For decades the leading network companies have been tightly coupling their software to complex, custom-built chips. Besides leaving IT buyers with a staggering array of appliances, the reliance on custom silicon has chilled industry startup activity. But with software defined networking, that is beginning to change.
Let me take you back to 2000. Andes Networks hired me that year to build a network packet processor. We were changing the world of network security by putting features that had traditionally been done in software into a set of purpose-built chips. It was heady stuff. It took us two years, a lot of engineers, and a large amount of capital to build three chips, a system and a software stack. And while we delivered on the promise of faster, cheaper and more efficient, we were proprietary and yet another box for IT to manage, and since we had to build our own chips, it was tough to challenge the incumbents. The company was eventually sold to Sun Microsystems.
In the past few years, the technology landscape has changed, making it possible for a new generation of startups to innovate and challenge the incumbents. Thanks to Moore's Law, cheap, commodity processors from Intel have caught up in performance to specialized networking processors. Adding to this, virtualization tools have transformed the data center by allowing software to run in a distributed, elastic manner. With the combination of cheap, powerful processors and a framework for virtualized cloud computing, networking functionality that used to be implemented in hardware can now be written in software and distributed across many x86 processors in a data center.
The result? A new SDN revolution that has put each of the formerly proprietary network layers up for grabs and the promise of a more flexible, cost-effective and software-based networking stack. Companies that have historically dominated the space with their proprietary technology are taking notice. The shift in technology has already resulted in VMware's $1.25 billion acquisition of Nicira and Juniper's $170 million acquisition of Contrail, multiple SDN announcements from Cisco, recognition from VMware that the software defined data center requires a programmable and flexible networking layer, and a change in Juniper's pricing strategy to a more software-centric model. [Also see: "Cisco vs. Juniper: How different are their SDN strategies?"]
In this "revolution," network infrastructure buyers are the clear winners -- the benefits for end users include a data center that is easier to manage and configure and is more scalable, and a set of elastic set of network services that can be scaled up or down on-demand in response to real-time compute and network requirements.
What's more, there are many opportunities for new companies to innovate. As we move to a more virtual, dynamic data center, each layer in the seven-layer network stack -- dominated today by multibillion dollar companies such as Cisco, Juniper, F5 and Check Point -- goes up for grabs. By our estimates, $35 billion in IT spend can be disrupted by SDN technologies, which means that upward of $150 billion in market value can be created over the next few years.
The big opportunity for entrepreneurs is to rethink and re-architect every network service using SDN constructs -- separation of the control and data plane built on a commodity hardware stack, elastic, on-demand scaling, and simplified management and configuration.
We've already seen multiple startups emerge to reinvent core network services such as security, load balancing and switching in a distributed, highly elastic manner. For example, Nicira (acquired by VMware) started the trend by innovating at the lowest layers of the network stack, allowing for a programmable, software based network; Embrane is re-architecting load balancing and security for the cloud; Plexxi is reinventing the top of the rack switch; And Pertino is reinventing the wide area network for the cloud era.
We are in the early innings of the network revolution and I am confident that the next five years will bring even more innovation as entrepreneurs continue to rethink the networking space. It's not often that multibillion-dollar markets are disrupted by a confluence of hardware trends, software innovations, and the determination of a group of visionary entrepreneurs. This should be fun to watch.
Lightspeed Venture Partnersis a leading venture capital firm with over $2 billion of committed capital under management and investment professionals and advisors in Silicon Valley, India, Israel and China with Lightspeed China Partners.
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