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.