09 Jul Eyeing $12B market, Nokia lands Apple deal for new data center switch | Light Reading
Nokia has landed Apple as a flagship customer for a new line of switching products as it takes a bigger step into a data center (DC) market worth about $12 billion annually.
The Finnish equipment maker already provided optical equipment and routers for the enterprise and telco markets. Now it is adding a switching line that has already attracted interest from hyperscalers and telecom service providers and could represent the next growth opportunity for Nokia.
The latest products are the culmination of a two-year research-and-development effort and promise capabilities that have not previously been available in the DC market, says Steve Vogelsang, Nokia’s chief technology officer of IP and optical networks.
They include a network operating system (NOS) that runs the switches the Nokia Service Router Linux (SR Linux) as well as an intent-based automation platform, branded the Nokia Fabric Service Platform (FSP), and operations toolkit.
Those appear to have been developed in close partnership with the hyperscalers and were intended to address some of the pain points in older products.
“Openness” was paramount, says Vogelsang. “They really couldn’t get a switch on the market that had the software environment they wanted,” he told Light Reading. “They wanted something that would allow them to fully control the devices in the network and integrate with the systems they had built.”
Until now, hyperscalers have been getting around that problem by stripping away the software and building their own operating systems, according to Nokia.
Evidence of some demand for a market offer comes via the deal Nokia has already signed with Apple, which is to use the switching line at a new facility in Denmark.
“We regularly upgrade our data center equipment with technology to increase efficiency and reduce energy consumption,” said Adam Bechtel, Apple’s vice president and networking lead, in Nokia’s statement about the launch. “Using Nokia’s new system will enable better networking and routing capabilities in our Viborg, Denmark facility.”
Nokia is at pains to insist its new offer is aimed not just at the hyperscalers, though, but at any “cloud builder,” including enterprises setting up private networks and communications service operators developing their “telco clouds.”
If it has yet to unveil customers in those groups, its statement includes expressions of interest and endorsements from a broad range of companies, including BT, Equinix, LINX and Turkcell.
“Nokia’s new data center fabric solution promises to provide full programmability with deep telemetry, along with a modern operational toolkit to drive the extreme automation and scaling of our telco cloud, which is critical to drive future 5G services,” said Neil McRae, BT’s chief architect.
The timing may be auspicious, too. “Data centers are going through a three- to four-year refresh cycle for reasons of capacity the servers and network infrastructure needs to upgrade so that upgrade cycle is just starting, and it is an opportune time to enter,” says Manish Gulyani, Nokia’s vice president of global enterprise marketing.
Helpfully, Nokia already has commercial relationships with many of the enterprise groups and hyperscale firms it is targeting, thanks largely to its fast-growing enterprise business.
That has been a bright spot for the Finnish equipment vendor amid setbacks in the mobile infrastructure market: Its sales in the recent first quarter rose 19%, to 311 million ($352 million), compared with the year-earlier quarter.
The switching line marks the latest addition to an IP and optical business that has been a similar success story ever since Nokia acquired most of those assets with its 2016 takeover of Alcatel-Lucent. Despite some coronavirus-linked pressure in the first quarter, sales of IP routing and optical equipment rose 13% last year, to nearly 4.7 billion ($5.3 billion).
But today’s move will intensify competition with DC specialists including Arista, Cisco and Juniper, which have a long track record in the market.
Alan Weckel, a founding analyst at 650 Group, says he is impressed by Nokia’s move and thinks hyperscalers will welcome the injection of rivalry.
“The hyperscalers are asking for multivendor solutions, so adding Nokia to the mix is good for the ecosystem,” he says.
The switching line will allow Nokia to compete in more deals, he says, and brings various unique features. “Part of this comes from working directly with a hyperscaler and part of it comes from starting from scratch, using 2020 design principles and practices versus 2015,” he says.
Brad Casemore, an analyst at IDC, says Nokia will be able to differentiate itself based on its heritage in the routing market, especially as DC switching “becomes increasingly predicated on IP routing protocols for simplicity and scale.”
But selling to hyperscalers is not going to be straightforward, he tells Light Reading.
“The largest hyperscalers increasingly develop their own network software or leverage open source NOSes such as SONIC, so cracking the ToR [top of rack] or even leaf layers of their networks will be daunting, but Nokia might have an opportunity to play at the spine and super-spine layers of those networks,” says Casemore.
Initially, Nokia’s best bet probably lies in the telco cloud market, where it already has relationships with many companies that are eager to modernize systems, he says.
“They might also make some headway with the Tier 2/3 clouds, but it’s a competitive space, inhabited not only by OEM [original equipment manufacturer] competitors, such as Cisco, Arista and Juniper, but also bare-metal switches from white-box ODMs [original design manufacturers],” says Casemore.
“It should be noted that SONIC is gaining ground in some of those accounts, too, though Nokia has indicated that it will support SONIC at hyperscalers and other accounts that have the resources and inclination to go in that direction,” he adds.
650 Group expects that overall spending on DC switching and routing products will exceed $17 billion a year by 2024.
“It is a big market we are going after and even a small chunk is good when you are starting from zero,” says Gulyani.
Iain Morris, International Editor, Light Reading