A top Cisco executive sees a host of ongoing opportunities to equip its service provider customers with 100G optical switching and optical gear.
Ahuja (Source: Cisco)
Speaking during the Cisco Financial Analyst day, Kelly Ahuja, SVP, Service Provider Business, Products and Solutions for Cisco, said that they are seeing more of its service provider customer base migrate their core and optical networks to 100G, but deployments will vary widely by carrier and geographic region.
"What I'm starting to see is the 100 gig buildout is starting to happen and it's happening in pockets and that actually has a good stuff for our optical as well as our routing sort of business because that--we've seen those transitions before," Ahuja said, according to a Seeking Alpha transcript. "So that's happening, but it's unclear how fast and how broad it'll happen across all the different markets and the geographies."
Ahuja added that the varying deployment cycles is due to the ongoing consolidation, but Cisco's profile has risen in service provider 100G discussions as these customers look to enhance their business service revenues.
"We're talking about macro, there's a lot of consolidation that's still being talked about or happening in the industry, but the big thing that's actually making us more relevant in these conversations is every operator wants to kind of get back to business services," Ahuja said. "They want to go figure out how to go after the mid-market or small to medium enterprise and that's making the conversations more relevant and that's actually making it much easier for us to have business conversations and then tying the infrastructure on top of that as well."
While Cisco has always been an optical player, they became the new talk of the town in the optical networking space lately.
In March, Verizon (NYSE: VZ) named Ciena and Cisco as preferred packet optical network system (P-OTS) suppliers for its 100G metro network deployment. Verizon had always been a clear advocate of using 100G in the metro, but what's different about this latest deployment is that it's going to serve as a Greenfield overlay to its existing metro transport network.
At that time, Andrew Schmitt, principal analyst for carrier transport networking at IHS Infonetics, wrote in a research note that gaining the lead vendor position for Verizon's 100G metro optical project is a proof point for Cisco's packet optical transport service (P-OTS) strategy.
However, he cautioned that "the company must hit certain milestones with Verizon in the coming quarters to retain its lead vendor position."
In tandem with 100G rollouts, Cisco is also seeing growing opportunities for both data center builds. A number of large telcos and traditional data center operators such as CenturyLink and Equinix are expanding their data center footprints in the United States and in key international markets in the EMEA region.
"You're actually also starting to see more data center deployments by the operators so that's the other piece we have to start looking at which is the compute and the switching business inside the service provider, and what does that mean because that's going to broaden out the infrastructure layer," Ahuja said.
Another key area will be the emergence of software networking via network functions virtualization (NFV) and software defined networking (SDN).
Cisco has already been making inroads with its SDN and NFV strategy with a number of large U.S.-based service providers naming it as one vendor in their software migration strategy. While it's still in the early stages of development, Cisco was named as one of Verizon's initial vendor partners for Verizon's SDN migration and already is part of AT&T's (NYSE: T) Domain 2.0 initiative team.
"On the platform side, we're really looking at kind of the adoption of the tools and capabilities that we bring to the table whether it's a controller ACI the datacenter, WAN controllers or RAN controllers so on et cetera and then really kind of taking that with the virtualization construct so look for things in that area around our wins around that and the orchestration engine and some of the virtualization capabilities that we're bringing," Ahuja said. "The adoption to more NFVs is not to replace stuff, but actually complement what's already there in the physical infrastructure is the way you need to think about that. And the last part is in the applications or the software side."
Despite these emerging opportunities, Cisco has been heading through some challenging waters in the service provider segment, a trend the company said it sees no signs of letting up anytime soon.
In its fiscal third-quarter, Cisco reported that service provider orders declined 7 percent from the same period in 2014. Cisco attributed the decline in orders to service providers being more conservative with capex spending and overall industry consolidation. Service provider sales in the United States declined 17 percent during the quarter.
- see this Seeking Alpha transcript
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