Photo: Big Switch
A new enterprise technology called software-defined networking is still in its infancy. But it’s already created some billion-dollar success stories, capturing the imagination of Silicon Valley’s savviest investors and inventors.Consider the $1.26 billion acquisition of Nicira by VMware last summer.
Or the $176 million acquisition of Contrail Systems by Juniper Networks last month, a mere two days after Contrail came out of stealth.
Software-defined networking, or SDN, changes the way companies build their IT networks. Instead of buying expensive routers and switches with a lot of fancy features from the likes of Cisco, companies can buy simpler, cheaper hardware, and less of it, and those fancy features are handled by a new layer of software.
SDN will continue to be a hot area for startups for years. The market is projected to grow from $360 million in 2013 to $3.7 billion by 2016, according to market researcher IDC.
This has led to a whole crop of startups ready to take on market leader Cisco and cash in.
Before we get into the startups, let's take a look at the old world of networking that's getting replaced ...
Here's a look at how a typical small network is designed today. The routers and switches are at the centre and everything hooks directly to them.
If you change your network, you must reconfigure your routers and switches -- a sometimes difficult process.
SDN adds a layer of software between the network hardware and the applications. If you want to change your network, you just change the software.
This creates several areas where startups can play: the 'control plane,' which is the new SDN software, and the 'data plane' which is the hardware, like routers and switches.
On top of the control plane is another area of opportunity: networking apps. These weren't previously possible to write for proprietary networking hardware and software, but SDN opens things up for developers.
The main enabling technology today for the control plane is called OpenFlow. It was created by the founders of Nicira, a startup bought by VMware last summer.
But there are alternatives to OpenFlow, too, and startups are making money creating them.
Now let's look at the top upstarts in this market.
Big Switch Networks was generally considered the No. 2 startup in the SDN world after Nicira, before VMware bought Nicira. It offers SDN software and switches.
Cofounder Kyle Forster was formerly a rising star at Cisco.
In October, Big Switch landed a $25 million financing round from Redpoint Ventures, Goldman Sachs, Index Ventures, and Khosla Ventures. That brought its total funding to $39 million.
Forster has close ties to Index Ventures partner Mike Volpi, who sits on the company's board. Volpi hired Forster at Cisco when he was a top executive there.
NoviFlow, founded by former Ericsson executives including CEO Dominique Jodoin, offers a very fast OpenFlow-based switch that can process data at 100 gigabits per second.
A typical corporate network today operates at 10 gigabits per second.
Its products were developed with researchers at the Université du Québec à Montréal.
Plexxi is another startup getting a lot of love from venture capitalists. It has raised $48 million to date.
With that kind of backing, founder David Husak isn't afraid to take on Cisco head-on. The company debuted its products in December, including a new switch that competes with Cisco's products. It also sells its networking software separately to run on any server.
Midokura is a Japanese SDN company that entered the U.S. market in October.
Midokura has international roots: Co-founder Dan Mihai Dumitriu cut his teeth at Amazon.
Midokura's claim to fame is that it works with a popular method for building cloud computing, called OpenStack.
Midokura has raised $5.5 million from Japanese investors.
Plumgrid was formed by a group of ex-Cisco execs aiming to solve an interesting problem in the SDN world: how to get all the hardware already out there to work with the new SDN tech. Their SDN software does that. It can be added to a network that already has products from Cisco or others.
While it's not based on the gold-standard software for SDN, OpenFlow, it will also work with the new OpenFlow products.
Plumgrid's goal is actually bigger than selling hardware. It wants to build an eco-system of developers writing apps for networks.
It landed a $10.7 million venture-capital round in August, led by U.S. Venture Partners and Hummer Winblad Venture Partners.
Pica8 was spun out of Taiwanese server manufacturer Quanta a year ago. It sells switches built with its own PicOS software, which is compatible with OpenFlow and runs on cheap commodity servers -- a direct threat to Cisco's business model.
Pica8 has 85 customers including Baidu, the Chinese search engine, and Yahoo Japan, customising both hardware and software.
Embrane is another SDN startup whose founders and early employees come from Cisco.
Its CEO, Dante Malagrinò, even helped build Cisco's iconic Catalyst 6500 switches.
Embrane is concentrating on a different part of the SDN market. Once the network is mostly software, it will need applications. Embrane delivers SDN-friendly apps like firewalls, VPNs, and network load balancers.
It raised $18 million in 2011 from New Enterprise Associates, with Lightspeed Venture Partners and North Bridge Ventures participating. In total, it's raised $27 million.
LineRate Systems' technology stemmed from co-founder Manish Vachharajani's work on high-performance networking at the University of Colorado at Boulder.
LineRate is concentrating on SDN apps that run on top of the 'control plane.'
Its apps do the kind of things that dedicated networking hardware would normally do -- things like securing network connections or balancing network traffic.
Startups aren't the only ones developing SDN products. Others playing in the market include NEC and its ProgrammableFlow PF1000, a virtual switch.
HP's networking unit, run by EVP Dave Donatelli, was an early adopter of OpenFlow switches.
Cisco and Juniper have both announced strategies to play in this new software world, and they're buying and investing in SDN startups. But there's no question that this new technology is forcing them into reaction mode.