Today, Nokia announced the company's entry into the Data Center Switching market with new hardware and an open Linux-based network operating system built from the ground-up to address the needs of hyperscalers.  Similar to a startup approach, Nokia started in stealth and with an open whiteboard to create a brand new operating system, automation toolkit, and set of switches to address hyperscalers' needs going forward.

Today's hyperscalers are very different from just 3-4 years ago in terms of scale and sophistication.  Our US Top 5 Hyperscaler segment includes Amazon, Apple, Facebook, Google, and Microsoft, and each of them purchases at a scale never seen before in networking.  To put this in perspective, the average Hyperscaler buys more networking gear in a month than the entire installed base of the largest Telco SPs and enterprises.  

The scale at which hyperscalers operate is very different and new for the entire supply chain to adjust.  Automation, AI, and agility become critical as humans cannot scale manual tasks in the same way.  Operational tasks, from configuration to maintenance, must be scaled with minimal human involvement. Nokia's network operating system embraces the approach of modern built-for-cloud architecture from its Linux base, allowing it to run on multiple ASICs as needed. Its operation and automation toolkit includes a "NetOps Development Kit" to enable easy integration of operator network applications and tools, and a "Digital Sandbox" that provides a unique ability to test and roll out new applications and versions of its operating system without risk.  At cloud-scale, there is no longer a dedicated dev/test/production network, so the concept of testing before running in production is very different from the typical enterprise application workflow.

While Nokia's new products were purpose-built for hyperscalers, other segments of data center switching will also benefit from the flexibility and openness of SR Linux, the automation tools, and high-perforamnce hardware. Large enterprises, colocation providers, tier two cloud providers, and telco service providers increasingly follow the architectures and design principles of hyperscalers as they work through their digital transformation projects.  

Hyperscaler networking tiers continue to increase based on several factors.  In the leaf/spine (Top-of-Rack/Aggregation) layer of the network, Hyperscalers are adding levels because of increased utilization of the network and the server.  Increased utilization is coming from the use of Smart NICs capable of offloaded certain functions like security, storage, and virtualization, allowing the server to run more efficiently at a higher percentage of the time.  Improved utilization creates an increased network load that changes the leaf/spine portion of the network.  Hyperscalers also deployed the virtues of SDN and AI to use telemetry data to understand better and test the network, allowing it to run at higher utilization.  The above trends will rapidly move the hyperscalers towards 100 Gbps server access and 400 Gbps aggregation networks.

In the Core, Ethernet Switching and Routing is rapidly adding additional tiers to address the needs of inter data center connectivity.  Data Center Interconnect (DCI) is about to become a new multi-billion dollar market for Ethernet Switching and Routing.

On the hardware front, Nokia announced Fixed and Modular platforms based on Broadcom's Jericho L3+ ASICs and Tomahawk L2 ASICs and the ability to adapt to future ASICs based on Cloud demand.  By filling out the company's portfolio, Nokia has become one of just a few companies that can address the Cloud networking needs from server access all the way to transport.  Given the increasing demands of multi-vendor and multi-ASIC from the hyperscalers, the new vendor diversity will help drive the ecosystem as a whole at 400 Gbps and beyond towards 800 Gbps and 1.6 Tbps based platforms in the future.  

At Cisco Live, Cisco announced its next Cloud Scale ASIC.  Specifically, it announced it's 25.6 Tbps (512x56G) ASIC for shipment in early 2021.  Cisco became the third vendor to announce a  25.6 Tbps ASIC this year, which we see as a higher volume class of ASIC than 12.8 Tbps ASICs.  At the same time, Cisco also announced a new line card on the Nexus 9500. Cisco's ASICs have ramped significantly in the Nexus 9K since the platforms market introduction and has continued to gain traction is the DC ASIC business as the Nexus 9K ramps in the Cloud as a strong alternative to Broadcom.
 
The company continued to push for 800G QSFP-DD, maintaining the companies position of DD as the form factor of choice for optics instead of OSFP as industry consensus on form factor is still fractured.
 
The Nexus 9K continues to strengthen the software features and offerings for Enterprise and Cloud customers, and we expect the Nexus 9K to expand more into the DCI space with 400 Gbps compared to previous iterations of the Nexus 9K.  We believe Cisco's tools around telemetry and security will make for compelling solutions in today's multi-cloud environment.

Microsoft acquired Israeli startup, CyberX Labs today in a move that gets Microsoft Azure into the IoT security market.  We have been tracking CyberX for a couple years and have generally categorized it as an emerging player in the Operational Technology Access Control (OTAC) market.  More recently, it has smartly repositioned itself as an IoT network discovery, posture assessment and management company.  We see OTAC as an adjacent market to an existing, more IT-oriented security market called Enhanced Network Access Control (ENAC).  Microsoft explains that CyberX will extend its Azure IoT security capabilities towards devices used in industrial IoT, Operational Technology and infrastructure scenarios, and that, it will allow customers to discover their existing IoT assets, manage and improve security posture of these devices. 

We see this move by Microsoft as encroaching into the network security space a bit further than it had before.  And, it is using IoT and industrial operations as a means to enter.  We sill see the CyberX portfolio as an OTAC company, but since many IoT devices are just Internet Protocol (IP) connected devices, the CyberX portfolio can perform many of the tasks of that of an ENAC system.  And so, this puts Microsoft quite closely in competition with the existing leaders in the much-larger ENAC market, namely, Cisco, HPE Aruba, Forescout and Fortinet (listed as a partner on the CyberX Labs website).  Cisco and Forescout have announced OTAC products recently, as well.  HPE Aruba, a big player in ENAC, had integrated CyberX into its Clearpass ENAC product in 2019 and featured CyberX at its user conference in 2019.

So, given Microsoft is acquisitive these days and clearly has an interest in beefing up its Azure IoT capabilities, and given that Forescout is in the midst of a failed merger bid from investor Advent, perhaps it is time for Microsoft to take a closer look at Forescout.

Every day consumers put more data in the Cloud and enterprises increase their utilization of Cloud services to conduct business.  The Cloud and the digital content it holds continue to make up an increasing portion of the world's economy - even more so with COVID-19 causing a rapid shift and acceleration in digital transformation projects in companies.  

To keep up, modernizations that previously took years to deploy are being pushed through quickly because of COVID-19.  2020 is now the year where it is truly Cloud-first, whether that be consumers using Cloud services more for personal activities ranging from interacting with loved ones via Social Media websites to e-learning or the rapid shift to work-from-home (WFH).

With enterprises relying on the Cloud for daily operations, the importance of end-to-end security is increasing every day.  In the Ethernet Switch (L2) and Routing market (L3/L3+), the interest in MACsec increases with each speed transition.  There is a higher attach rate of MACsec with 400 Gbps products compared to 100 Gbps, and we expect with the data center rapidly moving towards 100G per Lambda and 112 Gbps SerDes that MACsec will play a pivotal and significant role in the 800 Gbps market.


Cloud providers and Telco Service Providers continue to increase their use of MACsec, both inside the data center and between data centers (Figure 1).  



Figure 1.  MACsec deployment inside and between data centers

End-to-end encryption from the server, often via a SMartNIC, is becoming more common.  In the case where a packet crosses between two locations, MACsec encryption secures  user/enterprise data from the moment it leaves a Cloud’s data center to the moment it enters. As applications use edge computing resources and become distributed across multiple availability zones and countries, data sovereignty and security become more important and top-of-mind for data center architects.

As Cloud providers and Telco Service Providers adopt 400 Gbps and look toward 800 Gbps, we expect to see more purpose-built MACsec solutions.  The data center networking market is also transitioning away from Modular chassis, and toward more Fixed CLOS architectures, we expect more Fixed 1RU solution with MACsec, especially in the DCI layer.  DCI will be a new market for Ethernet platforms, and vendors will look towards new features beyond the ASIC, like MACsec, to compete in this space.

- Alan Weckel, Founding Technology Analyst at @650group

Throughout the years, I’ve attended Aruba’s Atmosphere conferences.  This year, I missed the in-person connections of the previous years, but Aruba did a great job transitioning over to a virtual event with engaging content…and some green screens.  At Aruba’s user conference, Atmosphere, the company informed attendees of its new single-pane, cloud-native platform called ESP.  We were impressed not only with ESP but how well it delivered the message under tough circumstances, using Zoom webinar.  We want to highlight the ESP launch because it launches the company into a new category, that of single-pane management.  We expect that customers value the capability to manage Wi-Fi, Switching, SD-WAN, 5G and IoT using the same system, without “swivel-chairing” between multiple software interfaces.  And, by combining all these different “edge” systems to a single manager, this allows for a unified policy, security and insights system.
 
ESP.  What we learned about Edge Services Platform (ESP) at the Atmosphere show.  ESP is an automated, all-in-one platform that operates in the cloud or on-premises, and is designed to deliver a cloud experience at the edge.  Large or small companies can use ESP, and it is also available on its controller-less APs, and can be used across large campuses down to branches and to remote worker locations.  Now, with the launch of ESP, data gathered from APs, switches, IoT devices, user devices and SD-WAN connections are retained in a single location, and thus this data can be analyzed together.  Since all the telemetry data is in one place, the company can now use Artificial Intelligence (AI) to improve insights into how the network is performing, to improve the throughput (the company claims 15%), and reduce to the time to resolve issues (the company claims a 90% improvement).  Aruba shared with attendees that it has 10M APs at customer sites – we see this large installed base, spinning off a lot of telemetry, as being a key advantage to Aruba, because AI systems get better with more data.  

Greenlake.  Aruba ESP can be consumed either as a service in the cloud or on-premise, as a managed service delivered through Aruba partner. Customers can also consume it as a network as a service through GreenLake. Greenlake is a Network as a Service offering recently introduced by Aruba that allows customers to pay for equipment and services monthly, as opposed to as an up-front expenditure.

Other new product announcements.  UXI-6 sensor - the company announced a new sensor for gathering information from IoT and user systems.  This data can be leveraged by software and services to enable asset tracking, contract tracing and other systems.  Additionally, the company announced a new Ethernet Switch, the CX 6200 Switch Series.  The new switch can run on enterprise campuses, branch access and data centers.  
 
Contact Tracing.  The company is also innovating for the future hybrid work environment. They are releasing a new set of contact and location tracing tools, and are working with a partner, Plexus.  It uses a variety of data sets: Wi-Fi, BLE/Bluetooth, location-capabilities inherent in the infrastructure, wrist-bands, keycards, or Aruba asset tags.  Wi-Fi-only is the base case and is the minimum data set that gets customers started immediately.  As additional data sources, primarily those leveraging Bluetooth to improve tracking and capabilities of the contact tracing system. For expanded capabilities, Aruba Technology Partners integrate with Aruba infrastructures to monitor social distancing and group sizes, and generate contract tracing trees of potentially exposed individuals. 

On May 28, 2020, we published a paper that shows our thoughts on the importance of using contract tracing, hotspot tracking, and other services that can decrease the risk to employees who are returning to work after companies open up their doors. 

Please download this paper for more information.

The big ideas unveiled at the conference were twofold.  First, Huawei is promoting worldwide open standards as a counter to the likelihood that if it gets cut off from US-influenced technology, it may have to create its own, non-standard technology.  Second, the company is promoting “F5G,” which is “fixed 5G,” or a global standard for Passive Optical Network (PON) technology that operates at as high as 50 Gbps and can be used for fixed broadband, optical LAN (Campus Networks), cellular backhaul/fronthaul, and even optical Access uses.  The company also discussed evolutions or themes discussed at previous events like HAS2019, such as mmWave, FDD+TDD integration, Control User Plane Separation (CUPS), and more generally, 5G.  Much to our surprise, the opening keynotes differed significantly from the previous year’s themes in that there was no discussion of the advancements the company was making in developing in-house semiconductors and optical subsystems.

First of all, the company’s keynote, presented by Rotating Chairman, Guo Ping, was focused on Huawei’s views towards the US efforts to thwart Huawei.  The Chairman complained about the year-ago Entity List actions, and then more about this week’s escalation of prohibitions against Huawei.  Huawei expects these US actions will negatively impact Huawei in the future.  It said it is ramping up R&D and is focusing on open standards.  It says US’s efforts will hurt US interests.  In the past year, Huawei says it has redesigned over 1,000 circuit boards and that it grew R&D 30% last year.  Huawei’s supply chain is not “closed off, but open than ever,” and it “will continue to diversify” its base of suppliers.  As a result of US restrictions, the company fell $12B short of its plan in 2019.  Huawei’s view is that it simply hopes to “survive” in 2020.  One key message from the keynote was that Huawei does not want to see a world with two standards and two supply chains for the communications industry.

The company’s big news, in our view, was that it is advocating for F5G, which is a variant on PON technology that could be used in nearly all parts of networks, from indoor enterprise, to residential and business last mile, to cellular backhaul/fronthaul, and so on.  The vision, which was shared by co-sponsor, ETSI, a standards body in the telecom marketplace.  We think Huawei’s goal of creating a single technology platform that can be used in various markets where today multiple standards exist could be a good one.  For instance, in campus LAN environments, one could certainly argue that copper-based Ethernet has run its course (our forecasts are for declining revenue), and in the “last mile,” 1G-class PON and its currently shipping successor, 10G PON will need to be replaced by something.  F5G, which would operate at 10 Gbps and 50 Gbps speeds, differs from another consortium’s approach to a 10G PON successor, which operates at 25G.  So, on the one hand, Huawei is entering the market with a big idea – to put the same kind of fiber system “everywhere” (to the home, in the business, to the cellular towers, for instance) – at a time when many of these markets are currently, or soon will be, undergoing a transition, is a good idea.  On the other hand, there are already other standards bodies working to create accepted approaches for “to the home” fiber at 25 Gbps, for “in the business” at 2.5/5 Gbps, 10 Gbps, 25 Gbps and 100 Gbps (some copper, some fiber), and “to the towers” at 25 Gbps, 50 Gbps and 100 Gbps.  If Huawei gets it way, and F5G succeeds to become a standards, while at the same time the other standards continue to progress as they are today, then we’ll end up with two standards, the Huawei/ETSI approach, and the other approaches used by BBF, IEEE, etc.  This is what Huawei said it is trying to avoid in the keynote.

We enjoyed Huawei’s perspectives about its experience in the Chinese mobile and fixed market, where we see increasingly Chinese vendors are serving an increasing portion of capital equipment needs, while at the same time, it was interesting to hear about how the company is taking its experiences to other markets like Europe, Middle East, Asia and Latin America.  Several topics it discussed that were important, in our view, were the importance of mmWave, FDD+TDD integration, and CUPS.  To review each, we thought it was interesting that Huawei continues to view that the mmWave frequency as being limited to a US-only 5G market implementation; it views the C-band (which is mid-band) as the main spectrum where 5G will be deployed around the world, and it thinks this is sufficient to achieve 5G’s goals.  Next, the company spent ample time discussing its RAN technology that allows both TDD and FDD to operate simultaneously, explaining that FDD is best suited for lower frequencies and allows for superior uplink capabilities, while TDD is best for mid-band and is well-suited for MU-MIMO, high capacity throughput radios.  The company also shared that its CUPS technology has been adopted by 60 customers, which represents significant progress.
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We are eager to see the standards “battle” resolved, whether that means Huawei works closely with existing standards bodies, or whether other players worldwide, get on board with F5G, so that the communications industry will benefit from volume shipments and consumers may benefit with lower prices and new technology getting deployed sooner.

Microsoft announced that it will acquire Metaswitch, a telecom core software company with deep expertise in IMS Core, automation, containers and cloud-native telecom systems.  The acquisition will complement Microsoft's previously-announced acquisition (April 2020) of packet core and IoT software specialist, Affirmed Networks.  Microsoft is positioning itself to become a viable alternative to in-house-built telecommunications core networks.  The company says that by running core functions on Azure, operators will be able deliver services to customers at lower capital and operating costs.

The company said it plans to continue to engage with existing suppliers and network equipment partners to share roadmaps and explore expanded opportunities to work together, including in technologies such as radio, 5G Core, orchestration and OSS/BSS.  Historically, Metaswitch has worked collaboratively with many companies that offer such software and hardware, so we think Microsoft is saying that this constructive relationship may continue.  But, we wonder, could it be that Microsoft intends to further bolster its capabilities to potentially include radio and OSS/BSS after successfully working with these kinds of companies for a period of time.  

It is clear that Microsoft is interested in serving the communications needs of customers.  It recently announced it will re-sell CBRS managed services from Federated Wireless, for instance.  Without question, collaboration services such as Teams have been very popular, and quite different from the types of services that have traditionally been offered by telecom operators.  To complement its own services, Verizon acquired a Teams competitor called BlueJeans Networks; however there are many opportunities for Microsoft to partner with other telcos.  It is deals like the AT&T / Microsoft Edge services announcement last summer that get us thinking that Microsoft has very big plans for collaborative working relationships with the telecom industry, extending its own offerings to telecom customers.

By gobbling up software companies like Metaswitch and Affirmed, and offering these technologies both as software-at-telco (premises-based) or as cloud-based software (Cloud/SaaS), you can argue Microsoft will be an ideal telco partner, offering capital efficient choice, with the two added kickers:  a- services may be deployed more rapidly if cloud-delivered services are chosen, and b-that Microsoft services (Microsoft365, AI, Teams, Azure and so much more) can be easily integrated into a telco's offerings.  

112 Gbps is one of the most important building blocks for Ethernet Switching, and networking in general, for this decade and today Innovium announced a 25.6 Tbps ASIC based on the technology. 

650 Group has been forecasting 112 Gbps in our reports for over three years and are excited to see the market getting ready for shipments in 2021.

We expect 25.6 Tbps ASICs to manifest as 32-port 1RU 800 Gbps platforms, as well as a higher density of 400 Gbps and 100/200 Gbps platforms.  112 Gbps is also an important technology for Data Center Interconnect (DCI) as more tiers in the networking are being added at many hyperscalers will utilize this technology to connect buildings and locations as metro spines become popular and widespread.
 
While 400 Gbps optics have been in short supply for over one year, we are more optimistic about 800 Gbps as the technology leap to get there in a pluggable is more manageable.  At the same time, the industry can use gearboxes and retimers to use older (generation 1) 400 Gbps optics.  With the continued interest from Cloud providers to use Fixed CLOS racks, the industry will also benefit from these higher-speed ASICs with copper connectivity.  Not 100% dependent and gated on optics availability is an important aspect to 800 Gbps in the early quarters of shipments.
 
With each 25.6 Tbps switch replacing at least six 12.8 Tbps (dependent on over subscription), the market will adopt and move rapidly towards 25.6 Tbps ASICs.  Besides DCI and the increased bandwidth mentioned earlier, AI/ML workloads will be moving from nascent to mainstream in 2021, which will provide additional market demand for the increased bandwidth.