Source: Here's Why The Game-Changing Product From Cisco's Super-Secret Startup Is Delayed

John Chambers frownCisco CEO John Chambers

The enterprise world was greatly disappointed when a product from Cisco’s super-secret startup, Insieme Networks, was neither launched nor demoed at Cisco’s big customer conference last month.

Instead, Insieme’s top marketeer, Soni Jiandani, got on stage and talked in vague terms about it.

People inside of Cisco are upset too, according to a source close to the company who requested anonymity.

That’s because Cisco is under attack right now from a new technology called software-defined networking (SDN) and Insieme is supposed to have the magic product that will let Cisco compete.

SDN is a kind of technology that takes the high-end features built into routers and switches and puts them into software that can run on cheaper hardware. Big companies still need routers and switches, but they can buy fewer of them and cheaper ones thanks to SDN.

Last April, Cisco invested $100 million to fund the startup as a so-called a spin-in, with the option to buy it outright for another $750 million should its products prove successful.

So far, Cisco has been extremely tight-lipped about Insieme. That was supposed to end last month at the Cisco Live conference with a demo, sources say, or at least product details. But instead, Jiandani’s keynote was “frustratingly information-free,” as Network Computing’s Andrew Conry Murray described it.

Here’s why: Insieme is struggling to design the chips for the new product, a source told us. Insieme’s custom chips, called ASICs, are so far behind schedule that Cisco is going to have to use standard off-the-shelf chips from chip maker Broadcom in its first-generation SDN device, “the same as everyone else,” our source told us.

Cisco confirmed part of this, but said the plan was always to build its first device using standard chips, also called “merchant silicon.”

A Cisco spokesperson told Business Insider:

We are taking a merchant plus custom ASIC strategy as we disclosed at Cisco Live — this has been the strategy from the beginning, and allows us to drive innovation faster than the typical 3-year cycle, allows us to drive better performance, power and density as well as innovate in the realm of optics. The basic points that we made at Cisco Live in June.

Our source stood firm, telling us that ASIC problems have caused delays. The source said that chip problems are often the reason that hardware products are late to market because designing silicon is hard. And late silicon causes other delays.

“When the silicon isn’t around, you can’t write the software for it. That’s why [Insieme] couldn’t show whatever they have” at Cisco Live, this source said.

Insieme’s boxes will eventually use their own custom chips, which will allow them to perform better or include special features, this source told us. The Cisco spokesperson confirmed that.

But Cisco really can’t afford to wait until then to a product to market, which could take years. That’s because VMware is pushing ahead with its SDN plans built around Nicira, the SDN market leader that VMware bought for $1.26 billion last summer. Plus, SDN startups are coming out of the woodwork with products, and are being snapped up by Cisco’s competitors the instant they come out of stealth.

We also learned that the software used by Insieme will be homegrown and based on a version of the operating system Cisco uses in its Nexus switches, NX-OS, our source said. That means it won’t be an adaptation of the open source software known as OpenFlow created by Nicira’s founders, and it should work well with Cisco’s current products.

Choosing to go with Broadcom and move fast could be the right move. If Cisco doesn’t delay too long, it will still sell a lot of SDN devices to its huge base of enterprises customers through it large sales channel.

Where Cisco is likely to lose out is with Web companies building big cloud computing data centres. They need highly efficient devices and “vanity free” hardware where they are not paying for anything fancy.

In fact, Facebook is already working on an open-source SDN device.

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