10 Networking Predictions For 2017

2017: Software and Services On The Front Burner

As solution providers and the networking vendors they work with are increasingly called on to provide business outcomes and ongoing services, some in the channel might find themselves needing to make some big adjustments

It’s going to be an interesting year to see what big moves channel partners make around providing new, innovative and profitable solutions to customers around Network-as-a-Service, Internet of Things, Unified Communications-as-a-Service, software-defined WAN and security. With the amount of M&A and industry consolidation, there are also unanswered questions about where players like Brocade Communications, Avaya, ShoreTel, Aerohive Networks and others will land as the cloud continues to reshape the network landscape.

Here are 10 predictions for what will take place in the networking industry in 2017, in no particular order.

1. High Pace Of Networking M&A Will Continue

The pace of acquisitions by networking vendors heated up in 2016, and there's no reason to think that will slow this year. Cisco spent around $3 billion acquiring seven companies and Juniper Networks bought three companies last year. Ruckus Wireless was acquired by Brocade Communications, with Broadcom announcing months later its intent to buy Brocade. Polycom was acquired by private equity firm Siris Capital Group, while both Avaya and ShoreTel hired financial consultants to explore the sale of some assets or potentially the companies themselves.

In the digital era fueled by cloud expansion, solution providers should expect networking vendors to continue this brisk acquisition pace in 2017.

2. Cisco Set To Take Security Market By Storm

Cisco's security business blossomed into a $2 billion annual run rate in 2016 with no hurdles in sight. The networking giant's strategy to embed security throughout the network led to four straight quarters of double-digit growth for its security business. Security is a highly fragmented market. Cisco's unique ability to provide an end-to-end security and network architecture gives channel partners the ability to cut down the number of security vendor products they incorporate into solutions, which can be difficult to manage.

Cisco unveiled a slew of new or enhanced security products and incentive programs in 2016 and has acquired four security vendors over the past 20 months, including August's acquisition of cloud access security broker CloudLock. CEO Chuck Robbins said Cisco doesn't plan to slow down its security M&A in 2017.

3. Breakout Year For Cloud UC

Cloud unified communications will account for 25 percent of line shipments in 2017, according to telecom research firm MZA, with cloud overtaking on-premises shipments within the next few years.

"The premise PBX or key system is becoming a relic of the past for businesses -- costly to maintain, and difficult to upgrade and scale as needs change," said BroadSoft CTO Scott Hoffpauir, in an email. "This year will be a breakout year for cloud-based UC and UC as-a-Service as more channel partners chase richer recurring revenue opportunities."

Zane Long, channel chief at UCaaS vendor RingCentral, said demand for UCaaS is creating a "bubble-up" effect in the channel. "Organizations are initiating conversations with their trusted channel partners about moving not just core data-driven applications, but also their business communications systems to the cloud," said Long in an email to CRN. "In 2017, we'll begin to see an increase in this demand, which will ultimately drive new channel business models."

4. Service Providers Will Dig Deeper Into SD-WAN

The SD-WAN space historically has been led by networking vendors that specialized in hardware-based solutions, but carriers entered the market in droves last year with the goal of adding more value to their basic connectivity offerings, and that trend will continue in 2017.

Tier-1 service providers such as AT&T, Sprint, Vonage and Verizon all formed strategic technology partnerships with SD-WAN startups like Viptela, Velocloud and Versa Networks.

"I haven't seen this level of excitement in the WAN services space since MPLS came out 15 or 20 years ago," said Kelly Ajuha, CEO of Versa Networks, in an interview with CRN. "There's just a compelling value proposition that exists in the enterprise and service provider to be able to go do SD-WAN."

5. Security Becomes Front And Center In Channel's Go-To-Market Strategy

Providing network connectivity and ongoing services may no longer be on top of mind for the C-level executives who are making the decisions on where to spend their IT dollars. Cybersecurity is now front and center, which is why most of the major networking vendors in the market – such as Cisco, Juniper and Extreme Networks – have been investing heavily in extending and revamping their security portfolio.

Research firm Gartner estimated that worldwide sales of information security products and services reached $81 billion in 2016 and predicted that the market will maintain a 5 percent to 10 percent annual growth rate over the next four years. Networking vendors have been shifting their R&D investments over the past few years to integrate security technology for partners to sell.

In 2017, security will increasingly become a top priority and go-to-market sales strategy for networking-minded solution providers.

6. IoT Becomes Top Of Mind For Networking Partners

If you’re a networking channel partner who hasn't been asked about the Internet of Things yet by a customer, that's going to change in 2017. With the IoT market on the verge of explosion, vendors such as Extreme Networks are investing heavily around IoT software, while Aruba Networks, a subsidiary of Hewlett Packard Enterprise, is launching new IoT offerings aimed at enabling channel partners to more easily sell IoT. Cisco, long an evangelist of the IoT opportunity, acquired IoT specialist Jasper Technologies for $1.4 billion, while also forming IoT partnerships with Salesforce and IBM.

Networking solution providers need to a solid, comprehensive IoT go-to-market strategy in 2017 as IoT will begin to hit the mainstream audience due to its cost-saving attributes and ability to make businesses run more efficient through data analytics and advanced visibility.

Networking vendors are expected to continue to invest in IoT in 2017 as the market is projected to reach $1.7 trillion by 2020, according to research firm IDC.

7. SDN Finally Takes Off

The global data center and enterprise SDN market reached $1.1 billion in sales for the first half of 2016, according to research firm IHS Markit, up 42 percent compared to the first half of 2015, with all major geographical regions reporting an uptick in SDN spending. Research firms expect significant SDN spending growth in 2017 as SDN will transform the telecom industry and enable faster and more flexible onboarding and support of new value added services.

"In 2017 we can expect to see complete software-defined network infrastructure solutions that are commercially available, multi-vendor, based on a viable ecosystem of SDN and NFV (network functions virtualization) components," said Benson Schliesser, Brocade's top SDN engineer, in an email to CRN. "Adoption will rise, beyond the early adopter service providers, as enterprises and private data centers begin to see a manageable path to achieve the value of a flexible infrastructure."

8. Innovation Engine At HPE-Aruba Will Roar

Hewlett Packard Enterprise made it’s a big bet in the wireless networking market with the acquisition of Aruba Networks for $3 billion in 2015. Last year, the two companies hit their stride with bullish plans already in store for 2017.

Aruba CEO Dominic Orr told CRN that the company plans to "accelerate" its acquisition strategy and plans to launch a new low-end product line for the SMB market early this year. Expect the networking innovation engine at HPE to roar unlike ever before in 2017 with Aruba leading the charge.

9. The Rise Of Network-as-a-Service

Simply selling connectivity or even one-off networking products has become a thing of the past for forward-thinking solution providers. VARs and network integrators will need to transform this year into strategic service providers: independent trusted technology consultants driving business outcomes with an emphasis on cloud and managed services delivered via a recurring revenue model. Networking vendors big and small -- from Cisco Meraki and HPE's Aruba Networks to Aerohive Networks -- are going to create more Network as-a-Service (NaaS)-type offerings for channel partners as their expertise and skillsets will be needed more than ever with the rise of IoT, cloud-based solutions and security threats.

With the ability to solve business outcomes through data analytics, better visibility and enhanced monitoring, NaaS will provide networking solution providers the ability this year to get closer to their customers and drive recurring revenue unlike ever before.

10. A New Cisco Will Emerge

With CEO Chuck Robbins (pictured) at the helm, 2016 was a transition year at the networking giant as the company underwent an internal restructuring that included 5,500 layoffs, the reorganization of its 25,000-member engineering unit and the departure of many of its longtime top executives. The need to shakeup the global networking leader was a necessity in order for Cisco to become nimbler, faster and shift its focus to the markets that will drive the digital economy.

To that end, Cisco has been revamping its certifications to emphasize skillsets in software-defined networking, IoT and cloud.

Cisco will find its footing as a digital company this year, with Cisco Meraki potentially taking center stage. You can also expect a drop in executive churn as Robbins has established his leadership team, including Rowan Trollope and David Goeckeler. This year will give us a clearer picture of who the networking giant (and potential cybersecurity giant) will be in the digital age.