Ethernet Buyer Behavior New Technology Adoption Survey Data & Analysis

April 15, 2015

Page 2

Waves are Driven by the Wind The bigger the wind, the bigger the wave.

They all came together in 2014

1980 1985 1990 1995 2000 2005 2010 2015 2020

Contract Manufacturer

Original Design Manufacturer & Open Source Hardware

Original Equipment Manufacturer

Enterprise IT

Hyperscale driven innovation

New class of OEMs

Integration of mobile and wireless

Webscale IT

Open-Source Software

Commercial Versions of Open-Source Cloud Platform

Hyperscale Computing

Wired/Wireless Carrier ICT & Smartphone Manufacturer

3 Market Dynamics Changing Enterprise IT

4

#1 Public Cloud

IaaS

#2 Software Defined

Data Center

#3 White Box

5

Cloud

Public Cloud IaaS

6

$-

$5

$10

$15

$20

$25

$30

2010 2011 2012 2013 2014 2015 2016

Worldwide Infrastructure-as-a-Service Revenue ($B)

Displacing traditional on premise servers,

storage and networking infrastructure.

Source: Gartner & Forbes

Public Cloud IaaS

Percentage of On-Premise Spending Replaced by Cloud Computing

0%

2%

4%

6%

8%

10%

12%

14%

16%

2008 2010 2012 2014 2016 2018 2020

Over 15% of the traditional enterprise

networking equipment market disappears into

the public cloud in the next 5 years.

Enterprise Infrastructure Leader Trajectory

8

2010 2011 2012 2013 2014

Cisco 40.0 43.2 46.1 48.6 47.1

Dell 52.9 61.5 62.1 56.9

EMC 17.0 20.0 21.7 23.2 24.4

HP 126.0 127.2 120.4 112.3 111.5

IBM 99.9 106.9 104.5 99.8 92.8

020406080

100120140

Billions

Private

Traditional Enterprise IT Leader Revenue Trend

2014 On-Premise IT & Cloud Service Brand Leaders

Voted by IT Pros

On-Premise Backup EMC Dell EMC EMC EMC EMC

On-Premise Enterprise Networked Storage

EMC Dell EMC EMC EMC NetApp

On-Premise Dedicated Enterprise Server

HP Dell HP HP HP HP

On-Premise Virtual Server VMware VMware VMware VMware VMware VMware

On-Premise Virtual Desktop VMware VMware VMware VMware VMware VMware

Cloud Backup Amazon (AWS) Amazon (AWS) Amazon (AWS) Amazon (AWS) Amazon (AWS) Amazon (AWS)

Cloud Enterprise Networked Storage

Amazon (AWS) Amazon (AWS) Amazon (AWS) Amazon (AWS) Amazon (AWS) Amazon (AWS)

Cloud Dedicated Enterprise Server Amazon (AWS) Amazon (AWS) Amazon (AWS) Amazon (AWS) Amazon (AWS) Amazon (AWS)

Cloud Virtual Server Amazon (AWS) Amazon (AWS) Amazon (AWS) Amazon (AWS) Amazon (AWS) Amazon (AWS)

Cloud Virtual Desktop Amazon (AWS) Amazon (AWS) Amazon (AWS) Amazon (AWS) Amazon (AWS) Amazon (AWS)

Overall Backup (On-Premise/Cloud) EMC Dell EMC EMC Amazon AWS Amazon (AWS)

Overall Enterprise Networked Storage (On-Premise/Cloud)

EMC Dell EMC EMC EMC NetApp

Overall Dedicated Enterprise Server (On-Premise/Cloud)

HP Dell HP HP HP HP

Overall Virtual Server (On-Premise/Cloud)

VMware VMware VMware VMware VMware VMware

Overall Virtual Desktop (On-Premise/Cloud)

VMware VMware VMware VMware VMware VMware

10

SDDC

Software Defined Data Center

11

Predominant Architecture Today Predominant Architecture in 10 Years

Software Defined Servers (Server Virtualization) Software Defined Data Center

I expect the enterprise SDN ecosystem to most likely evolve in the following way:

12

0% 20% 40% 60%

Other

Open switch OS leaders such as Cumulus will

dominate enterprise SDN

Open Linux and cloud platform leaders such as

Red Hat will dominate enterprise SDN

Enterprise virtualization software leaders such as

VMware will dominate enterprise SDN

Cisco will dominate the SDN era just like they

dominate the current era of hardware defined

networking.

Are vendors talking to you about evaluating, purchasing and deploying:

13

0% 20% 40% 60%

Other

None of the above

SDN orchestration software

NFV apps (router, firewall, load balancer, etc.)

Cloud operating system (OpenStack)

Software defined storage (object, block or file)

Which of the following SDN/NFV products do you expect to evaluate or deploy in 2015?

14

0% 10% 20% 30% 40% 50%

Other

None of the above

Virtual Router

Virtual NICs

Virtual Firewall

Virtual Load Balancer

Virtual Switches

My team knows that SDN and NFV are deployed by giant hyperscale environments, but:

15

0% 20% 40% 60%

Other

There are no buts, we think the SDN/NFV,

products and support are ready for our enterprise.

We would like to hear from other IT teams whohave deployed SDN/NFV

None of the above

We are evaluating SDN/NFV now

We have not evaluated SDN/NFV technology and

products

We have not learned enough about SDN/NFV

technology and products to consider evaluating

What percentage of all (server, storage and switch) network ports in your data center are:

16

0% 20% 40% 60% 80%

56Gb InfiniBand

10/20 Gb InfiniBand

1/2/4Gb Fibre Channel

40Gb Ethernet

40Gb InfiniBand

16Gb Fibre Channel

8Gb Fibre Channel

100Gb Ethernet

10Gb Ethernet

1Gb Ethernet

Which of the following high-speed Ethernet products do you expect to evaluate or deploy in 2015?

17

0% 10% 20% 30% 40% 50%

100Gb NICs

25Gb NICs

None of the above

100Gb Switches

25Gb Switches

40Gb NICs

40Gb Switches

10Gb NICs

10Gb Switches

My understanding is the 25G Ethernet standards:

18

0% 20% 40% 60% 80%

Other

A standard for this speed will

never be developed

Were ratified in 2014

Are still not ratified

This percentage of our 10Gb NICs are deployed in our data centers:

19

0% 20% 40% 60% 80%

In non-virtualized servers

In virtualized servers

This percentage of our 10Gb NICs are:

20

10% 20% 30% 40% 50% 60%

Partitioned into virtual

NICs

Not partitioned into

virtual NICs

Are you aware that today you can create multiple virtual 1GbE NICs out of one or more 10GbE NICs, efficiently splitting the bandwidth and lowering operating costs?

10.3%

24.0%

32.7%

33.0%

0% 10% 20% 30% 40%

No, if I had known, I would have started using 10GbENICs

No, but it won’t change my practice of using multiple

1Gb NICs

Yes, I knew and that’s a big reason why I started

using 10GbE NICs

Yes, I knew but it didn’t change my practice of using

multiple 1GbE NICs

I want to manage my virtual network resources from (select all that apply):

3.5%

15.2%

26.8%

33.8%

66.7%

0% 20% 40% 60% 80%

Other

Overarching manager of managers

(HP OpenView, CA Unicenter, IBM…

Best-of-breed software for individual

solutions

Switch/Fabric management software

Server virtualization hypervisor

(VMware, Hyper-V, Xen)

23

2015 Ethernet,

Networking & SDN Brand Leaders

Voted by IT Pros

FCoE Switches Cisco Brocade Cisco Brocade Cisco Brocade

Ethernet Core Switches Cisco Cisco Cisco Cisco Cisco Cisco

Ethernet Top of Rack Switches Cisco Cisco Cisco Cisco Cisco Cisco

Enterprise Ethernet NICs Intel Intel Intel Intel Intel Intel

Ethernet Network Monitoring SolarWinds SolarWinds SolarWinds SolarWinds SolarWinds SolarWinds

Embedded Blade Server Networking HP Dell HP Cisco Cisco HP

SDN Platform Cisco APIC Cisco APIC Cisco APIC Cisco APIC Cisco APIC Cisco APIC

SDN Enabled Switches Cisco Cisco Cisco Cisco Cisco Cisco

Layer 4-7 NFV Services Platform VMware NSX VMware NSX VMware NSX VMware NSX VMware NSX VMware NSX

SDN Monitoring Microsoft (DEMON) Microsoft (DEMON) Microsoft (DEMON) Microsoft (DEMON) Microsoft (DEMON) Microsoft (DEMON)

Bare Metal Switch OS Cumulus Linux Cumulus Linux Big Switch

(Switch Light) & Cumulus Linux (tie)

Big Switch (Switch Light)

Big Switch (Switch Light)

Cumulus Linux

Open Networking Switch Dell Dell Dell Dell Dell Dell

24

White Box

White Box/Bare Metal Switches

25

ODM Vendor

(Quanta, Hon Hai, Accton, Celestica)

Brand Vendor

(Dell, HP, Cisco, EMC)

Traditional Customers (Business, Gov,

Education)

Specialized Customers (Cloud, Carrier)

Hardware specification, design,

assembly and procurement, some

firmware and software support

Repair and maintenance, less of IT

consulting and software for these

IT savvy customers

HW assembly, design & components IT consulting, maintenance & repair

Traditional Model

New Business Model

Traditional , White Box & Brite Box Switch Models

Building on Bare Metal

ONIE is the

Open Network

Install

Environment,

and Open

Compute

Project open

source initiative

contributed by

Cumulus

Networks

OCP Wedge Switch Architecture

Switch ASICs: Broadcom, Intel, Mellanox, Accton

Big Switch – Switch Light OS

Cumulus - Cumulus Linux

Pica8 - PicOS NOS

FBOSS – Facebook NOS

Facebook Six Pack

29

Facebook's Six Pack switch is a 7RU chassis that includes eight of its

Wedge switches and two fabric cards (Photo: Facebook)

Which of the following open networking switch products do you expect to evaluate or deploy in 2015?

30

0% 20% 40% 60%

Non-branded white box switches from

hyperscale providers Quanta or Accton, runningan open switch operating system from Cumulus,

Pica8 or BigSwitch

None of the above

Branded white box switches (Brite Box)

switches from Dell or HP, running an openswitch operating system from Cumulus, Pica8 or

BigSwitch

We will not be evaluating or deploying open

networking switch products

Obstacles to my IT organization considering open networking switches are:

31

0% 20% 40% 60%

Other

None of the above

References from other IT organizations that

have deployed open networking switches

Vendors are not talking to us about open

networking switches

We don't believe new open networking switches

will be as reliable as switches from current…

We don't know enough about open networking

switches to consider them

We need the following protocols supported simultaneously in our data centers:

32

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

NVGRE for tunneling L2 traffic over L3 networks

RDMA for low-latency scale-out traffic across thedata center

RDMA for low-latency cluster interconnects

VXLAN for tunneling L2 traffic over L3 networks

Fibre Channel over Ethernet for storage areanetworks

iSCSI for for storage area networks

Fibre Channel for storage area networks

TCP/IP for LAN and NAS traffic

33

POV

Inflection Point Business goes on

to new heights

10x change in an element of the business.

What worked before doesn’t work now.

The executives are the last to know.

Source: Only the Paranoid Survive, by Andy Grove

Business declines

>$5B R&D

Hyperscale, Carrier & Enterprise

Unified Wired & Wireless

NFV Apps

SDN Orchestration

Open Source NOS

Bare Metal Switches

What it takes to win

A Winning Formula

35

Programmable Switch OS SDN Tools

Enterprise-class Hardware

The Result: Arista Revenue & Net Income

36

$140

$193

$361

$570

$13.8 $9.6 $20.8

$73.0

0

100

200

300

400

500

600

2011 2012 2013 2014

Millions

Maybe a Winning Strategy: Go Private and Double Down on Open

Jan., 2014 - The shift toward open data center and networking technologies

got a boost this week when Dell announced a reseller deal to offer Cumulus

Networks' Linux network OS for bare-metal switches.

Through the partnership, Dell said it will offer Cumulus Linux network OS to

customers as an option for its S6000 and S4810 top-of-rack switches.

The new strategy from Dell is the latest effort to decouple networking

hardware from the underlying software. Proponents say disaggregating

networking components will enable companies to significantly reduce their

data center and network costs as they look to embrace the software-defined

networking trend and get away from paying a premium for tightly integrated

network stacks from a single vendor.

"I believe there's a big market opportunity for using standard x86 hardware

modules for low-cost switches," John Abbott, distinguished analyst at The 451

Group, said via email. "The network is heading in the same direction as

servers and storage."

Dell, which is in the midst of re-inventing itself as a private company in the

post-PC era, wants to capitalize on that opportunity.

Dec., 2014 - Dell has added Midokura to its Open Networking initiative to

include Midokura. The deal includes a joint go-to-market program,

validated reference architecture and global reseller agreement.

Midokura’s Enterprise MidoNet software will now be available on Dell

infrastructure, delivering a network virtualization overlay for OpenStack that

helps enterprise customers and service providers create an agile cloud

networking infrastructure based on open technologies.

Dell said MidoNet fits well with its existing partnership with Cumulus

Networks for its Linux operating system. The Dell, Cumulus Networks and

Midokura solution enables a growing number of service providers and

enterprise customers to provision scalable virtual networks to connect to

physical workloads in a matter of minutes. Midokura MidoNet leverages

Dell switches to facilitate network traffic flows from virtual machines to non-

virtualized, physical workloads such as high-performance databases, email

servers and legacy systems at line rate.

What this shows is that we’re actively connecting the dots with like-minded

companies to upend the traditional, black-box model of networking,” said

Tom Burns, vice president and general manager, Dell Networking. “That

old model is too rigid, too locked and too slow to innovate. Dell’s Open

Networking initiative is about being open, flexible and software-defined to

help maximize our customers’ application environments.”

Acquire & Partner for SW Offer Bare Metal Switches

Maybe a Winning Strategy: Divest HW, Focus on Software & China

March 26, 2015 - H-P Nears Deal to Sell Control of Chinese Unit

Tsinghua Unigroup has emerged as the preferred bidder in an auction of 51%

of the business, H3C Technologies Co., the people said. A deal between the

two parties, which could also include a separate server operation, may still be

a few weeks away and there is no guarantee another bidder won’t re-emerge,

one of the people said. Tsinghua Unigroup had been competing with other

bidders for the business, which is worth roughly $5 billion in total, including

China Huaxin Post and Telecommunication Economy Development Center,

people familiar with the matter said.

H-P, driven by the issue to seek a buyer for the business, limited the list of

bidders for H3C to domestic companies in order to win Chinese government

approval for the sale and boost the prospects for the operation there.

Purchasing control of H3C would give Tsinghua Unigroup, a company funded

by the prestigious Tsinghua University, a major presence in China’s

networking gear market after it recently purchased two of China’s largest chip

designers. In September, Tsinghua Unigroup also signed a strategic alliance

with Intel Corp. that gave the U.S. chip maker 20% of the Chinese company’s

shares for a price of $1.5 billion.

H3C is a major supplier of corporate-data networking gear in China. H3C,

which H-P inherited when it bought 3Com Corp. in 2010, has 5,000 employees

world-wide, according to its website.

March, 2015 - The networking division at HP has had a chequered past.

Under some CEO's it has been seen as important to the business but

under others it has been left to rot. In 2013, HP revamped its networking

division and put Bethany Mayer in charge. Despite a successful tenure,

last year it spun out Network Functions Virtualisation (NFV) into its own

division and appeared to move Mayer sideways. The result was that six

months later, Mayer bailed for a better job at Ixia.

Since then, HP has been fairly quiet about networking, despite its

importance to HP's cloud strategy. HP has invested a lot of money into

Software Defined Networks (SDN), NFV, is a leading vendor in

OpenDaylight and OpenStack. As a result HP's silence has been confusing

to the market. Now it has announced it is to buy Aruba Networks for a

substantial $3 billion but when cash at hand is taken into account, HP will

pay a net $2.7 billion.

The market will be looking closely at this one and wondering if this will be a

good or bad move for HP.

By acquiring Aruba Networks, HP will also strengthen its wider security

intelligence offering. It will be able to gather much more detail about mobile

networking traffic. This is something that only a few of its security,

networking and cloud competitors such as Cisco, IBM and Huawei are in a

position to do.

Invest in SW & Wireless Divest in HW, gain access to China

Vendor Switch

Past: Enterprise HW Defined Ecosystem

Vendor Switch OS

Appliances Router Firewall

Load Balancer Etc.

Vendor NOS Orchestration

Monitoring

Vendor Storage Software Failover DeDup

Compression Etc.

Server Virtualization ESX

Hyper-V Xen KVM

Vendor/Merchant Switch ASIC

Vendor Storage System Vendor Server

Cisco & Dwarves EMC & Dwarves HP, IBM, Dell, Lenovo

Merchant Server OS

Merchant Server Processor

Vendor Block, File, Object OS

Merchant Server Processor

White Box Server

Cloud Platform (vCloud, Azure + commercial versions of OpenStack)

Future: Enterprise SW Defined Ecosystem

NFV Router Firewall

Load Balancer Etc.

SDN Orchestration

Controller Switches

Monitoring

Software Defined Storage Block File

Object Failover, Dedup, Compression

Server Virtualization ESX

Hyper-V Xen KVM

Merchant Server OS

Bare Metal Server

Merchant Server Processor

Today many pure-play start-ups in SDN, NFV, software defined storage and switch OS segments

White Box Switch

Merchant Switch OS w/SDN agents

Bare Metal Switch

Merchant Programmable Switch ASIC

10 Year History of Software Defined Servers

41

0%

20%

40%

60%

80%

100%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Workloads Virtualized

Workloads Not Virtualized

Source: Gartner

Software Define Storage in 10 Years (Forecast)

42

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Enterprise SDS

Traditional Enterprise Storage

Hyperscale SDS

Cloud OS Orchestration

Storage Apps

White Box Servers

Hosted Private Cloud

On Premise

Private Cloud

Public Cloud

Source: Wikibon & IT Brand Pulse

Commercial versions of open-source

based Enterprise SDS

Software Defined Networking in 10 Years (Forecast)

43

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Enterprise SDN

Traditional Enterprise Networking

Hyperscale SDN

SDN Orchestration

NFV Apps

White Box Switches

Open Switch OS

Hosted Private Cloud

On Premise

Private Cloud

Public Cloud

Source: IT Brand Pulse

Commercial versions of open-source

based Enterprise SDN & NFV Apps

Coming Soon An Epic Land Rush for the Wide Open Software Defined Data Center

You won’t have to buy the whole album to get one app

Network Software Suite

Network OS

Network OS

QOS

Load Balancing

Firewall

Network Monitoring

IPv6

Encryption

FCoE

WAN Opitmization

VXLAN

Network OS

Network OS

Network Services

Eagles

Justin Timberlake

Pit Bull

MC Hammer

U2

Marvin Gaye

Mariah Carey

Rolling Stones

Rolling Stones

Usher

Miley Cyrus

Bruce Springsteen

OpenStack Apps

Data Center App Innovation will Explode

Page 47

IBM is Ahead in the Race to Pass the Hardware Baton

Page 48

1985 Vertical Integration

Sell

Mfg.

Design

US RoW

2005 Original Design Manufacturer

Sell

US RoW

2015 Original Equipment Manufacturer

US RoW

1995 Contract Manufacturer

Sell

US RoW

Design

A New Group of HW OEMs are Ready to Carry the Baton

Page 49

Same Servers, New Perspective

89%

12%

36% 36%

IBM Lenovo

Software GM%

x86 Server GM%

x86 Server GM%

PC GM%

Page 50

First Movers

Net Worth

Mark Zuckerberg $33B

Larry Page $32B

Jeff Bezos $30B

Sergey Brin $30B

Jack Ma $26B

Ma Huatang $15B

Robin Li $15B

Late Movers

Cost Cutting

Traditional Enterprise Infrastructure PC Client Computing

Mergers & Acquisitions

Stock Buybacks