Date post: | 10-Jun-2015 |
Category: |
Technology |
Upload: | woodsidecapital |
View: | 570 times |
Download: | 2 times |
Software Defined Network (SDN) Market Overview
Woodside Capital Partners Sean Blakley, Tricia Salinero, Marshall Senk
June 19, 2013
CONFIDENTIAL
Contents
I. SDN Overview
II. SDN Market Update
III. Recent M&A Activity
IV. Q&A
SDN OVERVIEW
Traditional Data Center Hybrid Cloud Public Cloud
The Next Generation “Data Center”
3
Today’s network
— Built on monolithic devices, proprietary hardware and software — Static configuration, very slow to provision
To meet the needs of this increasingly applications centric model, networks must become more programmable, flexible and agile
— De couple hardware from software — Speed up new feature development cycle — Greatly improve network responsiveness and provisioning time — Lower OPEX and CAPEX
4
Traditional Networking No Longer Solves the Problem
5
SDN is Emerging as a Viable Networking Architecture
The Software Defined Network (SDN) is emerging as potential network architecture to satisfy the new network paradigm:
Software Defined Network Architecture
Programmability
Centralized Intelligence
Abstraction
Enable Innovation Accelerate New Features
Simplify Provisioning Optimize Performance
Granular Policy
Decouple: HW and SW
Physical and Virtual Control plane and Forwarding
Source: ONF.org
Software Defined Network
Applications Orchestration / Controller Physical / Virtual Network Element
Silicon Services Visibility / Management
Software Defined Storage Storage / Backup and Recovery
6
Companies in the SDN Sector
OpenDaylight is an open source software project that is not a standards body, but is about delivering production grade code for use in the SDN
7
OpenDaylight Scope
Source: Opendaylight.org
OpenDaylight – Major New SDN Open Source Initiative
8
OpenDaylight – Significant Member Base
OpenDaylight
Source: opendaylight.org
Silver Members
Platinum Members
Gold Members
SDN MARKET UPDATE
SDN Market Outlook
SDNCentral, a leading independent SDN community recently predicted a bright future for SDN
— “The SDN market is expected to surpass $35 billion in the next five years, far higher than previously reported. Almost by an order of magnitude.”
— “Adoption of SDN technology has accelerated in recent years from sales of $10 million in 2007 to $252 million last year. Companies are turning to new software-centric approaches to control their computer networks as they move beyond traditional network infrastructure that wasn’t designed for today’s cloud computing.”
— “The emergence of the software-defined networking market is supported by growth in venture capital investment in SDN-focused companies. Venture capital funding of SDN-related companies rose from $10 million in 2007 to $454 million in 2012.”
10 Source: sdncentral.com
We see SDN as a key initiative for many vendors and we see no slowdown in the vendor SDN development or M&A velocity over the next couple of years
— Open based software development environment and increasing use of off the shelf hardware should help reduce the cost and time to develop new features
However, we see a more gradual ramp in SDN deployments in the next few years as the market continues to mature
— Can not totally disrupt production enterprise and service provider networks — New technology introductions always take longer than expected
11
SDN Market Outlook
Initial SDN deployments have been limited to focused use cases within large service providers
— Google data center interconnect network • WAN based implementation of SDN • OpenFlow based • New networking device
• Much more efficient use of 100G interconnection links and streamlined operations
— Google expanding its use of SDN within the data center
— Verizon now trialing targeted network bandwidth application
Very limited use cases and implementations in enterprise data center applications
12
SDN Deployments
The SDN marketplace is filled with vendors offering pieces of the SDN network
There are many implementation models being proposed
— Pragmatic approaches of enabling current base of networking equipment to open up APIs, become more programmable
— Overlay solutions on top of existing physical networks or in new greenfield applications using white box networking infrastructure
Larger, more extensive product portfolio and services companies are moving towards offering complete solutions
— We see this is as a key step forward to offering complete solutions, that work, and are purchasable by the general enterprise market
13
SDN Solutions Vary
SDN Will See An Incremental Deployment Approach
The network will change, but not overnight
— Although it is incredibly painful to provision networks today and network operations do not match server/applications velocity, we will likely see an incremental approach over the next few years
— In 2013, trial and use cases will grow within the large service providers and Web 2.0 companies
• China Telecom, Google, Verizon all have SDN initiatives in place
• Use cases emerging around: security, virtualization, chaining, etc. in wireline and wireless deployments
— Mainstream enterprise applications may start to ramp in 2014
14
Longer Term Implications of SDN
We see no immediate pricing impacts from SDN, but do believe pricing pressures will continue to intensify on all suppliers
— We see a long term threat to established networking suppliers in price and margin
In the next couple of years, lower throughput/lower performance requirement switching (top of rack) and on premises devices may be increasingly implemented in software
We do not see high throughput/high performance devices such as aggregation switches or routers in the enterprise or service provider networks being implemented in software
— Too many performance hits, not necessarily more cost effective — ASIC based designs will remain for cost and performance advantages
15
Longer Term Implications of SDN May Be Disruptive
Network Functions Virtualization (NFV) and the general move towards virtualizing L4-L7 functions is gaining significant traction and traditional hardware based solutions are now being increasingly sold as virtual solution
— Application Delivery Controllers, Wan Optimization, Next Generation Firewall equipment suppliers seeing increasing sales of virtual editions
5+ years, with advances in multi-core processing, we see the market will increasingly see deployments of virtual switches and routers
16
RECENT M&A ACTIVITY
SDN M&A Opportunities
We see the emergence of many new start ups in the SDN market and believe that the majority could be acquisition targets by larger public companies
— In 2012 and early 2013, large public companies were acquiring SDN technologies at a fast pace; This trend is likely to continue
• Must have SDN Story – defensive or offensive
• Build out product portfolio and services portfolio
We see the following potential deals making sense:
— Traditional networking hardware suppliers: Alcatel Lucent, Arista, Brocade, Cisco, Dell, Ericsson, Juniper, HP, Huawei and other suppliers such as EMC and Oracle acquiring:
• Virtual networking companies: Midokura, NoviFlow, Pica8, Pluburis, Plumgrid, Vello
— Traditional networking hardware suppliers: Arista, Brocade, Dell, Ericsson, Huawei and other suppliers such as EMC and Oracle acquiring:
• Controller companies: Bigswitch, Embrane, Plexxi, Vello
18
M&A Accelerating in the Sector
Source: Capital IQ. 19
# Date Acquirer TargetTransaction Value ($M)
EV/Revenue Multiple (x) Target Business Description
1) 04/25/13 $120.0 NA Aepona Ltd provides cloud computing and network services. It offers network and API monetization services, such as API monetization platform, agile service enablement, mobile cloud computing, payments and settlement engine, and OPENIN products; and cloud services aggregation and merchandizing solutions, such as services aggregation and merchandizing platform, and cloud services brokerage.
2) 04/22/13 $42.0 NA Nolio Ltd. provides application service automation solutions for managing data center applications. It offers Automation Center, a data center product that provides deployment and change automation, failure and recovery automation, and auditing automation solutions; and Nolio ASAP 3.0, a software platform to enable information technology operations and development teams to achieve application release with visibility and control, as well as enables application deployment.
3) 02/11/13 $125.3 NA LineRate Systems, Inc. develops and sells software defined network service solutions for packet core operators, and cloud and Web service providers.
4) 12/12/12 $200.0 NA Contrail Systems Inc. designs and develops software-defined data centers.
5) 11/29/12 $141.0 NA Cariden Technologies, Inc. provides design, planning, and operational automation intelligence for managing networks. It offers MATE software that provides IP/MPLS traffic management solutions, which include maintenance planning, congestion mitigation, troubleshooting, and network look-ahead; what-if analysis, design verification, and strategic traffic engineering; and new-customer impact and capacity planning capabilities.
6) 11/18/12 $1,200.0 NM Meraki, Inc., a cloud-based wireless networking company, deploys wireless network infrastructures. The company’s products include Enterprise Cloud Controller, which provides wireless access to corporate LAN for offices, industrial firms, retailers, educational institutions, and multi-site locations; indoor and outdoor routers, repeaters, and access points; outdoor and solar antennas; and solar accessories, as well as power accessories for indoor and outdoor applications.
7) 11/05/12 $45.0 NA Vyatta, Inc. provides network routing and security software and hardware appliances. It offers an enterprise-class network routing, security, and traffic management software solution that enables network administrators to leverage the performance of Intel/AMD hardware, as well as run in VMWare, Xen, and Hyper-V virtual environments.
8) 10/04/12 NA NA vCider, Inc. offers virtual cloud networking services.
9) 07/30/12 $220.0 6.3x Xsigo Systems, Inc. provides virtualized infrastructure solutions for cloud- optimized data centers in the United States and internationally. Its products include Xsigo I/O Director, a hardware and software solution that streamlines server I/O management; Server Fabric that connects virtual machines to data center resources; Xsigo XMS 3 management interface that enables customers to create, monitor, and manage network and storage connections across the servers; Xsigo I/O modules that provide network and storage connectivity to the Xsigo I/O Director; and Expansion Switch that offers scalable I/O virtualization connectivity for servers.
10) 07/23/12 $1,263.0 NM Nicira Networks, Inc. offers software that virtualizes the network. The company develops Network Hypervisor, a solution that transforms data center networks. Its solution reproduces the network service model in logical space for controlling logical networks.
Q&A
Woodside Capital Partners Overview
11 years old, 300+ transactions, $10 billion transaction value
25 professionals; offices in Palo Alto and London
1/3 of transactions are cross-border
Emphasis on quality and teamwork: entire software team incentivize to help on your needs
Senior level attention: senior partner is key contact, actively engaged
Best comp in banking: highly incentivized team
Licensed: FINRA / FSA broker-dealer
Representative Engagements
2008 2007
2012
2010
21
WCP Research Team
Sam Skinner – COO and CCO — Formerly with IPR, M&C, Dakin, Paine Webber and Drexel Burnham
Sean Blakley – MD, Network Infrastructure and Services Analyst — Formerly with IPR, TLAB, AFCI, Harris Corp and HPQ
Marshall Senk – MD, Cloud Applications and Software Analyst — Formerly with IPR, Robertson Stephens, QSFT and ORCL
Ryan Koontz – MD, Network Infrastructure and Services Analyst — Formerly with IPR, TLAB, AFCI, ERIC and AT&T
Ed Bierdeman – MD, Cloud Applications and Software Analyst — Formerly with IPR, M&C, H&Q, SEBL, ORCL and Convergent Tech
WCP Research Offering
WCP Research Team
Provide institutional investors with nightly research notes
Analyze market in Software, Telecom and Networking sectors
Analyze disruptive technologies, industry drivers and co–ecosystems
Support investment banking with analysis and thought leadership 22
Research Coverage Focus: Software Defined Networking – panel expert and moderator at various public SDN
seminars Network Functions Virtualization Enterprise and Service Provider Wireless, Wireline networking Optical networking Cable and video infrastructure
Equities Coverage List: JNPR, CSCO, FFIV, CTXS, BRCD, ARUN, RKUS, CIEN, ALU, ERIC, AKAM Additionally a large number of private companies
Background: Research Experience: 7 years equity research in communications and networking
infrastructure Industry roles: 15 years senior management roles in sales, marketing, biz dev, and
product management Industry focus: Routing, switching, optical transport, broadband access, wireless
communications, wireless testing Companies: Tellabs, AFC, Globalstar, Harris Corp, HP, PG&E Education: MSEE / BSEE in Electrical Engineering
Sean Blakley, Managing Director Communications and Networking Infrastructure Analyst
23
Tricia Salinero, Managing Director Investment Banking
Most recent engagements: LSF Network acquisition of eVisibility LSF Network acquisition of Geary Interactive Conformia sale to Oracle Syndera sale to Tibco Confidential sale to Google Cavium divestiture of Montavista Auto to Mentor Graphics
Other representative engagements: PhotoWorks sale to American Greetings Oerlikon Optics divestiture to Halma Be Here Corporation divestiture Vodium sale to Precision IR Mimio sale to Newell Rubbermaid SkipJam sale to NetGear
Background: Founder and Managing Director, Newforth Partners Principal, Broadview International Business Development, SuperMac Technology Bachelors Degree, University of California at Berkeley M.P.A., California State, East Bay Licensed with the Financial Industry Regulatory Authority (Series 24, 7, 79 and 63)
24
Research Coverage Focus: Cloud technologies and infrastructure Cloud Services (IaaS and PaaS) Open Source Big Data Cloud Applications Social/Collaboration Applications Security
Equities Coverage List: CTXS, RHT, VMW, ORCL, CRM, PANW, WDAY Additionally a large number of private companies
Background: Research Experience: 12 years equity research in software infrastructure and
applications Industry roles: 10 years in a variety of staff and executive roles including product
development, product management and corporate marketing. Industry focus: infrastructure software, enterprise and cloud applications. Companies: Oracle Corporation, Quest Software, Robertson Stephens Education: BA/MA in quantitative analysis
Marshall Senk, Managing Director Cloud and Enterprise Software Analyst
25