Brocade’s unraveling

by Robin Harris on Wednesday, 17 March, 2010

The Wall Street Journal gave Brocade free advertising with the article Network Specialist Brocade Up for Sale back in October. 5 months later Brocade is still for sale – and despite the HP/Cisco network wars it still isn’t clear why anyone might buy them.

Brocade’s acquisition of 10GigE developer Foundry Networks was supposed to make them a purer networking company, but Cisco’s market share doesn’t leave a lot of room for anyone else. Brocade is losing share in the Ethernet market and stock analysts are cutting their forecasts.

A weak foundation
Brocade’s troubles have been years in the making. The company put itself in a box with its go-to-market strategy and hasn’t found a way out.

Brocade’s troubles reflect the dangers of an OEM strategy when your partner’s strategic interests are different than yours. None of them wanted Brocade to succeed as a networking company.

Hope
A key reason for the excitement around storage networks in the late ’90s was the hope that the network effect would drive storage costs and commoditization
the way it had with Ethernet. But that didn’t happen.

Single-vendor networks
The major vendors paid lip service to interoperability – plug feasts at SNW – but production-quality interoperability never happened. With all FC switches coming from either Brocade or McData it should have been easy – but since the storage vendors realized that there was no business advantage in openness, it never did.

Brocade was powerless to press the issue since the OEMs controlled the product support. No enterprise customer would buy a switch that his array vendors wouldn’t support.

So Brocade was stuck with a profitable business that wasn’t going anywhere. Except south. They needed better strategy advice than they were buying.

None of Brocade’s customers want the company either. Other customers won’t want to buy from them – EMC buying switches from HP? not for long – so the company valuation looks rich from a 5 year cash flow perspective.

The StorageMojo take
The OEM channel is popular in tech because it removes the expense and exasperation of selling to end-users. You work with fellow engineers at the OEM to qualify the product and their sales people do the work.

You don’t think you need much marketing – really, you do, but few realize that – and very few sales people. And the sales people you do need are the cool, savvy relationship cultivators, not the high-pressure closers. It’s almost all good.

The bad is the loss of control. Other people position you, test you, support you and ultimately use you for their gain. That can work well if, like DEC early on, your widget is buried inside another product and you’re free to market to end-users.

But as Brocade illustrates, you can’t rely on OEMs to build your brand. You have to do it yourself.

The WSJ article suggested HP and Oracle might buy Brocade. But the only valuable part is Foundry’s 10Gig products. And that piece is heading south too.

Courteous comments welcome, of course.

{ 12 comments… read them below or add one }

nate March 17, 2010 at 12:08 pm

I thought it was a sad day when Foundry was bought out by Brocade. I’ve never been a fan of Brocade myself but have been a fan of Foundry for a long time. I don’t know how much momentum they have left at the moment as far as new products go, of course most/all of their stuff was already well under development when Brocade came in. Their ServerIron ADX series has a ton of potential, really bad ass, I really wanted to get them in to my current company last year when we were doing a refresh but at the time they had not yet implemented SSL offload(totally new platform from the ground up), so couldn’t use them then.

My only complaint about Foundry was the software side, their UI was too similar to Cisco, too complicated to work with. Myself I have long preferred Extreme networks products, though in situations where their products aren’t suitable, Foundry was/is still my 2nd choice, I just try to pretend that Brocade isn’t their master(not that I’ve deployed any new foundry gear in some time).

I took a stab at Cisco’s new router recently comparing it with the Foundry NetIron XMR, which really slaughters the Cisco performance wise(big surprise, not) http://www.techopsguys.com/2010/03/09/yawn/

James Bourne March 17, 2010 at 5:00 pm

Hey Robin – can you clarify why the Foundry 10GbE products are heading south?

Robin Harris March 17, 2010 at 5:32 pm

James,

Not the products – the market share.

One of the analysts said that Brocade’s challenge is “execution” which is code for “whatever they are doing isn’t working – so they better figure something out that will work.”

Robin

Paul March 17, 2010 at 7:52 pm

Robin,

Here’s hoping Brocade’s new Chief Marketing Officer takes your piece as wisdom disguised as a challenge.

This Cisco shop just finished evaluating Brocade FCX stackables. We’ll try ’em for a new building. Came out ahead on all criteria but “Qty of Googleable support.” The refreshed stackables Cisco unveiled this week don’t blow me away, and their 4500 chassis bundle deals are starting to look desperate. Especially when you ask about latency.

Greg schulz March 18, 2010 at 9:44 am

Robin interesting piece and starts to get to the root of some of the issues over at BRCD, however it also misses the point in some areas and misleading in others.

For example, the piece comes across as though Brocade (BRCD) is only an OEM business model which is far from reality in that they have a very robust channel along with distribution program that has been in place for many years. Likewise, they also have a direct sales model which is slightly different today than what they had in the past.

Brocade has always had direct touch sales reps (not to be confused with direct fulfillment) where those feet on the street existed either to support the OEMs, distribution and the channel, or, across both of those to help stimulate demand and pull for those fulfillment models. In other words, get in front of the customers and vars to make sure that BRCD products were selected and leave it up to management to sort out how fulfillment was done (e.g. var/disti or OEM etc). This is also where you saw the solutioners get involved in helping to show how to use BRCD technologies in different way vs. simply touting speeds and feeds. However, that was BRCD of a different era.

BRCD today still has the OEM business that you mention, however they also have disti through the major distributors who then leverage their var channels which again is not all that different than in the past along with the various overlay teams. However BRCD also inherited a direct fulfillment model via McData via CNT (as well as via INRANGE). While BRCD still has the direct touch to help drive (e.g stimulate the pull) with the partners/channel/oem and their push efforts, they also have direct fulfillment with some customers/accounts.

Perhaps a different way of looking at BRCD is not that their model is seen as being OEM only which it is not, rather, like Cisco and others, its a hybrid of OEM, channel/disti/var and direct. In the case of BRCD, perhaps some of their challenges could exist in the form of channel/partner/oem/direct management or conflict? Im not saying that is the case, simply offering a different perspective.

Thus, to clarify, BRCD is not an OEM only business model.

And, then to offer a different perspective, that their model of being OEM + Distribution/Channel + Direct fulfillment vs. direct touch (e.g. pull or demand generate) could be an issue. I would also assert that BRCD needs to get their Mojo and swagger back like what they had in the late 90s and early 2000s when I used to compete against them and they were a force to be reckoned with. That means get out and show OEMs, channel/disti partners, customers, media, analysts/bloggers and others what they can do, how they help and leverage their technologies in a solution approach vs. touting why they are the best based on their history and speeds and feeds. Perhaps less talking at and/or over their audiences and more time talking with and too their audiences. Don’t get me wrong, they have one of the best and deepest histories and IP as well as people experience pools in the industry, however they also have to start making their new history and legacy.

With the likes of social media capabilities, something that so far BRCD seems to be using to talk at people, I wonder if they unleashed their resources and reapplied the solutioner model of empowering their people in a force multiplier manner what would or could happen.

Back in the early 2000s, go to an event where BRCD was at and you wanted to be with or around them as they were so cool, hip and trendy. Instead of an UhiGui demo or death by power point or video presentation, it was sit around an oxygen bar sipping fun libations while listening to music during time outs from other activities. Sure the technology was covered and that’s where AJ Cassimoto, Josh Judd, Owen Higgins and all of the other solutionier stepped in and stepped up and walked the talk. BRCD has many great people out in the field in sales, OEM/partner/channel support teams, engineering, SEs/solutioners that need to be unleashed and enabled to do what they need and want to do, get out and tell their story.

Something that I give CEO Mike Klako credit for however is doing what his predecessors at McData, CNT, INRANGE and so forth did not do and that is stepping into adjacent markets vs. simply trying to circle the wagons around Fibre Channel/FICON and distance extension. Sure those companies tried or dabbled in other areas, and yes, some of BRCDs excursions have been less than impressive, however they are also sitting on a lot of IP, IP that is in terms of both TCP/IP and general Intellectual Property (IP).

Maybe it is time for BRCD 2.0 or 3.0 or something along those lines?

I rather miss the old BRCD that was a discussion information exchange oriented company vs. the new BRCD which is more Cisco like where if you do hear from them, it’s generally being talked at from the ivory tower scripted marketing message type of company. Ironically, Cisco has become more of an information exchange and discussion organization similar to what BRCD used to be, hmmm…..

Or, as I have written about and discussed elsewhere including on my own blog in the past, maybe it’s time for Huwai to really shake up Cisco and the industry by getting closer to BRCD which is probably not likely given traditional industry thinking. However, we are also seeing where traditional industry thinking and wisdom such as with Cisco upsetting the apple cart and thus power of balance with their OEMs by entering into the server space.

Disclosure: I never worked for BRCD, turned them down to go work for INRANGE and then briefly with CNT after that acquisition/merger/assimilation. Consequently I know many of their people in different levels from when I worked with them at MTI, INRANGE or CNT among other venues. Likewise, neither BRCD nor Cisco are clients of mine.

Cheers gs
Greg Schulz

James Shorts March 18, 2010 at 10:35 am

James, the reason why Foundry 10Gbe product market share is heading south is that the majority of their install base is government entities. The dollars for these kinds of projects aren’t flowing right now. And in the commercial space they simply have speeds/feeds, no real technology advantages that set them apart. In real world commercial networks, you need features for resiliency more than you need raw speed. Innovation = revenue = R&D money = more innovation || lack-of-innovation = lack-of-revenue ≠ R&D money = not good

Greg, you can give some kudo’s to Klayko for at least thinking in adjacent markets, but don’t give him any kudo’s for driving any real product integration. Enough time has passed that we should be seeing real product integration. Instead, they’re still trying to decide what can and can’t be integrated vs. starting a whole new product line altogether while trying to fund/band-aid their existing product sets.

Brocade has had their opportunity to be bought. My guess is, they have some real poison pills in their financials and now they’re at a point where no one will touch them because their debt to revenue ratio is growing larger by the day.

Billy March 18, 2010 at 12:19 pm

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Yeah, especially if one got to hang out with their felon CEO Greg Reyes…

Robin Harris March 18, 2010 at 1:21 pm

Billy,

Mr. Reyes is not a felon, yet. His conviction on all 10 counts was overturned on appeal.

The retrial is underway and I think the prosecutors learned something from the first go around, but they still seem to be missing the core issue, IMHO. Maybe I should post about it again, but my views haven’t changed since http://storagemojo.com/2006/07/20/financial-woes-in-digital-data/ and http://storagemojo.com/2007/08/07/brocades-ex-ceo-nailed-for-fraud/

Robin

Greg schulz March 18, 2010 at 4:00 pm

James while there may have been opportunities to have been bought; do they have to be bought? Perhaps yes, perhaps no, maybe somewhere down the line.

Agree that BRCD has had plenty of time to at least come out with a decent slideware, cloudware, marketware/marketecture integration story and even some real products by now, not to mention leveraging their long term and early OEM partners like HP among others.

Perhaps they have too many oars in the water with evolving their traditional FC business at 8GFC core and edge and blades, their distance/extension business, their services business, their HBA business, their FCoE on traditional as well as FCoE on Foundry business. Perhaps good thing they mothballed the file/nas/fan stuff for now as well as simplified some of the legacy physical layer matrix switching stuff back to onpath among other items.

And unless say Cisco does something like buy an EMC and really start an all out battle, why would an HP, IBM, Oracle/Sun, Dell, Netapp or any other server/storage vendor want or need to buy BRCD? Now on the other hand, Ive said it once, and will say it again, what if Huawei were really serious about getting further into various markets with their $23-25 Billion+ biz growing at an estimated 40-45% yoy growth rate.

Just as interesting as it is to ponder the demise or availing of BRCD due to an HP buying 3COM and not BRCD or being passed over by other suitors at the dance, flip it around. That is, what if the big dance has not yet really started, what if a nontraditional type move for example a Huawei were made, after all, BRCD in the hands of a Huawei would enable it to still OEM to HP, IBM, EMC, Dell, HDS, NTAP, Fujitsu, Oracle and so on…

But then again, its just all fun and speculation isnt it…

Cheers gs
@storageio

Visiotech March 18, 2010 at 6:42 pm

Brocade FC products remains extremely popular in Canada. Customers just love and stick with them here. I do not see market lost with the 8Gbits upgrade that are happening now. In large SAN upgrade challenges changing vendors remain extremely rare.

Foundry has hard time position themselves still even with help from Brocade reps. I found their products ahead of Cisco in many areas. Not rare to see smaller companies surpassing bigger one. They are, in general, more flexible in terms of R&D.

I have good friends in both camps (Cisco and Brocade) but found Brocade peoples more knowledgeable about their products in storage technologies space. Cisco still try to position themselves has IP world leader first and then storage (now servers) after.

10Gbits IP just started to be more popular in storage space. Just because it fix NAS bandwidth problem and lots of backup backbone are now moving to 10Gbits because of tape drives and VTL speed requirements. Do not forget single LTO-4 and smallest VTL can sustain 1Gbit link to the max. Prior that their was no reason to do it. Today it is a must.

—————-cut here ————————————

Enjoy NAB…I’ve been there twice in the last three years and found out it is a must see for any serious storage vendors and/or consultant. Miles of future high tech media technologies booths. Archive space is critical for them. Dedup technologies do not help them so much because of nature of files (random). Too many vendors and lacks of standard drive this area. One day they will be hit by SNIA like protocols standards and number of vendors will shrink by more than half.

e2eiod March 19, 2010 at 2:23 am

Has anyone seen any real move to Wireless in the Enterprise?
I keep having this vision of Storage boxes built along the lines of the Backblaze box, http://storagemojo.com/2009/09/01/cloud-storage-for-100-a-terabyte/, except they are completely Wireless and use fuel cells for power. Completely self-contained. Maybe even their own A/C?
What does this have to do with Brocade?
Aside from the management problems of having to absorb so many acquired companies in a relatively short period of time which can cause “talent” dilution and the rise of acquired people who won’t stand the “test of time” to positions of influence and power. The most important thing it can cause is a loss of direction, “What is the company goal or objective?”. Who is the leadership and which direction will they go? IMHO, network products are at a bigger crossroads than computers or Storage.
My nickname was once “Mr. Terabyte an hour” because that was the minimum bandwidth Design objective for every infrastructure. That is way out of date. For an aggregate Enterprise bandwidth, even with network tiering, the Figure of Merit might be 10 terabytes an hour or more. Why? you might ask. Robin said it best.
“Why are those networking companies on a StorageMojo list? Because bandwidth and storage are fungible at about the 80% level. If you have lots of bandwidth you need less local storage – and the reverse is true.”
The famous “bottleneck” paradigm still exists. This is where $$$ is spent to make $$$$$$ but instead of spending at least $$ or $$$, or better yet, $$$$ to accomplish this only $, or less, is spent. Big computers ($$$), Big Storage ($$$) and puny networks ($) do not produce $$$$$$ results.

Cloud Computing is the beginning of “Amorphous Mass Computing”. Even if you get infinite bandwidth, which not even the government can afford, you will still need some new “Reference Locator (like a URL, URI, or vector)” ways to store and find Information. That’s a story for another time.

Jeremy Oakey May 27, 2010 at 5:18 am

Greg kind of touched on it but the one thing that may save BRCD is Dell. With the server battle heating up between Cisco and the other incumbents, Cisco is either cutting HP/Dell/IBM off from other core Cisco products or these vendors are cutting themselves off. This leaves Dell looking for more strategic alignment with someone like BRCD for FCoE, 10GbE, etc. Customers are still going to ask for Cisco on Dell deals often where the customer is already using Cisco products so how well Dell can help drag through BRCD products on their deals will be a direct coorelation to how much Dell will help BRCD but if the valuation gets to a low enough point, maybe Dell just acquires BRCD and aligns them with Dell’s requirements. One thing is for sure, with Dell’s push in areas like Desktop Virtualization, EQ storage, Scalent-rebranded Orchestration, etc – one thing is for certain; they need high-speed, reliable interconnects and Dell and Cisco are no longer on speaking terms.

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