Last month I attended Huawei’s annual Global Analyst Summit, for the requisite several days of mass presentations, executive meetings and tours that typically constitute such an event. Underneath my veneer of blasé cynicism, I was actually quite intrigued, since I really knew very little about Huawei. And what I did know was tainted by popular and persistent negatives – they were the ones who supposedly copied Cisco’s IP to get into the network business, and, until we got better acquainted with our own Federal Government’s little shenanigans, Huawei was the big bad boogie man who was going to spy on us with every piece of network equipment they installed.
Reality was quite a bit different. Ancient disputes about IP aside, I found a $40B technology powerhouse who is probably the least-known and understood company of its size in the world, and one which appears poised to pose major challenges to incumbents in several areas, including mainstream enterprise IT.
So you don’t know Huawei
First, some basics. Huawei’s 2013 revenue was $39.5 Billion, which puts it right up there with some much better-known names such as Lenovo, Oracle, Dell and Cisco.
It was five years ago, March 2009, when Cisco formally announced “Project California,” its (possibly intentionally) worst-kept secret, as Cisco Unified Computing System. At the time, I was working at Hewlett Packard, and our collective feelings as we realized that Cisco really did intend to challenge us in the server market were a mixed bag. Some of us were amused at their presumption, others were concerned that there might be something there, since we had odd bits and pieces of intelligence about the former Nuova, the Cisco spin-out/spin-in that developed UCS. Most of us were convinced that they would have trouble running a server business at margins we knew would be substantially lower than their margins in their core switch business. Sitting on top of our shiny, still relatively new HP c-Class BladeSystem, which had overtaken IBM’s BladeCenter as the leading blade product, we were collectively unconcerned, as well as puzzled about Cisco’s decision to upset a nice stable arrangement where IBM, HP and Dell sold possibly a Billion dollars’ worth of Cisco gear between them.
Five years later, HP is still number one in blade server units and revenue, but Cisco appears to be now number two in blades, and closing in on number three world-wide in server sales as well. The numbers are impressive:
· 32,000 net new customers in five years, with 14,000 repeat customers
· Claimed $2 Billion+ annual run-rate
· Order growth rate claimed in “mid-30s” range, probably about three times the growth rate of any competing product line.
With the next major spin of Intel server CPUs due later this year, HP’s customers have been waiting for HP’s next iteration of its core c-Class BladeSystem, which has been on the market for almost 7 years without any major changes to its basic architecture. IBM made a major enhancement to its BladeCenter architecture, replacing it with the new Pure Systems, and Cisco’s offering is new enough that it should last for at least another three years without a major architectural refresh, leaving HP customers to wonder when HP was going to introduce its next blade enclosure, and whether it would be compatible with current products.
At their partner conference this week, HP announced a range of enhancements to its blade product line that on combination represent a strong evolution of the current product while maintaining compatibility with current investments. This positioning is similar to what IBM did with its BladeCenter to BladeCenter-H upgrade, preserving current customer investment and extending the life of the current server and peripheral modules for several more years.
Tech Stuff – What Was Announced
Among the goodies announced on February 19 was an assortment of performance and functionality enhancements, including:
Platinum enclosure — The centerpiece of the announcement was the new c7000 Platinum enclosure, which boosts the speed of the midplane signal paths from 10 GHz to 14GHz, for an increase of 40% in raw bandwidth of the critical midplane, across which all of the enclosure I/O travels. In addition to the increased bandwidth midplane, the new enclosure incorporates location aware sensors and also doubles the available storage bandwidth.
Earlier this week at its Discover customer event, HP announced a significant set of improvements to its already successful c-Class BladeSystem product line, which, despite continuing competitive pressure from IBM and the entry of Cisco into the market three years ago, still commands approximately 50% of the blade market. The significant components of this announcement fall into four major functional buckets – improved hardware, simplified and expanded storage features, new interconnects and I/O options, and serviceability enhancements. Among the highlights are:
Direct connection of HP 3PAR storage – One of the major drawbacks for block-mode storage with blades has always been the cost of the SAN to connect it to the blade enclosure. With the ability to connect an HP 3PAR storage array directly to the c-Class enclosure without any SAN components, HP has reduced both the cost and the complexity of storage for a wide class of applications that have storage requirements within the scope of a single storage array.
New blades – With this announcement, HP fills in the gaps in their blade portfolio, announcing a new Intel Xeon EN based BL-420 for entry requirements, an upgrade to the BL-465 to support the latest AMD 16-core Interlagos CPU, and the BL-660, a new single-width Xeon E5 based 4-socket blade. In addition, HP has expanded the capacity of the sidecar storage blade to 1.5 TB, enabling an 8-server and 12 TB + chassis configuration.
Next up in the 2012 lineup for the Intel E5 refresh cycle of its infrastructure offerings is Cisco, with its announcement last week of what it refers to as its third generation of fabric computing. Cisco announced a combination of tangible improvements to both the servers and the accompanying fabric components, as well as some commitments for additional hardware and a major enhancement of its UCS Manager software immediately and later in 2012. Highlights include:
New servers – No surprise here, Cisco is upgrading its servers to the new Intel CPU offerings, leading with its high-volume B200 blade server and two C-Series rack-mount servers, one a general-purpose platform and the other targeted at storage-intensive requirements. On paper, the basic components of these servers sound similar to competitors – new E5 COUs, faster I/O, and more memory. In addition to the servers announced for March availability, Cisco stated that it would be delivering additional models for ultra-dense computing and mission-critical enterprise workloads later in the year.
Fabric improvements – Because Cisco has a relatively unique architecture, it also focused on upgrades to the UCS fabric in three areas: server, enclosure, and top-level interconnect. The servers now have an optional improved virtual NIC card with support for up to 128 VLANs per adapter and two 20 GB ports per adapter. One in on the motherboard and another can be plugged in as a mezzanine card, giving up to 80 GB bandwidth to each server. The Fabric Interconnect, the component that connects each enclosure to the top-level Fabric Interconnect, has seen its bandwidth doubled to a maximum of 160 GB. The Fabric Interconnect, the top of the UCS management hierarchy and interface to the rest of the enterprise network, has been up graded to a maximum of 96 universal 10Gb ports (divided between downlinks to the blade enclosures and uplinks to the enterprise fabric.
Today, after two of its largest partners have already announced their systems portfolios that will use it, Intel finally announced one of the worst-kept secrets in the industry: the Xeon E5-2600 family of processors.
OK, now that I’ve got in my jab at the absurdity of the announcement scheduling, let’s look at the thing itself. In a nutshell, these new processors, based on the previous-generation 32 nm production process of the Xeon 5600 series but incorporating the new “Sandy Bridge” architecture, are, in fact, a big deal. They incorporate several architectural innovations and will bring major improvements in power efficiency and performance to servers. Highlights include:
Performance improvements on selected benchmarks of up to 80% above the previous Xeon 5600 CPUs, apparently due to both improved CPU architecture and larger memory capacity (up to 24 DIMMs at 32 GB per DIMM equals a whopping 768 GB capacity for a two-socket, eight-core/socket server).
Improved I/O architecture, including an on-chip PCIe 3 controller and a special mode that allows I/O controllers to write directly to the CPU cache without a round trip to memory — a feature that only a handful of I/O device developers will use, but one that contributes to improved I/O performance and lowers CPU overhead during PCIe I/O.
Significantly improved energy efficiency, with the SPECpower_ssj2008 benchmark showing a 50% improvement in performance per watt over previous models.
In a surprising move, HP and Cisco announced that HP will be reselling a custom-developed Cisco Nexus switch, the “Cisco Nexus B22 Fabric Extender for HP,” commonly called a FEX in Cisco speak. What is surprising about this is that the FEX is a key component of Cisco’s Nexus switch technology as well as an integral component of Cisco’s UCS server product, the introduction of which has pitted the two companies in direct and bitter competition in the heart of HP’s previously sacrosanct server segment. Combined with HP’s increasing focus on networking, the companies have not been the best of buds for the past couple of years. Accordingly, this announcement really makes us sit up and take notice.
So what drove this seeming rapprochement? The coined word “coopetition” lacks the flavor of the German “Realpolitik,” but the essence is the same – both sides profit from accommodating a real demand from customers for Cisco network technology in HP BladeSystem servers. And like the best of deals, both sides walk away thinking that they got the best of the other. HP answers the demands of what is probably a sizable fraction of their customer base for better interoperability with Cisco Nexus-based networks, and in doing so expects to head off customer defections to Cisco UCS servers. Cisco gets both money (the B22 starts at around $10,000 per module and most HP BladeSystem customers who use it will probably buy at least two per enclosure, so making a rough guess at OEM pricing, Cisco is going to make as much as $8,000 to $10,000 per chassis from HP BladeSystems that use the B22) from the sale of the Cisco-branded modules as well as exposure of Cisco technology to HP customers, with the hope that they will consider UCS for future requirements.
Not to be left out of the announcement fever that has gripped vendors recently, Cisco today announced several updates to their UCS product line aimed at easing potential system bottlenecks by improving the whole I/O chain between the network and the servers, and improving management, including:
Improved Fabric Interconnect (FI) – The FI is the top of the UCS hardware hierarchy, a thinly disguised Nexus 5xxx series switch that connects the UCS hierarchy to the enterprise network and runs the UCS Manager (UCSM) software. Previously the highest end FI had 40 ports, each of which had to be specifically configured as Ethernet, FCoE, or FC. The new FI, the model 6248UP has 48 ports, each one of which can be flexibly assigned as up toa 10G port for any of the supported protocols. In addition to modestly raising the bandwidth, the 6248UP brings increased flexibility and a claimed 40% reduction in latency.
New Fabric Extender (FEX) – The FEXC connects the individual UCS chassis with the FI. With the new 2208 FEX, Cisco doubles the bandwidth between the chassis and the FI.
VIC1280 Virtual Interface Card (VIC) – At the bottom of the management hierarchy the new VIC1280 quadruples the bandwidth to each individual server to a total of 80 GB. The 80 GB can be presented as up to 8 10 GB physical NICs or teamed into a pair fo 40 Gb NICS, with up to 256 virtual devices (vNIC, vHBA, etc presented to the software running on the servers.
When Cisco began shipping UCS slightly over two years ago, competitor reaction ranged the gamut from concerned to gleefully dismissive of their chances at success in the server market. The reasons given for their guaranteed lack of success were a combination of technical (the product won’t really work), the economics (Cisco can’t live on server margins) to cultural (Cisco doesn’t know servers and can’t succeed in a market where they are not the quasi-monopolistic dominating player). Some ignored them, and some attempted to preemptively introduce products that delivered similar functionality, and in the two years following introduction, competitive reaction was very similar – yes they are selling, but we don’t think they are a significant threat.
Any lingering doubt about whether Cisco can become a credible supplier has been laid to rest with Cisco’s recent quarterly financial disclosures and IDC’s revelation that Cisco is now the No. 3 worldwide blade vendor, with slightly over 10% of worldwide (and close to 20% in North America) blade server shipments. In their quarterly call, Cisco revealed Q1 revenues of $171 million, for a $684 million revenue run rate, and claimed a booking run rate of $900 million annually. In addition, they placed their total customer count at 5,400. While actual customer count is hard to verify, Cisco has been reporting a steady and impressive growth in customers since initial shipment, and Forrester’s anecdotal data confirms both the significant interest and installed UCS systems among Forrester’s clients.