SDN – Opportunities in the new networking paradigm

By Georgios Kyriakopoulos, VP of Equity Research, SunTrust Robinson Humphrey

The networking industry has been evolving towards networks with higher software content that are characterized by openness and programmability. While this transition will continue for many years to come, it is not until last year that it started to gain wide acceptance with consensus now agreeing that the future of networking involves an ever increasing amount of flexibility and software. In an SDN world, network operators can reduce operational costs by simplify provisioning and potentially increase sales by creating new service offerings. Early adopters such as Big Switch have argued for 50% savings for SDN enabled networks.

What is SDN?

We are in the early stages of SDN and its definition and attributes continue to evolve but generally SDNorSoftware Defined Networking refers to a network architecture where the network control plane is decoupled from packet forwarding resulting ina greater degree of automation, programmability and openness. As such, network administrators can specify configurations for networking equipment such as routers and switches and manage their entire network much easier and efficiently than in today’s networks. Traffic can be managed from a centralized control point without the need to manually reconfigure individual equipment.

SDN in practice

Although the benefits of SDN such as increased automation and operational flexibility are well understood and desirable among network operators, given the high complexity of networks the transformation won’t take place overnight. Most likely, initial SDN implementations will be surgical starting with individual server racks and scale out rather than the other way around.As such, even new data centers will be built using “legacy” architectures with little initial SDN presence.This approach lets network operators get comfortable with the new technology while keeping capital expenditures low.

How it started

The networking industry first learned about SDN in April 2012, when Google announced that it had transitioned its data center networking to a solution controlled by software, instead of traditional hardware equipment. Later that year, in August 2012, VMware acquired Nicira, an SDN start-up with less than $10 million in annual sales, for $1.3 billion. Since then,there have been considerable discussions and often speculation regarding implications for traditional equipment vendors. The reality is that the evolution to SDN will take years and early adoption will come from a limited number of sophisticated networkers such as Google, and not by the majority of enterprises.

Cisco’s approach to SDN

Cisco, the clear leader in Ethernet switching with over 60% market share was considered as the most at risk during the early days of SDN. While Cisco was not an early adopter of the new networking paradigm, its strategy around SDN,the ACI (Application Centric Infrastructure),which was revealed two years ago, has evolved significantly and shown accelerated progress this past year. The ACI uses a holistic systems-based approach that integrates both physical and virtual environments under a common policy-based operational model. The ACI strategy enables a network that is driven by the applications that run on it.

Cisco’s SDN Components

The ACI strategy became tangible after Cisco announced products tailored to the aforementioned vision. At the heart of Cisco’s SDN offerings lies APIC, an open policy controller accessible by a set of APIs, that is positioned between the applications and the network and is the unified point of automation and management. Through APIC, applications can make changes to the network configuration to meet their needs. In terms of physical hardware, Cisco introduced a new line of switches, the Nexus 9000, for both traditional and ACI data center deployments. Cisco has seen significant interest for its Nexus 9000 switches evident by its expanding customer base that reached 1,700 end-customers in the January quarter up from 580 customers six months earlier.

While incumbent equipment vendors were initially hesitant to change, over the last year there has been significant progress with new products entering the market at an accelerated pace.Similar, despite Cisco’s initial hesitation towards SDN, a refocused strategy has resulted in a full suite of SDN products helping the company remain its leadership in networking.


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