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10 things we learned - or didn't -- from Cisco's Insieme launch

With Cisco/Insieme debut some things are clear but others are still open questions

By , Network World
November 22, 2013 01:16 PM ET

Network World - Cisco's introduction of the Insieme Networks product line and strategy was the most anticipated networking announcement in almost two years. It represents Cisco's response to the software-defined networking trend pervading the industry, and threatening Cisco's dominance and profits. While not a watershed moment – Insieme didn't change Cisco's modus operandii, as explained below -- Insieme is nonetheless one of the most important events and product introductions in Cisco's history. Here are 10 things we learned or have yet to learn from the Insieme launch:

• Cisco takes the SDN threat very seriously – Otherwise, they wouldn’t pay up to $863 million on an 20-month-old spin-in company to develop its next-generation data center product line in response to SDNs. By comparison, the ASR 1000 router cost $250 million and took five years to develop.  

• Cisco is still a hardware company – Why else would they respond to a software trend and threat with hardware? Despite all of its stated plans to become more of a software company and increase its software revenue, Cisco’s business model is hardware driven. SDNs de-value Cisco’s hardware.

[RELATED: First look: The Cisco/Insieme family]

[THE WAIT IS OVER: Chambers: Cisco waited too long to address SDNs]

• Cisco is intent on protecting its installed base – The standalone version of the Nexus 9000 – open source controller extensions, merchant silicon – is for DIY users. Customers leaning toward a completely integrated system are targets for the custom ASIC-based Nexus 9000 with the Cisco-developed APIC controller. Enterprises will likely adopt this platform vs. the standalone version, which might appeal to cloud providers considering white box hardware and open source software. Cisco will eat its own before allowing a competitor to.

• Cisco is intent on protecting its profit margins – Another reason Cisco funded and responded to SDNs with Insieme hardware. Cisco enjoys 62% gross profit margins on its products. Margins on merchant silicon-based white box switches are one-third to one-quarter that. If you are a Cisco customer and you want a programmable network, Cisco will strongly encourage you to buy the Application Centric Infrastructure (ACI)-mode Nexus 9000 hardware.

• Cisco believes the physical/virtual approach to programmability is the best – Cisco argues that software-based overlay approaches to SDN are optimized for provisioning virtualized applications and resources, while data centers have both virtualized and physical resources. Those physical resources include the networking infrastructure itself. Cisco claims its Application Centric Infrastructure, which is founded in the new Nexus 9000 hardware, can capably provision both physical and virtual resources in a data center.

• Cisco believes the software-based overlay approach is too costly – VMware disagrees, but Cisco says when upgrading from 10G to 40G, ACI and the Nexus 9000 infrastructure reduce TCO by 75% over a merchant silicon-based infrastructure running a software-based network virtualization overlay. Included in that calculation is a “per-VM tax” levied on users of those merchant silicon switches running a software overlay that accounts for most of the cost.  This is a key point in Cisco’s argument against the software overlay approach and in its data center networking competition with VMware.

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