Techaisle Blog

The Quotes

In a recent Techaisle depth-interview, the CIO of a Network Dependent (Techaisle’s proprietary Segmentation) Mid-Market business with 950 employees, 110 servers, 50 percent of servers virtualized, said, “Yes, I have heard about SDN. It’s a service where the architecture can be dynamically reconfigured or driven by a software personality layer as opposed to being hard-wired. Yes, we are planning to invest in it. Today the trend is towards intelligent networking. Software defined networking is something that can be used to automatically handle the traffic in the network. So, we can expect reduced costs from this type of a service. Brocade and Cisco are the two companies that have good solutions about these services.”

Although the awareness starts to fall rapidly for lower employee sized businesses Software Defined Networking (SDN) holds promise within the SMB and Mid-market business segments.

The IT Manager of a 70 employee size business with 4 servers using cloud, virtualization and managed services belonging to Network Increases Efficiency segment (Techaisle proprietary networking segmentation) said in another depth interview, “Yes, I have heard about SDN. I think it probably has an advantage of being much more flexible because of the different approaches that it has to dynamic network management. It has certain development tools that can be used to operate different network services. We, first of all need to investigate more about this technology and then see how well it fits in our infrastructure and only after we find enough information of it fitting the bill, should we implement it.”

The Opportunity

Techaisle’s research finds that 3 percent of small businesses and 11 percent of mid-market businesses globally have heard about Software Defined Networks. In the US the awareness jumps to 19 percent among mid-market businesses. SMBs that have some knowledge about SDNs, exhibit enhanced interest to adopt them in next 12-18 months with the objective of reducing their network related CAPEXs and managing their growth in cloud, mobility, big data technology usages.

Techaisle’s market sizing estimates that the SMB market for SDN will be US$204 million in 2016 growing at CAGR of nearly 81 percent. The market could open up more once the awareness and use cases increase.

The Concept

Software-defined networking (SDN) is a new approach to building computer networks that separates and abstracts the underlying networking elements thereby making the network more agile. SDN allows system administrators to quickly provision and program network connections on the fly instead of manually configuring policies. Administrators have programmable central control of network traffic without requiring physical access to the network's hardware devices.  Some even call this 'virtualizing the network', in the sense that each individual hardware switch may be part of multiple Layer 2 and Layer 3 networks and have its configuration and traffic management policies dynamically changed by the master network controller.

The Strides Made

Most of the large IT vendors have made very strong commitments to providing SDN solutions. Prominent among the larger IT vendors are:

• Avaya with its Application Development Network (ADN)

• Brocade with its Vyatta acquisition

• Cisco with its Open Network Environment (ONE) and Cariden acquisition and funding of Insiemi

• Dell with its Virtual Network Architecture (VNA)

• HP with its Virtual Application Networks (VAN)

• IBM with its Distributed Overlay Virtual Ethernet (DOVE)

• Juniper with its Contrail Systems acquisition

• VMware with its Nicira acquisition

Then there is OpenFlow, closely associated with SDN, an industry consortium of about 70 members, much like the Wi-Fi Alliance, a non-profit group that oversees development of the OpenFlow protocol. Both Google and Facebook have adopted OpenFlow (ONF) protocol within their data center operations. And most of the new switches from networking vendors like Arista, Brocade, Dell/Force10, Extreme, Huawei, HP, IBM, Juniper, NEC, and Pronto are OpenFlow compatible.

‘OpenDaylight’ Project which includes Big Switch Networks, Brocade, Cisco, Citrix, Ericsson, IBM, Juniper Networks, Microsoft, Red Hat, NEC and VMware, aims to provide an open-source software-defined-networking (SDN) controller, with vendor-agnostic interfaces thereby accelerating innovation around the SDN controller itself.

All of the above points to tremendous jostling for leadership roles and confusion in the market place. In spite of the confusion, SDN will continue to gain acceptance as enterprises will develop proof of concepts and the market itself will shake out the true leaders in the next 3-4 years.

The Promise for SMBs

SDN is ideally suited for the SMB segment with its promise of reducing complexity, costs and management along with easing implementation of cloud, mobility, social and big data connectivity.

Specifically within the mid-market segment, SDN will begin to pop-up in conversations among CIOs and IT Directors when they find their businesses faced with:

• Increased public and private Cloud adoption

• Network's inability to provide flexibility required to support virtualization, cloud, and mobility

• Inefficient network and traffic management with the explosion of devices, worker locations and applications

• Deployment of ultra-low latency networks to effect real-time transactions especially for the financial services vertical and those working on big data analytics

Announcement from HP

However, it must be said, that SMBs will look for product solutions with embedded SDN. We are already starting to see some solutions for the SMB market segment along the same lines. A new BYOD solution bundle was announced at HP’s recent Global Partner Conference. The solution includes end-to-end management software, switches with integrated wired and wireless capabilities, and is extended with a software-defined security solution. Ever bullish on the SMB market, HP believes this is an easily deployable, complete solution for a small to medium sized-business, very cost-effective and that provides investment protection with free switch software upgrades for OpenFlow support. Not only does it mean lower capex, but also less maintenance and less complexity.

Indeed, there’s a viable play for SDN for SMBs. A perfect use case could include implementation of virtual routed network on hypervisors, a web-based unified management application for provisioning, monitoring and control of the entire distributed network.

Technology complexity is continuing to increase for SMBs. And Techaisle is finding that majority of SMBs are required to re-architect and re-configure their networks to make a move to cloud or virtualization. Most of these SMBs take external assistance either from an IT Consultant or their channel partner. Nevertheless, they all have one refrain that reconfiguration is extremely complex, time-consuming and resource intensive.

Final Remarks

SDN is yet very complex even for the most cutting edge and aggressive technology adopter SMBs. It requires tools and structures that are still evolving. Managed services was introduced into the market several years ago but the RMM, PSA and other tools are still being refined so one should not expect the channels or the SMBs to jump onto SDN immediately.



There will be a lag between the enterprise and the SMB adopters. However, once products are available with SDN capabilities, SMBs will adopt SDN faster than enterprises. The SMBs that have virtualized their servers and storage will be the early adopters. Looking at potential savings SDN will a difficult opportunity to pass up on by the SMBs.

The desktop virtualization juggernaut continues to gather steam as more companies choose to use the technology to reduce costs, improve security, better disaster recovery, easier management and work from anywhere. Numerous Total Cost of Ownership reports have been published and the message from vendors to IT departments is clear – Desktop Virtualization is the way to securing desktops and reducing costs of management.

dinCloud has been making a lot of noise lately in the hosted virtual desktop area with its 100 percent channel-focused cloud-based business provisioning offerings for SMBs. We therefore had to sit down with Ali Din, CMO and Barry Weber, CTO to understand if the noise was pure cacophony in the media or were they really creating music, as their tag line says “Delivering a Heavenly Experience in the Cloud”. What followed was a series of questions and answers. (This Q&A was not sponsored by dinCloud)

What is the unique value proposition that dinCloud brings to the table for SMBs? All providers talk about customer service, understanding SMB requirements, lowering costs, etc. but we want to know what are the 2-3 unique selling points that resonates with SMBs as far as dinCloud is concerned?

dinCloud offers SMBs a fully integrated solution to run their business including backup & recovery, hosted virtual desktops (HVDs), data center security, networking, and servers. Our unique channel centric approach allows SMBs to continue to do business with the local MSP, VAR, and SI they have a relationship with, giving them local hand holding and supplemental services to run their business. Our SMB customers enjoy cost savings of up to 50 percent, enhanced security and compliance, enterprise class IT infrastructure and services, and an OPEX subscription model conserving capital.

How does dinCloud help SMBs assess and design solutions to meet SMB requirements?

We have developed a standard requirements gathering and onboarding process to rapidly migrate our SMBs’ IT infrastructure to their own virtual private Tier 3 data center. In addition, our proprietary cloud orchestration platform, dinManage, automates provisioning and migration tasks including creation and synching of the Active Directory infrastructure. dinManage is often white labeled by our partners.

How much time does dinCloud actually spend with an SMB prior to its becoming a client? What is the typical interaction?

dinCloud approaches the SMB customer through our channel partners. Engagement time varies to almost zero once our VAR/MSP partner has migrated the first of its customers, to several days of discovery for larger more sophisticated engagements.

How much time does dinCloud actually spend with an SMB on an ongoing basis once they become a client?

dinCloud’s channel partners front end most of the customer support activities; typically we will see approximately 1-2 tickets per week per customer.

In your view why does an SMB consider a hosted solution as compared to on-premise?

The SMB customer will enjoy enterprise-class infrastructure, security, and operations possibly for the first time in their history - they will conserve cash only paying for what they need, giving them unparalleled flexibility. They will now have IT compliance as well as backup and DR protecting their business. dinManage offers the remaining IT staff full visibility and control of their virtual private data center. No more HR costs and problems with training and maintaining several IT resources. Hosting in redundant tier 3 data centers not only provides enhanced security and uptime, but environmental factors such as cooling, electricity, and backup power are eliminated. Hardware, software and multiple point solutions no longer need to be purchased, supported, maintained, and managed. The SMB customer will be able to leverage BYOD and anytime, anywhere access. Additionally the SMB customer will immediately realize 30-50% cost savings when compared to a traditional on-premises model.

dinCloud has partnered with many different vendors, with which vendor solution has dinCloud seen more success? Why?

We have had a great deal of success with the purpose built custom high density super-computers by Super-micro giving us extremely competitive pricing and performance on our servers. Additionally, our investment in 100% NetApp has allowed us to leverage their industry leading tools (SnapMirror and SnapVault), as well as very efficient replication of data between our data center and the customer’s primary backup locations.

What are the top challenges you face in implementing virtualization solutions? 

From dinCloud’s perspective, there are a couple of challenges. There are so many great hypervisors to choose from today and dinCloud offers customers the choice of either VMware or KVM. We strive to stay current with hypervisor versions but coordinating the right time to upgrade hypervisor versions with customer schedules is sometimes a challenge.  While an upgrade should not impact to a customer, they are still very cautious about allowing dinCloud to do this.

What should vendors be doing to help you in offering and implementing virtualization solutions for SMBs?

dinCloud requires next to zero support from its vendors outside of normal bug fixes and some assistance in marketing (Netapp and Microsoft). We work very hard to provide a whole solution for the SMB market. This whole solution includes a private cloud environment with a firewall, selectable IP ranges, integration with AD, HVDs and HVSs, an easy to use cloud portal, choices of hypervisors, monitoring and white glove treatment to help the SMB easily and rapidly achieve their infrastructure goals and optimize operations costs and process.   We do not just provide a virtualization solution.

What are your top core challenges with the SMB customer? 

The SMB customer is often caught between a rock and a hard place when it comes to internal IT skills depth and breadth. dinCloud works to make infrastructure and operations easy for the SMB customer by pre-packaging the whole solution, by automating the implementation and by offering services to extend those that exist within the customer. The SMB customer is often faced with enterprise level requirements (PCI, HIPAA, etc.). They are challenged to deliver on these requirements. dinCloud’s challenge and goal is to continuously solve for their future problems. The SMB customer faces not only a budgetary challenge for skilled resources; they may also have small budgets that don’t match the typical costs of achieving the business IT goals. dinCloud works to continuously driving costs down, thereby helping customers protect their budget.

Any final words before we conclude?

dinCloud is gaining rapid momentum through our 100% channel sold model of complete end-to-end “Business Provisioning”. We believe that SMB customers have always relied on local MSPs and VARs and will continue to do so. dinCloud is emerging as the “Cloud Offering of Choice” for these traditional regional MSP/VARs, and more than any other market segment the SMB customer has a perfect use case for cloud-based IAAS, delivered by their local and trusted long time IT resellers.

Techaisle Take

dinCloud, a reseller has become a service provider. As we have written and presented several times that cloud computing is continuing to challenge the channel forcing them to develop and be trained in new competencies. These encompass service provisioning, billing, data center management, customer support and a whole host of related competencies. dinCloud by standard definition is not an IT vendor like VMware or NetApp but it has developed offerings by combining products from established vendors and instead of selling directly to customers is funneling its sales through its own channel partners.

Most SMBs rely on their local channel partners for maintenance & management of their IT infrastructure as well as for advice on new IT purchases. dinCloud is developing a network of channel partners and providing them appropriate training and skills to sell and manage cloud solutions for their local SMB customers. They are - Educating and training channel partners on what cloud actually means and how it impacts the SMBs; Developing solutions and use cases; Providing an effective and efficient pre-sales support to their channel partners to engage with SMBs.

DaaS (Desktop-as-a-Service) is poised for growth and dinCloud has positioned itself extremely well. Techaisle's survey shows that there is a growing SMB intent to use hosted VDI as shown in the chart below. The data compares the current implementation versus planning to implement. The survey shows that there is a 46 percent increase (from current 15 percent to planned 22 percent) in intent to use hosted VDI within mid-market businesses when compared with those that have currently implemented.

dinCloud is a good example of what Philippe Fossé,  Vice President of Europe, Middle East & Africa (EMEA) Channels, EMC wrote today, “More and more we see service integrators becoming resellers; resellers becoming service providers; and even users becoming service providers. This evolution is unprecedented, but is only the tip of the iceberg”

dinCloud has the right business philosophy, market understanding and product portfolio. They are making noise at the right time. They have had some major wins in the past few months such King Hawaaiin, maker of the number one branded dinner roll in the US which selected dinCloud to implement its hosted virtual desktop, server, and storage services to help IT improve efficiency and better manage operations across all its baking facilities and restaurants.

That noise they are creating could well become an orchestra.

 

One of the areas we watch most is the evolving needs of the SMB customer, who is being consistently pressured to speed up all core business processes while simultaneously reducing costs, generally  through the introduction of new technologies and specifically by adopting Cloud Computing approaches.

Looking Forward to SDN and SDDC  

Among Mid-Market companies (between 500 and 999 employees) recently interviewed, over 75% described their business being completely “Network Dependent” with a large share planning to move beyond Virtualization to Software-Defined-Networking (SDN) and Software-Defined-Data-Centers (SDDC).  Almost all had implemented Remote Managed Services (RMS), Cloud Computing, and Server Virtualization or VDI.

“Yes, I have heard about it (SDN) and we even tested it on one of our servers. We can get the software easily but we need to get proper hardware implementation as well and that too keeping our costs in control. So, both the things need to be evaluated. Yes, probably we would be investing in it, in the coming future. There are many things that are a concern for us right now, like cost, space and efficiency. So we need things that could help us in these areas.” - 900 Employee SMB IT Decision Maker

Mid-Market Reliance on Outsouced  IT Support

As we have written in the past, the larger SMB customers are more likely to rely on channel partners or vendor direct relationships to free up lean SMB IT departments and allow them to do more with less by supporting the research and selection process, and then testing and implementing the solutions, especially for those solutions involving a high level of configuration and remote management capabilities. The speed that specialists bring to the configuration, testing and implementation tend to outweigh the costs and speed up the decision cycle.

“Yes, the channel partners had a huge role. I sat down with their Cisco engineers and we looked over the changes we were going to make, then we did put together a business case, as to why we needed to upgrade or make changes to the system and what benefit it would result in. They were helpful and they made things look easier for us.” - 750 Employee SMB IT Decision Maker

New Functionality is driving Adoption

As we move into the Late Majority of SMB Cloud Adopters, there is less perceived risk and enough pressure to move companies toward implementing the architecture, if only to remain competitive.

"Now there are products available with better features and are cost effective. Earlier the cost of moving to the cloud was higher. Now because of the tough competition, the costs have marginally decreased. So, these things are enticing to look at different solutions. When we moved on to the cloud there were various benefits like cost effectiveness, in terms of IT management perspective. Previously it required 10 people, but now it can be done with 2 people. Previously the concept of datacenters was not that…important…, but now people are getting rid of the existing hardware and are moving towards datacenters to host most of their things that are in their offices. The datacenter costs are also competitive. If we look at any datacenter today and what they used to offer 5 years back, there has been a significant drop in prices due to the competition in the market.” - 500 Employee SMB IT Decision Maker

Budgets Continue to be Tight

We also see a significant effort on the part of customers to extend the life of the existing equipment and upgrade only the parts that are needed to achieve specific objectives such as 10GB capacity, which may require more robust firewalls, routers and switches, especially in those moving to VOIP. Typically we saw a reluctance to spend until it was necessary.

“Management here is very price conscious; they did not see the value of doing these things in the first place. The major factors were to increase speed and the reach of the network. So by these upgrades, we were able to demonstrate increased speed and increased network segmentation.” - 750 Employee SMB IT Decision Maker

Brand Importance Increases with Size of Company

While in certain areas such as SaaS, SMB end customers tend to be less likely to consider Brand as the key decision criterion, in the area of Networking among Mid-Market firms, virtually all said Brand was very important in their decision, mostly because of the expected service level associated with larger vendors but also to provide cover in a crowded market:

"There are a thousand solutions available in the market, but we had to ensure that what we chose was the best solution available and were cost effective. The new technology and the need to expand our business base were the main factors that drove the change.” - 900 Employee SMB IT Decision Maker

“Brand perception is very important because the management is not very technology minded, so to have a big name like Cisco was important to them. We depend on our channel partners for networking support or for help with windows server and Citrix products. They are our trusted partners.” - ~1,000 Employee SMB IT Decision Maker

Re-enforcing this tendency to Brand, the majors in the market were cited repeatedly as go-to Vendors. Cisco got the most mentions by far, followed by Citrix, Microsoft, HP, Juniper and Dell. As seen in the quote on outsourced support above, the vendors can also help in creating a business case.

“Well, I guess some of the ones (increase share) would be Cisco, HP, Dell and Microsoft. The major ones I know are trying to get there, if they are not close. It’s very hard to say who is going to lose much (share), but probably Microsoft or Apple are going to lose some. ~800 Employee SMB IT Decision Maker

We believe these attitudes represent some evolution that is becoming more pronounced as the market matures and intelligent networking becomes increasingly important to SMBs in general and Mid-Market companies in particular.

Small and Mid-Market firms will invest over a quarter trillion dollars in Datacenter Technology in the period between 2012 and 2016, according to the most recent report from Techaisle. Datacenter segments include Servers, Networking including Security Appliances and Storage solutions. We can also begin to add Virtualization within the context of data center as virtualized data centers are becoming front-and-center. As seen in this bubble chart, the nine key segments include each of the three product categories in the three largest regional markets, North America, Asia Pacific and Western Europe.  As we have shown in recent reporting, the rise of China continues to offer some of the most interesting market opportunities for vendors marketing to SMBs; the Asia/Pacific Storage Market being is the latest example, with combined spending over the forecast of $16B alone at a CAGR of over 22%. This is followed by the Asia/Pacific Networking Market, which is expected to reach $24B at a 14% rate. Although not growing as fast at 7%, the Asia/Pac Server Segment is expected to reach ~$17B. Other important points include:

• Growth rates for the combined Datacenter volume by region are forecast at 14% CAGR for Asia Pacific, 7% for North America and 5% for Western Europe. Worldwide is estimated at 8%. Combined market share of these three Regions accounts for 80%+ of Spending over the period.

• The North American Market with lower growth rates manages to stay ahead in volume overall for the combined spending, but as is happening with Japan and Western Europe already, the US Market will most likely be eclipsed in volume by China in the following, post-2016 forecast.

• Western Europe Networking and Server Segments will be overtaken during the current forecast, again squeezed by increases to Asia/Pacific by China.

• Latin America is growing relatively quickly at over 9%, driven by rapid Networking and Storage adoption but Spending is limited to <6% of the WW Total.

As mentioned, North American SMBs will spend the most, with Storage expected to grow fastest at ~11%, and while Western Europe Spending remains stable, Storage is also expected to grow the fastest at ~7%.  Asia/Pacific at ~14% overall is influenced by rapid growth in all three Segments, especially Storage, which was the fastest rate among all Regions and Segments that had real volume, i.e. 2%+ WW Share.

As per Techaisle's upcoming channel report, over 35 percent of VAR channels have started to address data center solutions. And as always, China is an anomaly where over 40 percent of VAR channels are now offering data center solutions.