The Future of the Data Center
We’re in the midst of a revolutionary shift in the enterprise data center that has not been seen in decades. At its core, this shift is being driven by the rise of “soft” infrastructure. Virtual machines and virtual networks and storage can be provisioned and reconfigured rapidly and in a highly automated way, rather than being limited by the constraints of hardware infrastructure that was built for a much less dynamic environment. The “software-defined data center,” as it is commonly known, has business repercussions that go well beyond transforming data center technology. It has shaken long-term alliances between technology giants. Vendors are scrambling to reposition themselves to best exploit this new era of soft IT.
VMware is perhaps the best example of this phenomenon. No longer is the company positioning itself as simply a pioneer of server virtualization, but rather it is now betting its future on the broader software-defined data center. VMware dominates the server-virtualization market (its technology lets a company run hundreds of virtual servers on one physical server). It’s no surprise, then, to see VMware accelerate its R&D schedules and M&A activity to extend its technology portfolio to also seize the infrastructure and storage markets that are up for grabs in the new software-defined data center.
In a major bid to own the leading infrastructure play in the new software-defined data center, VMware last summer acquired software-defined networking pioneer Nicira for $1.26 billion. That is a staggering sum that becomes even more impressive when one considers that, by most estimates, Nicira was generating less than $10M in sales. As part of its strategy to bite off a small piece of the emerging software-defined storage space, VMware also recently acquired Virsto for an undisclosed sum.
The rationale behind these acquisitions comes into clearer focus when you consider the larger opportunity posed by the software-defined data center. As data center workloads increasingly become virtualized, it makes sense that VMware, which already enjoys a market cap of more than $30 billion, look for ways to increase its role in managing the broader data center infrastructure.
So, with all of this in mind, what actually makes up the Software-Defined Data Center — and which companies stand to gain the most in each area?
Components of the Software-Defined Data Center
The concept of the software-defined data center revolves around making the three major infrastructure components of a data center (compute/server, networking and storage) more flexible, more automated and less dependent on the underlying physical hardware. The idea is to create a pool of available resources that can automatically adapt to changing workloads and ensure that the right resources are available whenever and wherever needed. When you look at the compute/server space, virtualization forever changed the way applications are deployed, and the dominant force behind this is VMware. While VMware has established itself as the market leader in server virtualization, offerings from Microsoft, Citrix and Red Hat are beginning to carve out sizable market share, as well. With almost 70 percent of workloads today running on virtualized servers according to IDC, this is certainly the most evolved component of the software-defined data center to date.
In the wake of the Nicira deal, along with major announcements from Cisco, Juniper and other networking giants, software-defined networking has become perhaps the next focal point of the software-defined data center discussion today. While not as mature as the server/compute side, the software-defined networking market is expected to grow; IDC predicts from $360 million in 2013 annual sales to $3.7 billion by 2016.
Cisco, which has long dominated the networking market and has a valuation of over $111 billion, has started to face new competition from startup companies like Nicira and Big Switch Networks, which designed their products for today’s virtualized IT environment. To go after this market, Cisco has invested $100M in a “spin-in” company called Insieme Networks. Cisco clearly views software-defined networking as one of the most significant technologies to emerge in decades.
The last component of the software-defined data center is storage, which is not coincidentally the trickiest part of the equation. The storage layer has traditionally been the laggard of the data center, and most venture capital firms have feared investing in startup storage companies due to the stronghold on the market enjoyed by technology giants like EMC, NetApp, HP and IBM. This has changed in recent years, however. The rise of virtualization and, more recently, cost-effective flash technology, has spurred a storage renaissance — today, storage is one of the hottest markets for venture investors.
The increased investment sexiness of storage helps explain the success of Fusion-io, which created a new memory tier based on flash technology. The company went public in June 2011, and is valued at more than $1.5 billion. Because of the huge impact of flash technology, some of the big legacy storage vendors have been looking for acquisitions to help modernize their product portfolio. Last summer, EMC acquired XtremIO for $400 million dollars to add flash to its own storage portfolio. However, flash is just one component of software-defined storage.
Flash is a very disruptive technology that has paved the way for dozens of new entrants into the storage market, but flash by itself doesn’t address the complexity and data management issues created in virtual environments. Most major storage vendors created their product architectures before virtualization even existed, meaning they were originally built for a physical world where application workloads were discrete, known and predictable. Indeed, many of the new storage startups have continued using the same architectures, albeit with faster flash storage rather than spinning disks. The problem is that the software-defined data center is possible only with virtualization. And adding new layers of software on top of these legacy architectures is an inefficient way to deal with the problem.
The move to the software-defined data center is the major technology shift of this decade, just as virtualization was in the 2000s and the Internet was in the 1990s. Like those previous shifts, there is a wealth of new opportunities for companies both new and old. It will be interesting to see how everything plays out — and, rest assured, this race has a long way to go.
Dr. Kieran Harty is a co-founder of Tintri Inc. and serves as its chairman and chief executive officer. Harty served as an executive vice president of engineering and R&D at VMware, and has more than 15 years of engineering and management experience with high tech companies. Before VMware, he was vice president of R&D at Visigenic/Borland and chief scientist at TIBCO. Harty has a PhD in electrical engineering from Stanford University and a master’s degree in computer science from Trinity College Dublin.