SDN, or software-defined software, is one of the latest networking strategies. Open Networking Foundation defines ''a network control plane that controls several devices and is physically separated from the forwarding plane.''
SDN vendors have now moved from simply pondering the product to actually shipping it. Cisco Systems (NASDAQ:CSCO) and VMware (NYSE:VMW) have both fleshed out their network virtualization and SDN strategies around their acquisitions: Insieme for Cisco; Nicira for VMware. Cisco's network virtualization is hardware driven while VMware's centers completely on software.
A simple SDN architecture looks like the diagram below:
How big is the SDN market?
According to SDN Central, the current size of the SDN market is just $3.4 billion. But the organization predicts that the market will grow at a brisk pace of 80% CAGR through 2018 to reach $35.6 billion, powered by the cloud, big data, and mobility. Organizations, on average, currently devote just 4% of their networking budget to SDN; that figure will hit 40% by 2014. The stakes for Cisco and VMware, which are regarded as the SDN market leaders, are high.
Between Cisco's and VMware's SDN strategies, which is better than the other, and which is likely to gain more traction in the market?
Cisco's SDN strategy
Cisco's ACI is a framework of both software and hardware, rather than a software suite, designed to knit together existing networks. The platform is built on top of Nexus 9000 switches, and is controlled by Application Policy Infrastructure Controllers, or APICs. These APICs sit outside the data path and stitch together Nexus physical underlay to the Nexus 1000v virtual switch.
Cisco prefers the OpenFlow standard, although it admits that it has some limitations in several areas such as monitoring, management, data forwarding, data packets, service administration, and distributed model.
Cisco developed the Open Network Environment, or ONE, platform to try and solve these limitations. Cisco ONE is intended to build scalable multitenant cloud infrastructures with a good operational experience between the physical and virtual.
A Cisco Open Network Environment architecture looks like the diagram below:
VMware SDN strategy
VMware's NSX comes in two distinct flavors: vSphere and multihypervisor. The vSphere integrates into the existing VMware ESXi deployments and builds upon the dVS, or distributed virtual switch. Multihypervisor, on the other hand, serves the needs of KVM and Xen deployment by building upon the OpenvSwitch project.
NSX can run on any physical IP network by taking advantage of hardware layer 2/3 gateway services from different switch vendors such as Brocade, Arista, and Juniper Networks. This is a big plus for NSX, since it does not force organizations to make potentially costly hardware upgrades to get SDN features in their existing networks.
Side-by-side comparisons between Cisco's ACI and VMware's NSX
Cisco's hardware-led SDN approach solves many visibility problems that an NSX deployment would typically encounter. Deploying Cisco's ACI, however, requires considerable capital expenditure. This can prove to be a problem for smaller organizations.
Not all enterprises need 1,000-plus nonblocking 10Gbps interface ports, and many are not likely to ever require that kind of capacity. Cisco ACI is, therefore, more likely to appeal strongly to data centers and large enterprises that consider port density a significant driver.
NSX, on the other hand, can be folded into existing vSphere deployments. This is perhaps its strongest selling point. Organizations can deploy it in their existing kits without the need for any costly upgrades. This makes NSX much easier to deploy in the short term than Cisco's ACI. NSX might therefore appeal more to smaller organizations.
Cisco's dominance in networking technologies is likely to act as a big driver for the company as competition in the SDN space heats up. Cisco is currently undergoing drastic product cycle transitions and business model restructuring. The company has, as a result, been slowly losing market share to rivals. But the networking giant still commands close to 75% of the enterprise router market, and about 70% of the enterprise switch market, with a combined market value of $21 billion.
Cisco's sticky enterprise base mainly consists of large companies. These companies are likely to prefer sticking to the Cisco's SDN technologies due to the huge scale of transition that they would otherwise have to undertake to shift to a rival networking company such as VMware. This fact alone will probably help Cisco's ACI technology gain market traction much faster than VMware's NSX technology.
SDN technology is still at its infancy, and it's hard to come across tentative figures of the current market shares for Cisco and VMware. But assuming that at least half of Cisco's 70%-plus market share in enterprise networking stick with its SDN technology, then the company could easily grab 35%, or more, of the overall market. Cisco's SDN market share could therefore be worth about $12.5 billion by 2018.
Cisco is regarded as one of the early market leaders in the IoT, or Internet of things. The growth in IoT is likely to accelerate SDN adoption and entrench Cisco's dominance in the space.
Foolish bottom line
Cisco's overwhelming dominance in enterprise networking is likely to prove a decisive edge in the SDN battle with the likes of VMware. The company's early lead in the IoT might also help the company's SDN technologies to gain market traction faster than rivals. It therefore appears as if current technology trends favor Cisco more VMware, and this makes it the better long-term investment.
Joseph Gacinga has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems and VMware. The Motley Fool owns shares of VMware. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.