August 29th, 2008

Brocade Buys Foundry: A Boost for FCoE?

Brocade’s announcement of its intention to acquire Foundry Networks for $3 billion has sparked much discussion in terms of its impact on the FCoE market. Michael Morris, writing for Network World, admits to questioning Brocade’s motives for wanting to enter the highly commoditized LAN switching market when Cisco already dominates it. His conclusion is that Brocade may be attempting to look for differentiation through FCoE as the SAN is comprised of expensive FC ports whose profitability could be eviscerated if FCoE succeeds as expected. Enterprise Strategy Group analyst Bob Laliberte believes the acquisition “instantly gives them the credibility, culturally, in large enterprises.”

The official stand at Brocade is that the acquisition of Foundry Networks was not motivated by FCoE but rather a move to extend their line of products and build on the synergy between their different technologies and markets. Brocade has had a roadmap for FCoE in place, so it’s still not clear how the company will integrate Foundry’s technologies. What is clear is that the FCoE market opportunities for Brocade will be large and of high strategic importance.

Disruptive Technology

While Brocade will expand its product offerings and market reach, the acquisition of Foundry may not result in much of an immediate market shift given that Foundry has been considered a niche player. However, the acquisition of Foundry will boost Brocade’s FCoE positioning at these critical, early stages of the FCoE deployment within the data center.

Consider that convergence within the data center continues to lead to divergence in product requirements as standards evolve and become more complex, such as Enhanced Ethernet for FCoE and continued pushing for Power over Ethernet (PoE), QoS, and more robust security for VoIP and WLAN applications. The opportunities for specialization lead to more niche markets and more openings for smaller players to gain localized dominance.

While FCoE as an emerging market could be considered a niche, early dominance of market share could expand to a long-term leadership position in the evolving SAN market. This is possible because FCoE is clearly being considered as a disruptive technology, one that could change the underlying SAN infrastructure, business models, and, as a consequence, major players servicing and driving the industry.

This disruption may have a greater impact than current competition for existing markets. Brocade has already gained a dominate position in the SAN switch market. But from a technological perspective, some experts believe that developing for FCoE will not be as simple as sending Fibre Channel packets over an Ethernet link, but be like developing for an altogether new technology. The converged network of the future will bring many new use-cases to the switch fabric that was once limited only to storage traffic. And while the technology that Foundry will bring to Brocade isn’t the Enhanced Ethernet FCoE calls for, having expertise in Ethernet will be a critical requirement in the future success of FCoE solutions.

Put another way, no one yet has dominance in the FCoE space.

What Brocade will do with the technology they acquire through the acquisition of Foundry is still a matter of speculation. What is not in question is the growing momentum of FCoE and the continued support and investment of key industry players.

References:

1. Brocade Buying Foundry…Has to be an FCoE Play
http://www.networkworld.com/community/node/30200

2. Brocade + Foundry = Trouble for Cisco?
http://www.networkworld.com/community/node/30187

3. Brocade to buy Foundry for $3 billion
http://www.networkworld.com/news/2008/072108-brocade-to-buy-foundry-for.html?nwwpkg=brofound?ap1=rcb

4. Brocade-Foundry deal can’t hide majors’ dominance
http://www.networkworld.com/news/2008/072208-brocade-foundry-deal-cant-hide-majors.html?inform?ap1=rcb

5. Brocade’s Foundry buy will boost Fibre Channel over Ethernet market
http://www.networkworld.com/news/2008/072208-brocade-foundry-fcoe.html?page=1

6. Dell Oro Group take on Foundry and Brocade merger: Datacenter requirements are evolving towards converged fabric
http://www.networkworld.com/community/node/30262

Posted by Joy Jiang at 11:15 am. Filed under General | Permalink
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