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January 2013 SDN Market Perspectives
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January 2013
SDN Market Perspectives
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Table of Contents
I. SDN Market Perspectives
II. AGC Overview
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The Next (R)evolution?
What is it?When will it be here?Who will use it?Why will they use it?Where will they use it?
How big is this thing?
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New Networking Requirements for the CloudPace of innovation in networking has lagged behind server side
Virtualization and Cloud are key change agentsTraditional networking is leading to inefficient use of infrastructure in today's virtualized environments
Virtualization (and Cloud) has changed networkingComplexity - virtualization at all layers of infrastructureScale – increased numbers of MAC and IP addressesCapacity – gigabits to multiple terabits of capacity to enable ultrafast connectionsMobility - freedom and flexibility in matching workloads to computing power
Big Data Also Driving RequirementsLow-latency IO, high memory throughput, and power-efficient compute operations
OpenFlow Networking Standard Gaining MomentumEcosystem supporting; commoditization of hardware switch vendors not the focusMulti-tenant VM networking use case leading the way as OpenFlow moves from the domain of the hyper-scale data centers to IaaS (public cloud) providers and the enterprise data center Software Defined Networking enabling rapid, programmable provisioning
The Cloud StackUnlike the traditional OSI stack model of Layers 1 though 7 with distinct separation between network layers (Layer 2/3/4) and application layers (Layer 7), Cloud Networking transcends the layers and blurs these boundaries by coupling the network infrastructure with machines and modern web applications.
Source: Forrester
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Looking Back – Networking 2007
Routing Mgmt Access Control VPNs …
Operating Systems & Middleware
Specialized Packet Handling/Forwarding Hardware
Millions of lines of code5,400 RFCsHigh barrier to entry
Billions of gatesHuge complexityPower/people intensive
Many complex functions embedded into the infrastructureOSPF, BGP, Multicast, NAT, TE, MPLS, Firewalls, …Redundant layers/servicesUnique “differentiation”
Mainframe mentality industryFunctionality standards hardware nodes
Source: Adapted from ONS12 presentation by Brandon Heller, et al
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Compounding the problem…
Campus
WAN
Access
Aggregation
Core
95%
5%
Evolved campus Ethernet model into tree structure
CoreAggregationAccess
Most (95%) of traffic is “north-south”
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Compounding it further…
Data Center
WAN
Access
Aggregation
Core
20%
80% by 2014(1)
Applied same model to the data centerDifferent traffic patterns
Majority “east-west”Different performance needs
Lossless storage trafficLow latency, high bandwidth
Different service needs to support virtual compute model
Static to dynamicMulti-tenancyWorkload management
Source: (1) Gartner Synergy Report
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Additional market drivers
Up to
10XIncrease in network capacity to support new wave of business video applications
INCREASE IN BANDWIDTH REQUIREMENTS
At least
50 BillionDevices will connect to wireless networks by the year 2020UNIFIED WIRED AND WIRELESS CAMPUS NETWORKS, IT CONSUMERIZATION
More than
25%Of all daily business communications will be video or multi-media communications by 2013 COLLABORATION, TRAINING, PRODUCTIVITY
Video and Mobility are transforming business communications
Source: Gartner – G00207476 Key Technology AnalysisGartner – G00175764 Key Issues For Communications Strategies, 2010ONS12
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General shift in networking
FROMFROM TOTO
Hardware/AppliancesHardware/Appliances (Open) Software(Open) Software
Distributed Control PlaneDistributed Control Plane
Custom ASICs/FPGAsCustom ASICs/FPGAs
ProtocolsProtocols
Function-Specific FeaturesFunction-Specific Features
(Logically) Centralized Control Plane
(Logically) Centralized Control Plane
Merchant SiliconMerchant Silicon
APIsAPIs
Policy-based Apps and Services
Policy-based Apps and Services
Vendor-controlled ReleasesVendor-controlled Releases Rapid Innovation CyclesRapid Innovation Cycles
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NET
WO
RK
SIT
CDN DPI
B-RASPacketCoreIMS
Intra data center
2020
Hardwaremodularization/virtualization
Networkapplicationsvirtualization/cloudification*
Control[ler]/programmability
Managementautomation+
X86 Generic ServerGeneric Ethernet Switch
TIME
* Examples, may vary based on telco priorities etc+ timeline unclear
ATCA COTSBlade Custom
ASICs2012
Distributeddata centers
Real-timeOSS
Real-time Net-aware Self-optimizinganalytics apps networks
Policy aaS,Security aaS...
RoutingNFV Firewall
OptimizationHome
RANGateway
Home-access-DC
Access-core[edge]
Inter data center Core [edge]-transport
Net IDE
SBC
SDN/ NET OS
Speculative Timeline (Telco View)
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Core Technology Concepts
Automation
Supporting Initiatives
NFV
OrchestrationONF
OpenStack
X86 serversHypervisors
APIs
GenericEthernetSwitches
Controllers/Openflow
CloudificationVirtualization Abstraction
ITIL
SON
IETF ForCES, PCE
Core Product Enablers
BGP
Programmability Real-timeOSS
Hybrid Switches
A (Partial) Taxonomy of the Revolution
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Which leads us to SDN
Source: ONF White Paper Software-Defined Networking: The New Norm for Networks – April 13, 2012
WikipediaA network architecture in which the network control plane is decoupled from the physical topology.
ONFIn the SDN architecture, the control and data planes are decoupled, network intelligence and state are logically centralized, and the underlying network infrastructure is abstracted from the applications.
SDN Model
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SDN (Software Defined Networking): SDN is an architectural concept thatencompasses the programmability of multiple network layers – includingmanagement, network services, control, forwarding and transport planes – tooptimize the use of network resources, increase network agility, unleash serviceinnovation, accelerate service time-to-market, extract business intelligence andultimately enable dynamic, service-driven virtual networks. –Heavy Reading
OpenFlow: In a classical router or switch, the fast packet forwarding (data path)and the high level routing decisions (control path) occur on the same device. AnOpenFlow Switch separates these two functions. The data path portion stillresides on the switch, while high-level routing decisions are moved to aseparate controller, typically a standard server. The OpenFlow Switch andController communicate via the OpenFlow protocol, which defines messages,such as packet-received, send-packet-out, modify-forwarding-table, and get-stats. –Open Networking Foundation
NFV (Network Function Virtualization): NFV aims to ... leverage standard ITvirtualisation technology to consolidate many network equipment types ontoindustry standard high volume servers, switches and storage, which could belocated in Datacentres, Network Nodes and in the end user premises... [NFV] isapplicable to any data plane packet processing and control plane function infixed and mobile network infrastructures. –NFV ISG (ETSI)
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Definitions
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• This is a huge shift in thinkingo Biggest change in network technology since the Internet hit in the late
90s?• It has strong backing from Tier 1 telcos
o
oHighly active in both the ONF and the NFV“There is no alternative...”
• In the long term, networks and IT will mergeo
o
But how long term (and how much time do telcos have)?What happens in the short/medium term transition period?
• It requires a short-term and a long-term response from supplierso ....In an environment where there’s plenty of high concept, and not
much nailed-down consensuso Radicals and pragmatists in a battle for control?
The Big Picture
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Configurable Networks
Apps‐Aware Networks
Managed Networks
Closed Networks
Network Interfaces
VendorChassis/Appliances
Custom ASICs
Programmable Networks
Network‐Aware Apps
Automated Networks
Open Networks
OpenFlow….Net OS
Generic Switches &Serversx86
Key Long-Term Technology Objectives
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Radical reduction in the cost of hardware
Wider choice of suppliers for network functions
Reduced opex, especially in maintenance of distributed, dedicatedhardware
Much faster hardware and software replacement cycles
Opportunity to build new, more granular product sets more cost-effectively
Ability to massively speed up service development and deployment
Opportunity to reach new kinds of customers
Ability to make network functions available as services to third parties
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•
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•
•
•
•
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Key Long-Term Business Objectives
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Inside the layers
• Virtual network overlays• Slicing• Tenant-aware broadcast• Application-aware path computation• Traffic engineering• Network services (FW, LB, Security)
• Data plane resource management• Common services and libraries• Topology• Metadata• State abstraction
Packet forwardingPacket manipulationStatistics gathering
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SDN theory and practice
The Premise… The Promise…
Commodity (merchant silicon) solutions can be exploitedControl plane can be distributedState can be externalizedAcceptable performance can be maintainedStandards will evolveNetworking manufacturers will adopt SDN-enabling protocols and features
Centralized management and controlMore granular network controlImproved automation and managementRapid innovation ProgrammabilityIncreased network reliability and security Better end-user experience
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Phase 1Data Centre Centric Cloud
Phase 2Carrier Cloud
Phase 3Fully Software Defined Cloud
Data center compute and storage are virtualized, automated, orchestrated.Network is unvirtualized and manually configured. WAN and internet connectivity stops at data center edge.
Converged orchestration of cloud and network resources: ability automatically to spin up VLANs/IP/VPNs alongside cloud IT resources. WAN/LAN stitching is automated.
Full virtualization of IT and network functions, with high scale distribution of cloud compute platform at network edge, managed through converged, automated and autonomic IT/network orchestration.
Cloud is a Key Driver for SDN and NFV
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Key attributes of Cloud Networking include:Scalable: Scale to thousands of nodes and provide a non-blocking fabric across the entire cloudLow Latency: Latency is key to improving application performance. The network needs to provide ultra-low latency in a large-scale environment.Guaranteed Delivery: The cloud must provide predictable and reliable performance to a large number services, including HPC applications, web, video and data.Extensible Management: Cloud Networks cross all traditional boundaries between servers, enterprise networks, and service provider networks. They need to be managed in a hybrid environment, often with customizations that are unique to that individual deployment. The management of the network needs to be extensible and customize-able to allow such applications.Self-Healing Resiliency: With larger scale, networks become much more critical and faults need to be contained and healed automatically.
New Networking Requirements for the Cloud
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• Research focus in 2013 on impact of these initiatives on fixed network transformation
• What are the benefits?o Low cost TDM replacement strategyo Global scalabilityo Universal application accesso Core Network sharingo Fixed/Mobile core deployment
simplification
• What are the challenges?o Latencyo Securityo QoSo Survivability (enhanced or reduced)
• Related research will also examine the impact and evolution of Session Border Controllers (SBCs)
Source: Heavy Reading
Virtualization in the Core Network
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Capital Markets and Development Activity Reflecting Value of SDN
VMWare enhancing its cloud stack; first to recognize the importance of virtualized networking – and placed a very high value on it with Nicira acquisitionFollowed by Brocade acquisition of Vyatta and Oracle acquisition of XsigoCisco acquisition of Meraki and Juniper acquisition of Contrail continue networking shift toward software, cloud centralized network management and mobile connectionsOver a dozen SDN controller private companies have emerged; many new funding rounds in 2012
Big Switch $25MPlexxi $20MContrail Systems $10MInsieme Networks $100MPica8 $7M
Traditional hardware/software vendors are extending capability to build cloud management platforms (“cloud in a box”)
Cisco – UCS, Open Networking Environment (ONE)Dell – Virtual Network Architecture (VNA); Advanced Infrastructure ManagerHP – Virtual Application Networking (VAN)IBM – PureSystems; Distributed Overlay Virtual Ethernet (DOVE)Juniper – OpenFlow agent available to Junos SDK partnersMicrosoft – Server 2012/Hyper-V; Virtual Machine ManagerRed Hat – Enterprise Virtualization Manager for ServersNetApp – FlexPod Data Center PlatformEMC – teaming with Lenovo for serversNEC – ProgrammableFlow architecture
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Precedent M&A
Analysis
M&A Precedents
(1) Meraki reportedly was at a $100M annualized booking run rate at the time of acquisition
($US in millions)
Date Announced Target Name Acquirer NameEnterprise Value ($M)
LTM Rev. ($M)
EV / LTM Revenue
1. 12/07/12 Contrail Juniper $175 ND ND
2. 11/18/12 Meraki(1) Cisco 1,200 100 12.0x
3. 11/05/12 Vyatta Brocade 30 5 6.0x
4. 10/04/12 vCider Cisco ND ND ND
5. 07/30/12 Xsigo Oracle 220 35 6.3x
6. 07/23/11 Nicira VMware 1,260 ND ND
7. 07/20/11 Force 10 Dell 700 180 3.9x
8. 09/27/10 Blade Network Technologies IBM 400 40 10.0x
MEDIAN $400 $40 6.3x
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SDN Infrastructure Universe
Platform Players
PrivateNetworkingVendors
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Table of Contents
I. SDN Market Perspectives
II. AGC Overview
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Why Partner With AGCAGC Partners Drives Both Big and Small Deals to Strategic Outcomes
The most active M&A firm in all of technology boutique banking from 2009-2011
Emphasis on deals between $25mm and $250mm
Reputation for delivering compelling valuations – many years and hundreds of transactions worth of experience
Strong Relationships with the Leading Acquirers and InvestorsIn the last 90 days, we have held in-depth discussions with over 200 leading buyers regarding live M&A opportunities
Completed transactions with 21 of the largest technology acquirers and 11 of the largest technology investors
One of the Largest Global Technology Banking Teams50-person team with 15 partners
Offices in Boston, Menlo Park, NYC, Minneapolis, and London
Partners have Deep Sector Knowledge and the Ability to Uniquely Position the Underlying StoryPartners recognized as leading domain experts - Cloud, Comms, Data Center, Defense, Digital Media, Energy & Environmental Technology, FinTech, HCIT, Infrastructure, Internet, Mobile, SaaS, Security, Semiconductor and Software
Each partner regularly publishes thought pieces on their sector of focus
Premier Industry Investor ConferencesEach 2-day event has 300+ companies, 1,000 attendees, 800+ one-on-ones, thoughtful and timely panel discussions
Many of the major strategic technology acquirers send their corporate development teams to meet with participants
We have held a combined total of 15 annual East and West Coast Conferences over the past 8 years
Engagements Led by Partners - not Handed Down to Junior BankersEach partner has a 15-25 year history and 50-250 deals of experience in technology M&A
Great Value – Higher Level Service at a Compelling Price24/7 commitment from our partners that have skin in the game
Phenomenal references - virtually 100% of our clients will give glowing references of our passion, capability, commitment, creativity, thoughtfulness and finesse working towards these most strategic outcomes
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AGC Partners Top-Ranked Tech Boutique 2009-2011
Source: The 451 Group*Deals only include American M&A deals in certain sectors; does not represent actual number of AGC’s completed deals
72 deals completed
overall 2009-2011
24 in 2011
28 in 2010
20 in 2009
166 transactions closed
since inception in 2003
Firm Number of Transactions1. Morgan Stanley 81
2. Goldman Sachs 68
3. Bank of America 59
4. Jefferies 56
5. JP Morgan 55
6. Credit Suisse 51
7. AGC Partners 47
8. Houlihan Lokey 43
9. Pagemill 41
10. Deutsche Bank 39
11. UBS 34
12. Barclays 33
13. GCA Savvian 33
14. Signal Hill Updata 32
15. William Blair 32
16. Stifel Nicolaus Weisel 31
17. Citigroup 29
18. Needham 27
19. Raymond James 27
20. Qatalyst Partners 26
Top Tech Dealmakers 2009-2011
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BostonNew YorkMenlo Park
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One of the Largest Global Technology Banking Teams
Minneapolis
15 Partners
10 Project
Managers
20 Analysts
5 Business
Development
Professionals
AGC Partners’ 50-person team has deep domain and extensive technology transaction experience covering North America and Europe
London
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Unparalleled Transaction Success with Leading Acquirers
EMC / RSA
Oracle Cisco IBM
Dell
NetScout McAfee NetApp Barracuda RiverbedSolarWinds
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HP/3com
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We Know the Communications & Networking Industry
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