise of SDN — that networks can be built using less expensive hardware.
Pluribus' Srikantan thinks Facebook has it right.
"There is no direct connection between Facebook's Wedge and our products at Pluribus, but the vision is the same," Srikantan says. "We took standard off-the-shelf components from Intel, from Broadcom, from others, and created a system that just puts it together. That's the promise of Facebook's OCP."
Pluribus has been around much longer than Facebook's Wedge, which means that Facebook has validated his company's approach, he says.
Srikantan has faith that Cisco will still do well in the SDN market. He says Cisco is a "very strong company" run by "very smart people."
But he thinks the old way of building networks — buying expensive pieces of hardware equipment from companies like Cisco or Pluribus — won't live on.
"You are seeing a shift, even in network operations staffs, trying to take advantage of this new stuff because this is the future," Srikantan says. He has staked his career on that belief.
Pluribus has gained some big marquee customers, too, like Airbus and CloudFlare. Cloudflare is another startup taking on Cisco by turning networking into a cloud service.
Meanwhile, Cisco says that its ready for the likes of Pluribus, Facebook and all the SDN players. A spokesperson previously told Business Insider that their competitor's tech "is loaded with hidden hard and operational costs" and that at Cisco, "we know this segment of the market (largest Internet players) very well. We intend to retain and grow these customers."
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