What’s next for the shadow IT industry? It should be obvious: after blowing up the storage and server business models, what’s left?

Amazon has been working on their own networking software and hardware for several years. While networks aren’t a large part of their cost structure – servers are – it was rapidly growing because network gear wasn’t following Moore’s Law.

AWS can’t predict customer workloads – a low-data web server might be replaced by a data warehouse – so they have to provision for the maximum workload. As low-data apps might need 1% of the bandwidth of high-data apps, that’s an expensive proposition.
AWS cloud logo
They were forced to address the problem.

No doubt Google, Facebook and Azure are seeing the same issue. Then the question is: what is the likely impact on the network market?

The StorageMojo take
The data center network vendors are caught in a classic Innovator’s Dilemma trap. Cutting their prices to meet web-scale competition wouldn’t win them much business but would cost them lots of revenue and margin.

Software-defined networking is obviously driven by web-scale competition and technology. The incumbents want SDN to succeed – to avoid a worse outcome – but only on their terms.

That’s the same problem storage incumbents have with scale-out clusters: embrace, but not too tightly; promote, but not too aggressively.

But the cost differential between on-premise proprietary kit and cloud is too big to ignore – and it’s growing. Worse, the differential will continue to grow, while the capabilities improve.

Historically few companies have survived a shift from 60-70% gross margins to 30%. There are just so many practices that lower margins can’t support baked into company operations.

One thing is certain: datecenter network bandwidth is a commodity and needs to be priced like one. The opportunity is in the upper layers of the stack.

Courteous comments welcome, of course.