January 19, 2018

Enterprise Tech Outlook - Cloud Discussions Dominate Every Sector

ANET, CHKP, CSCO, FEYE, FFIV, FTNT, HPE, JNPR, NTAP, NTNX, PANW, PSTG, SYMC
By Nancy Piccin
Cloud migrations are top of mind for channel partners in every enterprise technology sector, as vendors seek to capitalize on opportunities and maintain relevance -- and footprint -- in customer environments.

The 10 reporters and editors of OTR Global's Enterprise Technology team conducted more than 750 live interviews with industry sources in the network security, network equipment, systems and storage sectors during 2017, publishing more than 50 pieces of core research. Based on our findings and ongoing discussions with these channel partners, distributors, resellers and consultants in technology, we have identified some key research topics to explore during 2018. 

Hardware Vendors Battle the Cloud

  • Cloud migrations are a current tailwind for security, networking, storage and systems as customers upgrade gear to become cloud-ready, but partners expect negative impacts longer term. During 2017, some vendors cited cloud decision cycles for deal delays, particularly in carrier and large cloud environments. During 2018, some of those logjams could break free, spurring a new round of spending -- but when will that inflection occur, if at all? Will other unexpected consequences emerge to turn the expected negatives into neutral or even positive impacts?
  • In the same vein, hardware vendors have been adding virtual editions and cloud-based tools to maintain footprint and remain relevant. Which vendors will succeed in keeping customers’ interest? How important will it be to mirror on-premise environments, feature-for-feature and vendor-for-vendor, in the cloud?
  • As more products become software-based, vendors find the transition from upfront to deferred revenues challenging. Some sources argue customers will need many more virtual units to replace physical ones, but it may take time for customers to flesh out their ‘inventory’ of these, stalling revenue growth in the meantime.
  • Storage, systems and networking vendors all are developing new tools to help customers automate processes and resource allocation. Some sources have called automation ‘table stakes’ in the new hybrid cloud architectures. Will these capabilities become differentiators for legacy vendors, or will one or more startup vendors emerge to become the next standout?

Security: Best-of-breed Approach Giving Way to Multi-Vendor Platform Strategies
The evolving threats to customer data and increasing governmental compliance requirements are putting pressure on companies to increase their security visibility. The shortage of trained security analysts puts an even greater burden on companies to simplify their security architectures. Next-generation firewall vendors have reacted to this situation by presenting customers with platform architectures, ultimately allowing multiple vendors to communicate in an integrated platform.

While vendors push the platform approach, some channel partners note that products from competing vendors aren’t compatible enough to talk to one another at the platform level. Do current architectures represent the limits of integration, or can more be achieved? 

Palo Alto Networks Inc.’s “big picture,” including its cloud strategy, Traps, Aperture, Global Protect, and ELAs, is helping its position improve, especially in large, global accounts. The vendor is gaining in places where it had been a secondary vendor, displacing Check Point Software Technologies Ltd. in more primary environments and in new projects. Will Palo Alto’s momentum continue? Will Palo Alto maintain its position as the best-of-breed security platform? Will Palo Alto have to discount to move down-market to gain share or can it continue to gain by moving up-market?

Fortinet Inc.’s reputation has improved in the enterprise space, helping it gain more traction as it steadily moves up-market, largely versus Check Point and Cisco Systems Inc., though Fortinet still has difficulty competing in many high-end accounts. Fortinet continues to do well in the lower end of the market, gaining share among customers outgrowing low-end vendors like SonicWall Inc. and WatchGuard Technologies Inc. Will Fortinet’s Security Fabric drive share gains in the enterprise segment? Will Palo Alto’s new products and price aggressiveness in Fortinet’s mid-market space slow Fortinet’s growth?

Check Point started 2017 with a lot of hype around its new global sales executive, but things cooled down quickly mid-year. High maintenance renewal costs and an inability to make quick discounting decisions turned off customers and channel partners, while sales execution issues and turnover added to channel concerns. Check Point’s strategy of adding on new features to existing customers continues to be its greatest strength, offset by a reputation as a me-too vendor in security, especially in emerging technologies like CASB, endpoint, and even the platform approach. While Palo Alto and Fortinet partners are preaching about their security platforms, Check Point partners are less well versed, and some partners were unfamiliar with Infinity altogether -- not a good sign. Will Check Point be able to catch up with its competitors? Will Check Point continue to be the share donor for faster growing Fortinet and Palo Alto? 

Symantec Corp. has multiple moving parts with its consumer business, LifeLock, the sale of its certification business, and the integration of Blue Coat, but the overall view of the enterprise business from the channel has been positive post-Blue Coat acquisition, bolstered by cross-selling opportunities, improvements in endpoint, and the Blue Coat refresh. CASB has drawn interest more quickly than anticipated, and feedback indicates the technological gap between SEP 14 and the niche endpoint vendors has narrowed significantly. Will Symantec’s cloud strategy convince customers to build their security platform from the web and cloud side versus the network and firewall? Will channel cross-sale opportunities create meaningful additional revenue opportunities for Symantec?

FireEye Inc. has significantly improved its channel relations in 2017. Are those improvements drawing new and relapsed channel partners? Are customers adopting FireEye technology beyond its traditional network product? 

Other security themes to watch in 2018:

  • Firewall customers have become accustomed to buying software blades, subscriptions and bundles tied to appliances. As customers shift spending away from hardware, will customers continue to digest add-on software subscriptions at the same rate? Will the shift away from subscriptions tied to appliances slow the hardware upgrade cycle?
  • CASB is growing in prominence, yet we hear very little about it from the major firewall vendors, aside from Cisco. Will the next-gen firewall vendors push harder into the CASB market? Is it too late for them? What risk would that put on Symantec?
  • Endpoint continues to be a security priority, and new offerings from Symantec and an improved reputation from Palo Alto’s Traps puts the private endpoint vendors on alert. Are customers willing to replace their existing endpoint detection and response products with a more integrated global security solution?
  • Security spending trends in EMEA has remained robust, related to EMEA catching up to the United States in terms of security investment. Some of this is related to GDPR, though sources have indicated that GDPR spending has been slower than anticipated. Will the May 2018 deadline drive last minute security sales in the 2Q18? Will GDPR’s first victim motivate other companies to spend on security in 2H18? Will the EU target non-European companies for lack of compliance? If so, will this cause a secondary spending bump among customers who felt above the law?
  • Is the prevalence of ransomware/cryptolockers driving security budgets away from perimeter protection and more toward data protection, back-up and recovery, endpoint security, encryption and cyber insurance coverage? What opportunities do the platform security vendors have in this market?

Networking: Cloud migrations matter in networking, too. Market giant Cisco is racing to push its Intelligent/Adaptive network concept, adding software to improve analytics, self-healing capabilities, machine learning and AI via its new DNA Center software platform. Cisco’s software-defined ACI has gained traction, giving credence to a strategy that doesn’t rely solely on hardware sales. Meanwhile, Juniper Networks Inc. is rolling out its own automation capabilities, and sources have in the past viewed Juniper as the credible Cisco alternative when customers need a multi-vendor strategy.

But as in other hardware sectors, it’s a race against the clock to preserve brand loyalty and keep customers from abandoning on-premise data centers. On the other hand, there is anecdotal evidence of customers pulling some workloads and data back from the cloud, which could potentially spur new on-premise spending; which vendors will capture that wallet share? Will Juniper be able to recover from recent execution stumbles that opened the door to Cisco?

Storage: New technologies including the NVMe protocol and 3D TLC flash continue to drive storage performance and density. With each new advance, a new bottleneck is exposed, prompting further advances to solve whatever next problem emerges.

Performance improvements that allowed decentralization helped the rise of HCI at just the right time to enable data services and "edge computing" that required processing closer to the data source. As IoT use cases expand, will new, specialized form factors be introduced to capture and process all this data? 

Last year, just as flash storage adoption had begun to accelerate, partly because flash had become more affordable, the industry was hit with supply shortages that drove prices back up. Industry sources have said they expected adoption to become more widespread as pricing became closer to that of spinning disk, but the price hikes did not appear to curtail adoption; one study claimed all-flash arrays drove 80% of primary storage revenue during 2017. If prices remain high, will customers rethink how they allocate flash, spinning disk and cloud storage resources?

What will come next in this fast-moving sector? Which vendors will move quickly enough to capitalize on the technology? Pure Storage Inc. succeeded in branding itself as the flash storage vendor and is now working to identify closely with the NVMe protocol. Will its successful branding translate to sales success? Will it generate enough mind share to derail NetApp Inc.'s (so far) successful comeback? And, will storage vendors figure out ways to capitalize on the ransomware/cryptolocker exploits in the security space via more efficient backup, snapshot or offline storage technologies?

Systems: As Hewlett Packard Enterprise Co. attempts to remake itself, the legacy vendor also must contend with seismic change in the industry -- and the departure of the CEO who spearheaded its transformation. HCI vendors led by Nutanix Inc. stole a march on HPE by pioneering the modular form factor and upending the competitive landscape for servers; HPE hopes to regain some of that ground with its purchase of SimpliVity. HPE has struggled to revive its server segment, but reviews for its new Gen10 platform are mostly favorable; HPE needs Gen10 to drive refresh and new sales during 2018.

Meanwhile, the Synergy platform -- at first dubbed “composable infrastructure,” but later explained as the next iteration of the C7000 blade family -- is gaining slow but steady acceptance. Storage has been a weak spot, but HPE won some mind share when it bought Nimble Storage, and OTR Global sources reported some improvements late in 2017. HPE forged an alliance with Arista Networks Inc. during 2017, but sources have yet to report any tangible impact; the Arista connection could round out HPE’s networking portfolio, supplementing the Aruba wireless lines that have been so successful.

Contributors: Jaclynn Anderson

What is an OTR Snapshot?

OTR Snapshots are direct feeds from our editors expressing their views on key issues and events in their industries, within and beyond our core coverage. Snapshots feature industry insights, source commentary, and general observations.