The Vyatta difference
One of those resources is Vyatta. Brocade acquired the open source networking nemesis of Cisco to pursue new market opportunities in data center virtualization, public cloud, enterprise virtual private cloud, and managed services, and bolster its overall software networking capability.
Vyatta is a key piece of Brocade's Network Functions Virtualization (NFV) offerings for cloud and service providers.
"The company's approach to letting Vyatta develop autonomously, effectively inoculated and distinct from the company's established hardware business, was a smart move," says IDC's Casemore. "As networking value migrates to software, Vyatta is well placed to benefit by providing a platform for virtualized network functions."
Meyer says Vyatta, OpenDaylight, OpenStack and OpenFlow were merely appetizers to the main course at Brocade: a significant growth opportunity in software based on strategic importance, autonomy, technology agnosticism, and work on machine learning -- machines that use data to make predictions or decisions rather than requiring explicit programming for instruction.
"When network people get to work on machine learning, if that's what they want to do in the industry, then that's a great thing," Meyer says, referring to his own experience at Brocade, a $2.2 billion company. "There's great opportunity here not only in networking but in what a technology company might do."
Machine learning likely has more upside than Fibre Channel SANs, the technology on which Brocade built its business. Though Fibre Channel SAN switches are still close to a $2 billion business, it's been lumpy: the market grew 6% from 2011 to 2012, but declined 6% in 2013, according to Dell'Oro Group, which expects 2% growth for 2014.
Brocade has gained about 2 percentage points of revenue share in each successive year between 2011 and 2013. In the third quarter of 2014, Fibre Channel switch revenue grew 1% sequentially and 2% annually for the company, while Cisco's grew 51% sequentially to $171 million based on pent-up demand for 16Gbps products, according to Dell'Oro.
So the aggressive moves into machine learning specifically and software generally are for long-term survival, notes 451's Christy.
"Brocade has a strategic problem because the market life of FC networking is limited," he says. "The CEO [Lloyd Carney] has concluded that SDN is Brocade's best chance of doing something of strategic impact."
Meyer says the software efforts are not at the exclusion of the traditional business, but integral to it and vice versa.
"We envision SDN as sort of a network thing but I call it CSNSE: Compute, Storage, Network, Security and Energy," Meyer says. "You have to have all of these things working together in order to optimize them the way our customers want to."
Sounds like a software-based hyper-convergence project in the making at Brocade. Is that where all of this is leading?
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