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How HP can win in the data centre

Beating Cisco will take investment, innovation and insight

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HP and Cisco are currently embroiled in a war of words, market share and revenue in Ethernet switching overall, but can HP really put up much of a fight in the data centre?

The data centre is where virtually all of the action in switching is right now. And HP is a leading vendor of data centre blade switches. But the company appears to be treading water in high density 10 Gigabit top-of-rack switches and in the core.

As rivals like Cisco, Brocade and Juniper unleash more 10G switches to address top-of-rack and core requirements, HP is conspicuously quiet even after spending $2.7 billion (£1.71 billion) in 2009 to acquire 3Com. According to HP, a big reason for buying 3Com was its data centre switching portfolio, chiefly the A12500 core switch and the A5820 top-of-rack device. HP also offers the A7500 and A9500 for data centre aggregation and smaller cores.

HP has been largely silent about the A12500's progress and that of the A5820 since the 3Com acquisition. HP did unveil a four port Fibre-Channel-over-Ethernet module for the A5820 last year, and claims its A12500 is a leading platform in data centres in China. Beyond that, the company has largely been missing in action while its competitors broaden their switching arsenals with new high density fixed and modular 10G platforms.

Leader of the gang

By contrast, in blade switching HP is the leader with its flagship product, the 6120. That indicates the entrenched server side of HP is driving its data centre networking and computing sales, even after the acquisition of 3Com which closed 17 months ago. HP clearly has at least one significant gap to fill and some branching out of China to do, analysts say.

"HP has a few product gaps and probably hasn't met its sales objectives with the 3Com products," says Jon Oltsik of Enterprise Strategy Group. "I'm also hearing that success has really been limited in APAC/China."

Going forward, HP should have five priorities in switching:

  • Address the top-of-rack.
  • Expand its core switch to markets beyond China.
  • Leverage its server and blade switch success to increase penetration of its fixed and modular data centre switches.
  • Further unify management across its applications and infrastructure to stimulate adoption of its FlexFabric architecture for flattening, consolidating and converging data centre networks and resources.
  • Continue to increase the densities and feature sets of all of its data centre switches.

HP says it's a serious contender now and will be even more so in switching when it addresses priority number one in the first quarter of 2012 with a new line of top-of-rack switches.

"We are the market leader in the data centre, period, in servers," says Bethany Mayer, acting head of HP Networking. "So we have a beachhead as strong as Cisco's, and I think even stronger, and combining our switching technologies together with that... is really what we're trying to achieve here."

Top-of-rack switching is the hottest segment of data centre networking right now. The 10G Ethernet market was $1.4 billion in the second quarter, and top-of-rack switching accounted for 55% of the 1.4 million ports shipped, according to Dell'Oro Group. That trend will continue.

"We continue to believe that almost all revenue growth in the (10G) market will come from this segment going forward and anticipate that 2011 revenues will reach $1.3 billion, accounting for 7% of (overall Ethernet switching) market revenue," Dell'Oro states in its Q2 report. That means top-of-rack switching could account for 23% to 24% of the 10G market this year.

Top five

The top five vendors in top-of-rack switching are Cisco, IBM through its Blade Network Technologies acquisition, Juniper, Dell and Brocade. HP has been missing from this list for two straight quarters.

But HP hopes to soon change that. Company officials wouldn't divulge what its new top-of-rack switches would look like in terms of port density, throughput, switching capacity, performance and so forth, but they will support HP's own IRF multi-chassis technology and the TRILL specification for multipath forwarding in an Ethernet network.

Some say those switches can't come soon enough. In the first quarter, Oppenheimer & Co analyst Ittai Kidron noted HP's weakness in data center switching in a bulletin on the overall market.

"10GbE strength was due to Virtual Connect (blade switches), not data centre traction with A12500 or top-of-rack switches," Kidron wrote. "In our view, HP's still dealing with 3Com/ProCurve integration issues and is at risk of falling behind if it doesn't improve its data centre portfolio by 2H11."

HP says it can't figure out where Kidron is coming from. It says all of its data centre switching offerings are growing from a revenue perspective and that traction will continue when the new top-of-rack switch line debuts early next year.

"We have some products coming out very near term that go beyond the A5800 in terms of port performance and density," Mayer says. "That will provide us with the density we're looking for at top-of-rack, and more."

"The richness of the feature set and the density will be very, very interesting," adds Saar Gillai, HP Networking CTO.

Despite HP's lag in top-of-rack, the company is number two in 10G Ethernet revenue with 10.5% of that $1.4 billion market in Q2, according to Dell'Oro. Cisco leads with 72.4%.

HP blades led the charge. HP says it has shipped 5 million blade switch ports, and 31% of 10G ports shipped in Q2 were from blades, while uplink ports on Gigabit Ethernet switches accounted for 15%, Dell'Oro says.

Lagging adoption

The company could use that kind of momentum in the core too, analysts say. Forrester Research's Andre Kindness says he hasn't detected any traction of HP's 3Com switches in production within the core or data centre. He acknowledges, though, that he hasn't had any contact with enterprises or Forrester clients in China.

"There really hasn't been any new (3Com inherited) products in two years," says Andre Kindness of Forrester Research. "In the data centre, companies are looking for leadership (in switching). They're seeing it from Juniper and Cisco; I just don't think they're seeing it from HP at this point."

Kindness makes a case for HP divesting its network hardware business and focusing on virtual networking through software and a more cohesive, comprehensive strategy.

Without breaking out revenue by specific product, HP says A12500 sales have experienced 200% year-over-year growth, and that core revenue is growing faster than edge revenue. HP also says sales of the A7500 are strong.

"We have a marketshare leadership position in China, which is one of the fastest growing markets in the world," Mayer says. "That is a lot of data centres, frankly. We grew the (overall HP Networking) business 15% this past quarter and took share from Cisco in switches and routing."

Mayer says HP Networking has realised seven consecutive quarters of growth even though Dell'Oro shows some lumpiness in those numbers. Market share in the fourth quarter of 2009 was 6.3%, dropping to 5.6% in the following quarter, growing to 10% in the second quarter of 2010 after closing the 3Com acquisition, and then dropping slightly to 9.8% in Q3 and 9.9% in Q4, and bouncing back to 11.2% and 11.1% in the first two quarters of this year, respectively.

"When other folks lost share and lost revenue, we gained revenue," Mayer says. "Overall, the business is doing very well."

HP plans to continue to upgrade the A12500 with additional software features and higher densities.

"We're looking for something a bit more creative than just another switch," Gillai says. "If you think about Virtual Connect and some of the things we do looking at the whole problem, not just the switching domain, our next big boxes are going to enable more of that. More disruptive than just another switch."

State of flux

The data center is still in a state of flux so HP still has time to become a stronger player in switching, analysts say. But it needs to show that it, too, is keeping up with the Ciscos, IBMs, Brocades, Junipers and Dells of the industry.

"I think HP needs patience here," says Oltsik. "There are a lot of upcoming data centre networking transitions: convergence, tier elimination, fabric, software-enablement, etc. So HP should have lots of opportunities moving forward. HP needs to build on what it has and make changes as the market develops. This is an evolutionary change that will happen over time."


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