Amazon, Facebook, Google give Cisco's switches the COLD shoulder

Microsoft and cloudy pals go DIY as networking giant's stock plummets


Analysis Networking giant Cisco lost around $10bn in market value last week as investors sold out in response to weak earnings and poor growth projections. Worse yet, some of its biggest customers – from Amazon and Google to social network giant Facebook – are implementing technologies that will allow them to reduce their dependence on the networking giant.

This spells some serious trouble ahead for the company with a shift in how some of its biggest customers buy networking equipment.

Meanwhile, spending on mobile devices is rising at the expense of traditional PC purchases, which in turn encourages the use of apps operated by or hosted on platforms owned by these companies – and they don't like Cisco.

Switching up

Amazon Web Services, for instance, is building its own networking switches so it doesn't have to rely on the "black box" technology produced by companies such as Cisco, Amazon's chief technology officer Werner Vogels confirmed to The Register.

"It is clear that networking has for a very long time been a black box. They don't even come with APIs," he explains. "This is the history that forced us to really look at way networks are laid out and build [devices] and do [it] ourselves. Also the cost – everything else in our data centre [is] more efficient."

Google is thought to have been operating its own custom networking gear as well for several years, and has recently loaded its own custom software-defined networking technology onto its wide-area networks. In September, 2012, a mysterious "Pluto" switch meant for Google turned up at a branch office in Iowa due to a shipping error.

Social web giant Facebook is also fleeing the company by working with a cross-industry group to develop a specification for an "open" switch that will be made by a low-cost original device manufacturer like Quanta or Wiwynn.

What unites these customers is that they are part of a new wave of companies that have grown sufficiently large that they have a motivation to control everything in their supply chain: and control is something that Cisco always tries to keep for itself so it can extract lucrative service fees from punters.

Cisco, and contemporaries Juniper and Brocade, have built closed switches and routers for decades to help companies shuttle around data center traffic. They have closely guarded the inner features of their technology, and every release with it brings a wealth of new features for their platforms that requires a legion of people armed with certifications and arcane experience to manage.

Economies of scale...

Now, some of the world's biggest data centre operators are running away from the traditional companies, and going to Asian device manufacturers for low-cost gear designed by their own teams.

Whenever we've asked Cisco about this looming threat, the company typically argues that these people have reached a scale that they no longer form the majority of Cisco's target market.

There are two critical problems with this market: these companies, especially Amazon Web Services and Google via Compute Engine, are cannibalising on-premise IT spend as companies move to their compute clouds, and by pioneering these new approaches the fleeing firms will create an ecosystem of accessible, low-cost Cisco-beating kit.

In Cisco-land, all businesses need pricey networks to deal with a deluge of devices and "the internet of things". All of these businesses operate their own networks, and will need glossy equipment for complex tasks.

In reality, many businesses IT departments are being hollowed out by cost-cutting and cloud shifts, and small businesses may not operate any hardware at all. Large enterprises, meanwhile, are growing to the point that they can now command the economies of scale that let them do their own hardware – Goldman Sachs, for instance, is a member of Facebook's open hardware scheme.

Privacy

There's also the recent issue of revelations around NSA spying, which may severely impact Cisco's ability to sell to governments that feel the US may want to compromise them. By example, Cisco's sales to China have been plummeting.

In fact, the only cloud market we can see growing as a consequence of all of these shifts are those operated by telcos. Cisco will continue making wads and wads of cash here, but will it be enough to replace the hollowing out of the market as a consequence of a major shift to mobile devices and clouds? Doubtful.

Cisco may also say there are some markets that will never use the cloud due to security concerns, and will have a need for the types of serviceable kit operated by Chambers & Co. That may very well be true, but the awarding of a $600m private cloud contract for the CIA to Amazon indicates that even the most secure workloads may shift to these new IT suppliers.

All these factors seem to favor the custom networking schemes of the larger providers, and where large providers go the rest of the world tends to follow, as we have seen in the widespread adoption of Linux, lower-cost storage hardware, scale-out systems like 'NoSQL' databases and the Hadoop analytics stack, and others.


Other stories you might like

  • Google has more reasons why it doesn't like antitrust law that affects Google
    It'll ruin Gmail, claims web ads giant

    Google has a fresh list of reasons why it opposes tech antitrust legislation making its way through Congress but, like others who've expressed discontent, the ad giant's complaints leave out mention of portions of the proposed law that address said gripes.

    The law bill in question is S.2992, the Senate version of the American Innovation and Choice Online Act (AICOA), which is closer than ever to getting votes in the House and Senate, which could see it advanced to President Biden's desk.

    AICOA prohibits tech companies above a certain size from favoring their own products and services over their competitors. It applies to businesses considered "critical trading partners," meaning the company controls access to a platform through which business users reach their customers. Google, Apple, Amazon, and Meta in one way or another seemingly fall under the scope of this US legislation. 

    Continue reading
  • Amazon fears it could run out of US warehouse workers by 2024
    Internal research says the hiring pool has already dried up in a number of locations stateside

    Jeff Bezos once believed that Amazon's low-skill worker churn was a good thing as a long-term workforce would mean a "march to mediocrity." He may have to eat his words if an internal memo is accurate.

    First reported by Recode, the company's 2021 research rather bluntly says: "If we continue business as usual, Amazon will deplete the available labor supply in the US network by 2024."

    Some locations will be hit much earlier, with the Phoenix metro area in Arizona expected to exhaust its available labor pool by the end of 2021. The Inland Empire region of California could reach breaking point by the close of this year, according to the research.

    Continue reading
  • I was fired for blowing the whistle on cult's status in Google unit, says contractor
    The internet giant, a doomsday religious sect, and a lawsuit in Silicon Valley

    A former Google video producer has sued the internet giant alleging he was unfairly fired for blowing the whistle on a religious sect that had all but taken over his business unit. 

    The lawsuit demands a jury trial and financial restitution for "religious discrimination, wrongful termination, retaliation and related causes of action." It alleges Peter Lubbers, director of the Google Developer Studio (GDS) film group in which 34-year-old plaintiff Kevin Lloyd worked, is not only a member of The Fellowship of Friends, the exec was influential in growing the studio into a team that, in essence, funneled money back to the fellowship.

    In his complaint [PDF], filed in a California Superior Court in Silicon Valley, Lloyd lays down a case that he was fired for expressing concerns over the fellowship's influence at Google, specifically in the GDS. When these concerns were reported to a manager, Lloyd was told to drop the issue or risk losing his job, it is claimed. 

    Continue reading
  • It's a crime to use Google Analytics, watchdog tells Italian website
    Because data flows into the United States, not because of that user interface

    Another kicking has been leveled at American tech giants by EU regulators as Italy's data protection authority ruled against transfers of data to the US using Google Analytics.

    The ruling by the Garante was made yesterday as regulators took a close look at a website operator who was using Google Analytics. The regulators found that the site collected all manner of information.

    So far, so normal. Google Analytics is commonly used by websites to analyze traffic. Others exist, but Google's is very much the big beast. It also performs its analysis in the USA, which is what EU regulators have taken exception to. The place is, after all, "a country without an adequate level of data protection," according to the regulator.

    Continue reading
  • Amazon shows off robot warehouse workers that won't complain, quit, unionize...
    Mega-corp insists it's all about 'people and technology working safely and harmoniously together'

    Amazon unveiled its first "fully autonomous mobile robot" and other machines designed to operate alongside human workers at its warehouses.

    In 2012 the e-commerce giant acquired Kiva Systems, a robotics startup, for $775 million. Now, following on from that, Amazon has revealed multiple prototypes powered by AI and computer-vision algorithms, ranging from robotic grippers to moving storage systems, that it has developed over the past decade. The mega-corporation hopes to put them to use in warehouses one day, ostensibly to help staff lift, carry, and scan items more efficiently. 

    Its "autonomous mobile robot" is a disk-shaped device on wheels, and resembles a Roomba. Instead of hoovering crumbs, the machine, named Proteus, carefully slots itself underneath a cart full of packages and pushes it along the factory floor. Amazon said Proteus was designed to work directly with and alongside humans and doesn't have to be constrained to specific locations caged off for safety reasons. 

    Continue reading
  • Google recasts Anthos with hitch to AWS Outposts
    If at first you don't succeed, change names and try again

    Google Cloud's Anthos on-prem platform is getting a new home under the search giant’s recently announced Google Distributed Cloud (GDC) portfolio, where it will live on as a software-based competitor to AWS Outposts and Microsoft Azure Stack.

    Introduced last fall, GDC enables customers to deploy managed servers and software in private datacenters and at communication service provider or on the edge.

    Its latest update sees Google reposition Anthos on-prem, introduced back in 2020, as the bring-your-own-server edition of GDC. Using the service, customers can extend Google Cloud-style management and services to applications running on-prem.

    Continue reading
  • UK competition watchdog seeks to make mobile browsers, cloud gaming and payments more competitive
    Investigation could help end WebKit monoculture on iOS devices

    The United Kingdom's Competition and Markets Authority (CMA) on Friday said it intends to launch an investigation of Apple's and Google's market power with respect to mobile browsers and cloud gaming, and to take enforcement action against Google for its app store payment practices.

    "When it comes to how people use mobile phones, Apple and Google hold all the cards," said Andrea Coscelli, Chief Executive of the CMA, in a statement. "As good as many of their services and products are, their strong grip on mobile ecosystems allows them to shut out competitors, holding back the British tech sector and limiting choice."

    The decision to open a formal investigation follows the CMA's year-long study of the mobile ecosystem. The competition watchdog's findings have been published in a report that concludes Apple and Google have a duopoly that limits competition.

    Continue reading

Biting the hand that feeds IT © 1998–2022