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Posts Tagged ‘data center’

This week Avaya held its reseller event, the Avaya Executive Partner Forum, in Cancun, Mexico. During the event the company highlighted some positive changes to its channel program and addressed some of the more controversial issues head on. Considering the number of new products that have come out of Avaya over the past couple of years, including new versions of Aura, IP Office, video, VSP 9000 to support the VENA architecture, wireless, collaboration pod, I really don’t believe product is an issue for Avaya anymore. The company must execute on its channel plans for growth, which will put it in a better position for an IPO in the future.

The most pressing issue Avaya and its channel partners face is growing network share. With all due respect to the excitement around video, cloud services and other hot markets, good old fashion networking is the key. If you look at the big buckets of IT spending, Avaya already owns about a quarter of the telephony share (give or take, depending on whose numbers you use), so gaining significant share there isn’t likely. Looking at the exciting video market, that market isn’t more than a couple of billion if you include infrastructure, end points and related items. If Avaya somehow miraculously took 20% share in that market, that’s equivalent to about $300M-$400M in revenue. However, just 5% of the $20 billion Ethernet switch market is $1 billion in revenue.

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I started the analyst part of my career way back in March of 2001. I was hired by the Yankee Group to run a group that looked at broadband services and the first report I wrote was on a technology called “IP Service Switches.” These products came from companies like CoSine, Ennovate, Allegro, Celox, Shasta (acquired by Nortel) and SpringTide (acquired by Lucent), and promised to deliver scalable, low-cost virtual services from the edge of the service provider network. The idea being that a carrier could offer multi-tenant, value-added services from the edge of the network from a single platform. However, IP service switches never really took off and the category died a slow death.

Earlier this week Juniper made an announcement that seemed eerily similar to what these vendors tried to push back in 2001. The company unveiled a new set of hardware and software products that run on the MX Series 3D Universal Edge router. By deploying the MX 3D, service providers can offer a number of revenue-generating, value-added services, such as load balancing, firewalls, content management, security services and content streaming right from the edge of the network. After a closer look, the range of services Juniper is offering is broader than what was available in the IP Service Switches of 10 years ago, but the concept is the same.

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Who is John Galt? That’s the famous opening line from the literacy classic, Atlas Shrugged, by one of my all-time favorite authors, Ayn Rand. If you’ve read the book, you understand the meaning of the question. If you haven’t read it, I’ll explain. The question is meant to be a sarcastic phrase used to respond to questions that have no answers, or questions whose answers have no point. For example, “Why is America so fascinated by reality TV?”: “Why do my kids’ hockey bags smell so bad?”; “Why won’t the Obama administration allow for a one-time cash repatriation holiday?”; and “Why can’t the city of Cleveland ever have a decent sports team?” The answer is a simple “Who is John Galt?”

I bring this up for a couple of reasons. First, part two of the movie comes out in October (I guess another question might be, “why do all great books make terrible movies?”) and this past VMworld in San Francisco has made me ponder another unanswerable question – “Why do IT silos still exist?”

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Brocade last week released its quarterly earnings and also announced that long time CEO Mike Klayko would be resigning his position at the company.  This ends a lengthy tenure for Klayko who joined Brocade in 2003, through the acquisition of Rhapsody, and then was named CEO in 2005.  

One of the questions I’ve been asked often is what kind of CEO should Brocade hire to replace the flamboyant Klayko?  I think the incoming CEO needs to be a nuts and bolts person with good operational strengths and also someone with a channel background to continue what Klayko put into motion.  Despite the flat stock price over the past several years, it’s hard to argue the company isn’t well positioned to take advantage of current trends such as cloud computing and virtualization. 

To understand why I feel that way, let’s look back at the Klayko tenure and the positives and negatives which put Brocade in the position it’s in now. 

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Cisco added to its long list of acquisitions after recently plucking off Silicon Valley-based Virtuata. Virtuata is a provider of virtual machine and cloud security and will be incorporated into Cisco’s data center group, which is run by former Q-Fabric chief David Yen. No financial details were given but the company only has 15 people, so it’s likely to be a relatively small deal for Cisco.

This is typical of Cisco, which either buys large, market-leading firms like Tandberg or WebEx, or very small technology companies that can be dropped into existing business units. Considering the Obama administration has yet to grant a repatriation holiday, and is unlikely to prior to the election, this is likely to be what we will continue to see from Cisco regarding domestic acquisitions.

This move makes sense for Cisco for a number of reasons. First, security remains the biggest inhibitor to cloud and virtual environments, so adding a security product into the mix makes total sense. Virtuata is also a technology company, making integration into Cisco’s existing products such as its Unified Computing System (UCS) and Nexus-based Fabric much easier than if it had been a product company with a large install base.

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