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Cisco's exit from ADCs should come as no surprise

It gave up over half its market share in the past four years; took a pummeling from F5 and Citrix

By Jim Duffy on Wed, 09/19/12 - 5:51pm.

Cisco's retreat from the Layer 4-7 load balancer market should come as no surprise. It was getting pummeled by F5 and Citrix; and Cisco is increasingly virtualizing those and other ancillary capabilities to its core routing and switching products through software.

Cisco confirmed this week that it will not develop further generations of its ACE load-balancing products based on a review of data center trends and growth market opportunities. ACE, which is embodied in modules for Cisco 7600 routers and Catalyst 6500 switch and a standalone appliance, was not a growing product line for Cisco.

ACE is an application delivery controller (ADC). ADCs are vital to virtualized data centers and cloud environments as more VM workloads are added and movde around within and between data centers, and within the cloud. Multiple active paths between switches need to balance traffic loads to ensure application uptime and performance, and reduce latency and congestion.

In Q2, Cisco registered an 11.2% share of the $389.6 million ADC market, according to Dell'Oro Group, down from 14% in Q1. F5 has a 48% share of the market; Citrix is No. 2 with about a 20% share.

Dell'Oro expects the market to reach $1.6 billion in 2012. So with Q1 and Q2 share as indicators, Cisco's total ADC revenue is less than one half of 1% of its total revenue. But its fortunes fell fast in ADCs: Cisco surrendered more than half its share in the market since 2008.

The fastest growing portion of the ADC market is in virtual appliances, according to Dell'Oro. The market more than tripled in Q1 but it still accounts for roughly 8% of the overall ADC market. And according to Dell'Oro's Q1 figures, Cisco isn't even a blip on that radar -- Citrix leads that market, followed closely by F5, with Riverbed and A10 following them.

Some of these companies are now enticing Cisco ACE customers to jump onboard with them. A10 this week announced a trade-in program that offers ACE customers up to $24,000, plus installation and migration services when they switch to the company's AX series ADCs. A10 is even looking to head off a migration of ACE customers to F5 by claiming a "better value alternative" to F5's BIG-IP product line by avoiding "hefty integration and licensing costs" in addition to an "already high price tag" on the F5 products.

With an almost 50% share of the market, users are apparently willing to pay for them. F5 says it has an ongoing trade-in and incentive program for "aging load balancers" such as Cisco ACE and will use the Cisco exit to attempt gain additional traction in the market.

"Given Cisco's announcement, F5 has received many inbound inquiries from Cisco ACE customers asking about incentives or promotions to swap out their ACE products for F5's application delivery solutions," says John Oh, F5 vice president of marketing. "Our partner ecosystem is very well-versed on replacing ACE with F5's market leading ADC, BIG-IP."

Brocade is also a player in the ADC market with its ServerIron ADX switches. The company is working on a trade-in program but the details are not yet finalized.  

"Brocade is in the process of launching a compelling worldwide program for current ACE customers and Brocade's partner/channel organizations," said Keith Stewart, senior director of product management with Brocade. "Brocade will offer a high availability ADX bundle program with full service and support to trade-in existing Cisco ACE or (content switching) products.  Customers can take advantage of Brocade's Network Subscription, which provides a profitable option to acquire ADC equipment via a monthly subscription, aligning costs with their revenue." 

Citrix is not offering anything specific to the Cisco event. Its existing competitive product trade-in program includes a 10% discount on the cost of a Citrix NetScaler ADC platform, plus consulting services priced on a per user basis, says Greg Smith, Citrix senior director of NetScaler product marketing.

Riverbed doesn't disclose specifics of its Stingray ADC trade-in program. But it promises to provide financial incentives to ensure customers reduce their total cost of operations by 30% or more.

Radware, another leading ADC vendor, did not provide ACE trade-in program information by our deadline.

UPDATE: Here's a statement from Radware Vice President, Marketing & Channel, James Colby:

"Radware runs a number of competitive trade-in programs designed to help prospective customers overcome the obstacles associated with adopting new technologies. Incentives are both financial - material discounts applied to standard product pricing - and in the form of complimentary professional services that mitigate the risks associated with migration projects. Radware is offering a special incentive for Cisco customers who are looking to replace their legacy technology through an attractive trade-in program allowing customers to switch to the world's most cost-effective ADC - the Alteon ADC.   The demand for high-density, virtualized application delivery solutions from ACE users has been growing and we expect it to intensify with the recent announcement."

And a statement from a Cisco spokesperson:

"Cisco routinely reviews its business to determine where it needs to align investment based on growth opportunities. In assessing the data center market, which is undergoing a fundamental transformation with virtualization, cloud, and newservice delivery models, Cisco is re-evaluating traditional load-balancing approaches, including its ACE product line, to ensure it continues meeting customer needs in this environment. Cisco will continue to support our current product portfolio. Cisco is not exiting the market, but as the market is evolving we are looking at new ways to deliver our load balancing technology. We will share additional details as they become available."

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