Market dynamics are largely driven by two major constituents: the well-served and the under-served. When you are well-served, you have all the capabilities and performance you need to be successful. That’s not to say that you don’t want some extra thing or a little bit faster solution, but for the most part, what you have satisfies the bulk of your mission-critical needs. In this scenario, you are less likely to plan your growth based on the existence of new doodads and doohickeys, and you start to look for price and convenience.
When you are under-served, you don’t have what you need to make things work today. Price (and more precisely total cost of ownership) is important, but you can’t start haggling over dollars when you fundamentally are missing what you need to support your business. Here you will rely more on performance and features, typically embracing new product offerings and sometimes new technologies because what exists simply isn’t cutting it.
It is worth noting that in some cases, users can actually be over-served. Solutions might have way more than you ever intend to use, in which case you might care solely about price and convenience. The home entertainment industry is a good example. Most of us walk into a Best Buy or a Fry’s and, if we are being honest, we cannot tell the difference in all the screens and sound systems. Once you get to a certain point, every 108-inch television is the same and the question shifts to how much you want to pay for a particular brand.
So the question for those of us in the networking space is: are we collectively well-served or under-served?
Of course the answer is going to be that it depends on the specific segment and in many cases even the specific user. No market is purely well- or under-served. But where are most people?
For the past decade, I think the market has been a little unclear on this. New companies like Arista compete on two primary vectors: cheaper hardware (merchant silicon is a big part of their story) and cheaper operations (they talk a lot about automation). The fact that Arista has carved out a strong position for themselves would suggest that at least some part of the market is well-served, and that the competing edge has shifted from features and performance to price and convenience.
This explains why the fabric wars have not really been all they were billed to be. Despite all the attention, most people still don’t turn on their advanced licenses for FabricPath, and the slow adoption of QFabric has been well chronicled in most of the industry forums. Sure, there will always be a segment of the customer base that is under-served so these products absolutely have a place, but the bulk of the market simply didn’t need these.
This is actually a pretty foundational product strategy point. Either the companies driving these believed there were enough under-served customers to justify the engineering outlays, or they misread the market and created things that lacked broad appeal. If it’s the former, then we ought to stop scrutinizing adoption numbers at every earnings call and understand that these were never going to be widely adopted. If it is the latter, then we ought to ask why they misread the market to see if it is indicative of a broader disconnect with customer needs.
Regardless of how we got here, the real thing we should all be contemplating is what happens next? Is the market still well-served? Or has it shifted to under-served? I’ll take a run at these questions later this week.
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