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Large Corporations Push Suppliers to Develop New Networking Technology

August 1, 2014

By Rachael King

The head of an industry group comprising big companies from finance to logistics said that many group members will hold off buying new networking equipment until suppliers offer certain technology improvements. The companies want lower prices, interoperable gear and faster innovation, benefits of a new approach that favors commodity hardware and more sophisticated software.

Many of the companies in the Open Networking User Group have indicated they plan to start deploying the new networking technology next year, moving beyond trials now under way. “These companies are saying that they’re going to hold procurement [of new networking technology] until there are demonstrations that the equipment is interoperable,” said Nick Lippis, co-founder and co-chairman of the Open Networking User Group.

IT executives from companies including Credit Suisse Group AG, FedEx Corp., Gap Inc., Fidelity Investments, JP Morgan Chase & Co., and Symantec Corp. collaborated on a white paper which laid out their concerns. The paper said the group was committed to using “the collective strength” of member procurement to influence changes. It did not, however, go as far as to say companies would hold procurement until demands were met. These companies, when contacted, declined further comment.

The group said it wants lower operating and capital costs and compatible products. The paper included the names of executives at the six previously named firms along with executives at Pfizer Inc., UBS AG, Bank of America Corp., and Cigna Corp. Most of the executives are part of the group’s board and many are participants in working groups that are developing guidelines for suppliers. Pfizer and UBS did not respond to a request for comment. Bank of America and Cigna said that the executives were mentioned because they are members of the Board of Directors of the organization but that their role doesn’t reflect the view of the companies.

At issue is a shift to new networking technology that favors less expensive commodity hardware, paired with software that is used to create virtual switches and routers. That substitution of hardware with software, known as software-defined networking, is an alternative to traditional, physical switches, routers and other equipment. Many IT executives are impatient for this new technology to mature as many would like to move from trials and start larger-scale deployments next year. The global software-defined networking market is estimated to grow to $3.7 billion in 2019 from $290 million in 2014, according to an April report by Research and Markets.

The paper asks networking suppliers such as Cisco Systems Inc., Hewlett-Packard Co., VMware Inc., and Juniper Networks to create SDN products that reduce current annual network operating costs by 15% to 30% and reduce capital costs by as much as 25% to 75%. Members also want to eliminate so-called vendor lock-in, in which networking technology from one supplier does not work with that of another, discouraging customers from seeking alternatives, according to the paper the group released earlier this month.

Suppliers are at various stages of embracing–or at least acknowledging–this approach. For some, the open, software-driven direction represents a threat to their core business.

Some suppliers say that while user requirements are helpful, it may be too soon to create industry standards for software-defined networking. VMware’s network virtualization platform is just starting to be adopted, said Martin Casado, chief technology officer of networking at VMware. “Normally when you standardize, you standardize a well-known problem or technology, but it’s too early here,” said Mr. Casado. The risk is that the industry will stifle innovation, he added.

Both H-P and Juniper said their goal is to create open interoperability and choice in these new networking products. H-P said it wants to “drive out closed proprietary systems that foster lock-in.” Juniper has taken a different approach, making the source code for its SDN controller freely available in an open source project called OpenContrail. “Closed complex technology systems are deadly to business growth,” said Mike Marcellin, senior vice president of strategy and marketing at Juniper Networks in an e-mailed statement.

Cisco Systems, the largest networking supplier, did not respond to a request for comment.

Companies are starting to wake up to how important networking is to their businesses, said Andre Kindness, principal analyst covering IT infrastructure at Forrester Research. As such, they’re exploring technologies from new suppliers. “In the past, it was always easy for companies to default to Cisco,” he said.