Ethernet sales fizzle, but self-aware networks set to explode

The money is moving up the stack, as always


The switching and server markets are loosely coupled, just like the machines themselves in the data center. When one goes up or down, the other tends to either lead or follow, depending on the technology transitions underway in both markets at any given time. The server market is in a bit of a slump, and the Ethernet switch market has followed suit.

As El Reg previously reported, server shipments were essentially flat in the second quarter, according to the box counters at IDC, and revenues fell by 4 per cent year-on-year to $12.2bn.

And, despite the transition to 10Gb Ethernet underway in data centers, Ethernet switch revenues at layers 2 and 3 of the network stack fell 4.4 per cent to $5.36bn. Some of that decline is competition, and some of it is penny pinching as some customers still think that 10GE server adapters and switches are too expensive compared to their gigabit Ethernet predecessors.

But not everybody feels that way, particularly customers who are building shiny new private clouds where the cross-server traffic of virtualized workloads almost necessitates a move to faster switching between machines and a flatter layer 2 network at that.

IDC reckons that sales of 10GE switches was up 10.7 per cent, pulling up the class average across all Ethernet switching, and that the aggregate ports shipped in the quarter rose by a very impressive 61.4 per cent to 3.5 million ports.

"The surprising decline in the Ethernet switch market after several quarters of positive growth is a result of several factors, but the highlight was that the slower growth in the 10GE core segment of the market could not completely offset the decline in the network edge/access segment," said Rohit Mehra, vice-president of network infrastructure at IDC, in a statement.

"10GE along with the emerging 40GE Ethernet switch segments are the ones to watch as growth in virtualized applications and converged infrastructure will continue to drive the need for advanced networks in datacenter build-outs."

Cisco Systems still owns Layer 2 and 3 Ethernet switching

The top five Ethernet switch makers and their market share by revenue
Cisco Systems still owns layer 2 and 3
(Source: IDC)

Competition in layers 2 and 3 is intense. This rivalry, particularly among server makers that have captive network divisions and are trying to unseat market leader Cisco Systems, is putting pressure on revenues, especially in the near-commodity gigabit Ethernet segment of the market.

Whatever's dampening Ethernet switch sales is in full effect in the United States, China, India, and Western Europe. Latin America, Japan, Central Europe and Eastern Europe had single-digit Ethernet switch revenue bumps, but sales in Asia-Pacific (not counting Japan) were down 3.5 per cent year-on-year; in the United States revenue slipped 6.4 per cent and in Western Europe it was even worse with a 10 per cent decline.

Just like server makers have made a mad dash for network switch makers in recent years, expect switch makers to either build or buy their software-defined network (SDN) software stack. SDN senses what's going on in the network and shapes the traffic across switches and routers in real time to changing conditions; in a way, it allows the network to become self-governing.

IDC projects that $360m in SDN software, including OpenFlow controllers and virtual switches for hypervisors as well as OpenFlow-enabled switches, will be sold in 2013, and that this market will explode to $3.7bn by 2016. This SDN forecast not only includes hardware and software, but also any services that are used to implement SDN on the network.

There are many ways to skin the SDN cat, and Cisco and HP in particular are using a mix of existing code and OpenFlow standards to build out their SDN software stacks while others such as Big Switch Networks, VMware-Nicira and Pica8 are going the open-source route. The interesting thing will be how the quasi-proprietary SDN vendors attempt to preserve their switch sales through SDN sales.

It could turn out that having competitive and cheaper Ethernet switches is not the way to topple Cisco. (That would be what HP and IBM tried to do to take on Digital Equipment Corp in the early minicomputer market.) But rather a move to a completely open-source SDN stack becomes desirable and therefore drives a hardware sale, much as the Unix open systems and then the Linux open source movements shifted server buyers from proprietary to RISC and then to x86 server platforms.

Cheap iron was not enough to move people off boxes. But cheap iron plus open source software that was also cheaper did get many companies to move some apps and to do all new app development.

Then again, Windows Server is not open source and it accounts for more than half of server spending and the vast majority of shipments. Ubiquity and familiarity on the desktop drives server sales at small and medium businesses, as does the vast Windows application portfolio.

Open standards, open APIs, and open source matter a great deal to a lot of people, but not everyone and not for all workloads. We'll see if server history repeats itself in SDN. No matter what, it seems clear that this is where networking profits are going to come from. ®


Other stories you might like

  • Walmart accused of turning blind eye to transfer fraud totaling millions of dollars
    Store giant brands watchdog's lawsuit 'factually misguided, legally flawed'

    The FTC has sued Walmart, claiming it turned a blind eye to fraudsters using its money transfer services to con folks out of "hundreds of millions of dollars."

    In a lawsuit [PDF] filed Tuesday, the US regulator claimed the superstore giant is "well aware" of telemarketing fraudsters and other scammers convincing victims to part with their hard-earned cash via its services, with the money being funneled to domestic and international crime rings.

    Walmart is accused of allowing these fraudulent money transfers to continue, failing to warn people to be on their guard, and failing to adopt policies and train employees on how to prevent these types of hustles.

    Continue reading
  • HPE unveils Arm-based ProLiant server for cloud-native workloads
    Looks like it went with Ampere – which means a certain Reg writer lost a bet

    Arm has a champion in the shape of HPE, which has added a server powered by the British chip designer's CPU cores to its ProLiant portfolio, aimed at cloud-native workloads for service providers and enterprise customers alike.

    Announced at the IT titan's Discover 2022 conference in Las Vegas, the HPE ProLiant RL300 Gen11 server is the first in a series of such systems powered by Ampere's Altra and Altra Max processors, which feature up to 80 and 128 Arm-designed Neoverse cores, respectively.

    The system is set to be available during Q3 2022, so sometime in the next three months, and is basically an enterprise-grade ProLiant server – but with an Arm CPU at its core instead of the more usual Intel Xeon or AMD Epyc X86 chips.

    Continue reading
  • US weather forecasters power up latest supercomputers to keep you out of the rain
    NOAA makes it rain for HPE, AMD

    Predicting the weather is a notoriously tricky enterprise, but that’s never held back America's National Oceanic and Atmospheric Administration (NOAA). After more than two years of development, the agency brought a pair of supercomputers online this week that it says will enable more accurate forecast models.

    Developed and maintained by General Dynamics Information Technology (GDIT) under an eight-year contract, the Cactus and Dogwood supers — named after the fauna native to the machines' homes in Phoenix, Arizona, and Manassas, Virginia, respectively — will support larger, higher-resolution models than previously possible. The cost to build, house, and support and operate these machines, now operational, will cost $150 million over the next five years, we understand.

    “People are looking for the best possible weather forecast information that they can get,” Brian Gross, director of the Environmental Modeling Center for the National Weather Service, told The Register.

    Continue reading
  • Google said to be taking steps to keep political campaign emails out of Gmail spam bin
    Just after Big Tech comes under fire for left and right-leaning message filters

    Google has reportedly asked the US Federal Election Commission for its blessing to exempt political campaign solicitations from spam filtering.

    The elections watchdog declined to confirm receiving the supposed Google filing, obtained by Axios, though a spokesperson said the FEC can be expected to publish an advisory opinion upon review if Google made such a submission.

    Google did not immediately respond to a request for comment. If the web giant's alleged plan gets approved, political campaign emails that aren't deemed malicious or illegal will arrive in Gmail users' inboxes with a notice asking recipients to approve continued delivery.

    Continue reading
  • China is trolling rare-earth miners online and the Pentagon isn't happy
    Beijing-linked Dragonbridge flames biz building Texas plant for Uncle Sam

    The US Department of Defense said it's investigating Chinese disinformation campaigns against rare earth mining and processing companies — including one targeting Lynas Rare Earths, which has a $30 million contract with the Pentagon to build a plant in Texas.

    Earlier today, Mandiant published research that analyzed a Beijing-linked influence operation, dubbed Dragonbridge, that used thousands of fake accounts across dozens of social media platforms, including Facebook, TikTok and Twitter, to spread misinformation about rare earth companies seeking to expand production in the US to the detriment of China, which wants to maintain its global dominance in that industry. 

    "The Department of Defense is aware of the recent disinformation campaign, first reported by Mandiant, against Lynas Rare Earth Ltd., a rare earth element firm seeking to establish production capacity in the United States and partner nations, as well as other rare earth mining companies," according to a statement by Uncle Sam. "The department has engaged the relevant interagency stakeholders and partner nations to assist in reviewing the matter.

    Continue reading
  • California's attempt to protect kids online could end adults' internet anonymity
    Websites may be forced to verify ages of visitors unless changes made

    California lawmakers met in Sacramento today to discuss, among other things, proposed legislation to protect children online. The bill, AB2273, known as The California Age-Appropriate Design Code Act, would require websites to verify the ages of visitors.

    Critics of the legislation contend this requirement threatens the privacy of adults and the ability to use the internet anonymously, in California and likely elsewhere, because of the role the Golden State's tech companies play on the internet.

    "First, the bill pretextually claims to protect children, but it will change the Internet for everyone," said Eric Goldman, Santa Clara University School of Law professor, in a blog post. "In order to determine who is a child, websites and apps will have to authenticate the age of ALL consumers before they can use the service. No one wants this."

    Continue reading

Biting the hand that feeds IT © 1998–2022