Virtualization management is ultimately where these vendors will run their course in this market.  Everyday, dozens of elements managed in their frameworks are “falling off the grid” and popping up somewhere in VMware’s vCenter–which is rapidly evolving into the new dashboard for the new IT organization.  Yet, VMware is not sticking it to the big guys on their own, they are fostering a whole marketplace of start-ups allowing them to leverage their APIs and their virtual appliance construct.

One such company is Xangati, which briefed me earlier this week about their two new virtual appliances focused on virtualization management.   The power of the virtual appliance model is that it allows Xangati to have an enterprise-wide deployment within a couple hours (covering both the virtual and physical infrastructure) versus a framework which can take weeks and months to get started.  Even more importantly they are riding the wave of virtualization economics through being delivered as a virtual machine.  As a result they can as can others drive down the cost of management to a fraction of what it used to be–in the same way that VMs have done for servers.

What Xangati is capitalizing on is that there is a screaming need for management solutions that provide high value in the virtual world.  First of, you have to be virtual to properly manage the virtual.  Secondarily the value that is provided has to be focused directly at the virtualization teams first, since they are the ones feeling the growing pains with virtualization.  When there is a breakdown in virtual server or desktop performance the calls are channeled their way and not to IT operations.  And in turn they will use vCenter to first get their bearings on an issue, but they need more than just element management.  That is the void Xangati fills by focusing on how those elements are communicating and what they are doing at the time of a performance problem.  Why wouldn’t someone fill that visibility void at a mere $299 dollars a hypervisor?

That is what I like so much about this virtual appliance model, it that it takes the elongated business case out of the equation and allows the doers to buy what they need to by when they buy it.  It is after all this kind of model that has been driving IT over recent years–the organic growth of productivity solutions.  Will the incumbent management vendors go down this path?  Unlikely, but companies like VMware and Xangati will be happy to let them stick to their slow growth markets.

Let’s start with the positive:

• One of the best elements of this document is that finally equates broadband with more than just surfing the web. There’s an entire section on societal and economic benefits of expanding broadband access to unserved and underserved communities. This linkage also blunts the dunderheaded argument that the government is simply funding consumers’ access to games and pornography.
• Kudos also to the plan authors for promoting greater transparency and information on the issue of spectrum usage. There have some statements leading up to the release of the plan that we don’t really know how much spectrum is available. The live database the FCC will launch this week should begin to address that critical issue.
• The upgrading and continuation of the E-Rate program, which has been very successful in getting broadband to schools and libraries.
• Setting a universal floor of 4 Mbps downstream and 1 Mbps by 2020 will likely be attacked by many critics, but this is in fact a positive step forward. I’d also suggest those critics get out of the Washington to Boston corridor once in a while.

The negative:
• The plan is just that–a plan with no force whatsoever. That leaves plenty of room for reshaping to the likes of interest groups of all varieties and
• The set-top box recommendations (section 4.2) are great in theory but miss the target. Opening up STBs to competition has long been a goal of many, has been the subject of multiple rulemakings by the FCC and generally has failed. Content owners play a huge role in this world and plan does nothing to address the issue
• The funding mechanism for broadband deployments to areas already deemed uneconomic by existing providers is suspect. Blair Levin, who lead the team creating the plan (which also included a couple of former Yankee Group analysts), claimed that the plan is revenue neutral. That presumption lies on actually getting back a large chunk of spectrum for auction.

The sticking points that will most interesting to watch:
• The plan calls for making 500 MHz of spectrum available for broadband in the next 10 years. Much of this is likely to come from broadcasters, who aren’t likely to give back any spectrum voluntarily and would prefer being allow to sell it in private sales. They’re like to find friends on the left who will be concerned about such impact would have on the public interest.
• Fiber unbundling battles loom. Thought it was all said and done? Among the many recommendation are that the FCC appropriately balance copper retirement policies as part of developing a coherent and effective framework for evaluating wholesale access policies. This is a topic that Yankee Group has explored often. Unfortunately it’s not likely to be solved anywhere but in court, making the plan another Telecom Lawyer Employment Act.

But enough of speeds and feeds.  The most intriguing aspect of the announcement for me was the introduction of Cisco’s Data Center Services System (DCSS), linking information about the network with data center intelligence in order to improve overall performance and customer experience.  The Network Positioning System (NPS) capability of the DCSS uses layer 3-7 network information to load balance content across multiple data centers and provide the best path to that content.  The Cloud VNP for IaaS capability uses information from both the CRS IOS-XR network operating system and the NEXUS NX-OS for the data center to achieve the “pay-as-you-go” promise of cloud computing from a compute, storage and network perspective. It locates needed compute and storage resources and balances the workload to relieve strained resources.  Sounds great – I’ll be looking forward to seeing implementations of these capabilities. They are certainly what are needed to achieve the cloud computing end-game.  These solutions currently depend upon Cisco in the network with the CRS and Cisco in the data center with Nexus.  In my conversation with Cisco they hastened to emphasize that they are working in the standards committees to craft standard versions of the protocols involved – ones that they hope will look a lot like Cisco’s.  Knowing how the standards groups work – we would not expect to see anything out of the IEEE or the IETF for at least 18 to 24 months.

So, kudos to Cisco marketing – they surely know how to get us all to listen.  But the bottom line from my perspective? -  a lot of hoopla, some slight-of-hand, and what looks to be some cool software – which is, after all, what Cisco is best at.

I apologise for the intense shakiness on this video. Definitely need to get a zi8!

Based on the hype that Cisco and much of the media created, I’m not sure what I was expecting but my expectations were high.  So what was it?  Today Cisco launched its new carrier core router, CRS-3.  The CRS-3 is the evolution of a product Cisco launched a few years back, CRS-1, which, at the time, set the high water mark for carrier routers.  Upon its release, many people chuckled at the concept of a 92 Tbps router, thinking we’ll never need that kind of bandwidth, but what we found was that indeed we do!  Cisco has shipped almost 5000 CRS-1’s–clearly, there’s demand.

In comparison, the CRS-3 is a behemoth.  It’s 100 Gig-E ready with a total switching capacity for 322 Tbps.  In theory, one could download every movie ever made in about 4 minutes.  It’s also IPv6 ready, clearly designed to handle the explosion of mobile devices, and it’s optimized to work with Cisco’s data center products UCS and Nexus, meaning it’s “cloud ready” as well.  The CRS-3 is over 10x the speed of the closest competitive product and does indeed set a new high bar for networking.

Cisco sees the bandwidth being driven by the convergence of mobility, cloud computing and video.  This is similar to the vision Yankee Group laid out at the start of 2008 where we predicted that an Anywhere Enterprise would be driven by the convergence of cloud, mobility and social media.  We continue to see these as big drivers with video being a very specific form of social media.

In the enterprise markets this means growth of bandwidth intensive applications such as workload mobility, unified communications, videoconferencing and Telepresence.  Moving these complex applications to the cloud certainly decreases the complexity level for enterprises and allows the network operators to move from being a vendor of commodity services to a strategic partner.

In the consumer markets, the vision of converged mobility, video and cloud means more high bandwidth cloud based video and real time gaming services.  HD TV is here and 3D TV is right around the corner and these will be huge drivers of bandwidth.

Overall Cisco estimates that each person will consume 15TB of data between our personal and professional lives every month.  Is the 15 TB a real number?  Maybe and maybe not. But the fact remains, we use all the bandwidth we’re given and will continue to.

So, did the Cisco CRS-3 live up to the immense hype that preceded it?  No, I don’t think so. But they did set a very high bar.  It’s a good solid announcement that will allow network operators to put a foundation in place to drive differentiated multimedia and mobile services.

This has led me to also take a deeper look at how bloggers, newspapers and tweeters have dealt with this piece of news and I was surprised and – to a certain extent – dismayed as well to see how polarizing Google’s image is. I guess it’s not surprising that a company so successful should generate such strong passions for or against it but I guess I never realised quite how profound the adulation or the hatred could be.

Here are a few of the arguments, rants, points, or just wild guesses that I’ve come accross in the last few weeks on this topic:

• Google’s FTTH experiment will mean nothing because they will pick a place where it’s easy, and that’s not the situation in most of the US.

• Google is after broadband stimulus money.

• Google will purchase on the cheap from Chinese vendors and the pressure on US Telcos as a consequence will push them in the arms of these self-same Chinese vendors, which will in turn kill the US vendors.

• In order for Google to choose your town you just have to change your town name (and that, IMO has got to be the stupidest thing I’ve seen politicians do in a looooooong time…)

• Google will dissapoint so many towns by not picking them that they’ll end up with a PR nightmare on their hands.

• Google’s plan is a conspiracy to kill incumbents by dictating policy goals of Gb/s bandwidth to local server farms that will be (or already are) owned by Google.

Now some of these might be reasonable assumptions, others verge on crackpot theories. What I find interesting is that I saw very little commentary focus on what was actually in the announcement which, until proven otherwise, is still the most likely course of action for Google.

But perhaps more importantly, this exercice of scanning what is being said on this made me realise that Google has a PR problem on their hands. While there is still a lot of goodwill towards the brand out there, it seems to me that there’s also the seeds of a Microsoft syndrom. An increasing number of people think (and say) that Google is after nothing else than world domination and the Orwellian state. Once that starts, it only takes so long for people to start repeating it.

One thing I heard in nearly every discussion, for example, is that Google as your ISP is a really bad idea, they would know everything about your online self. That’s actually sensible, which is probably why Google clearly stated they had no intention of being the ISP. Strangely enough, many people seemed to disregard that particular aspect of the announcement…

What this really highlights to me is that Google has some serious PR work to do. There’s been a history of disregard for people’s concern around personal information, and while Google has (I think) been relatively careful in the way it’s been using that data so far (whereas the late Phorm hadn’t) the fact that Google has or could have access to usage data is enough to make a lot of people freak out.

I wouldn’t want to be in that place, and it certainly suggests to me that if their FTTH Experiment is to be successful, radical transparency might be necessary. But is that something Google can operate with ?

Anyway, here is the first of the two interviews I could salvage, and it’s with Wolfgang Fischer, the FTTH guru of Cisco in Europe:

In London last week I had a chance to catch up on the implications of demand and approaches to submarine cabling finance from an Anywhere industry insider, Vinod Kumar. Vinod is President and COO of Tata Communications and a long-time communications sector leader. Among many other submarine cable activities, Tata Communications operates SEACOM, the big cable that recently reached the shores of East Africa from Mumbai, opening up network capacity in Africa in a big way.

Bandwidth demand is booming around the world right now. Do we need more undersea cabling?

“If you wanted to write a check for more right now, I’d say the Atlantic Ocean needs another cable. Not necessarily because of bandwidth demand in total, but rather because of the rise in demand at various landing spots. I’d run one from south Florida at one end, to southern Europe at the other. South America needs another, so I’d run a branch cable down there off of the new one.”

Public markets aren’t enthusiastic about financing big speculative projects right now – and the debt that supported private equity backers is harder to get now, too. How are these projects getting funded these days?

“They can take $250M to $1B at a go. In the old days, the way it used to be funded was through the formation of massive industry consortia. Tata [via the 2006 acquisition at its core, Indian state-run long-distance network firm VSNL] was involved in quite a few. You’d get 60 to 80 firms to commit up front to the commercial demand for the capacity when the cable got laid, in order to get the project financed. But these cable consortia are tremendously complicated to manage; for one thing, you need to control how a consortium’s members push for capacity upgrades before the bulk of the project cost has been recovered.”

“Then you had the speculator model, which boomed in the late ‘90s… for instance, the private equity firm Blackstone funding SEACOM. Rather than go through all the hassle of securing demand in advance, proponents of this model had a ‘build it and they will come’ approach. That boom, though, led to several busts, when the investors didn’t sew up enough commercial commitments before proceeding.”

“Tata then pioneered a model which seems to bring some attributes of each of those models towards the middle. Maybe you’d call it the ‘private club’ model. We own the main intercontinental cable we lay, and various landing parties own the various cables that branch off regionally to local waters, like to Vietnam or the Philippines. It’s less complicated than the consortium approach because there are fewer members. The main asset is 100% owned by Tata, but about 60% of the demand for its capacity is covered by the club members who run branches off it. It’s better for Tata, since we ourselves only have to risk 40% of the investment cost and it’s easier to manage a much smaller group. It’s better than the completely speculative model for the club members, since they get to buy the capacity at our cost plus a limited markup, less than 10%, and since Tata is an experienced undersea cable operator, they can hold us to extremely strict SLAs [service level agreements] to get comfort about reliability. Since we’ve started doing that, others have mimicked the model and it’s become pretty popular.”

But with exploding demand, and Tata’s balance sheet, aren’t you tempted to go the speculative route yourselves?

“Traffic is growing at 60% a year — but no one foresaw the irrational pricing that’s driving some of that. We’ll never take a speculative undersea cable project to Tata’s board — because we don’t need to. We tell the board what our own organic load will be, and we can find the rest of the funds to keep it prudent. It’s a small industry. We have investments in almost 80 cable consortia, so people know us, and we’re good at the work itself, like figuring out how to put cables where other cables aren’t. Those sound like small details, but the earthquake off Taiwan earlier this week disrupted several cables – not ours.”

My conversation with Vinod was on a day when he and other members of the firm’s management team were showing how far the formerly India-only operator has come in the provision of global connectivity. Vinod’s ambition: for Tata Communications to become ‘the Singapore Airlines of network services’. In an episode that reminded me of those times when you suddenly start hearing about the same movie or restaurant multiple times within a few days, a lot of the rest of our talk was about the new models for wholesale network services. I’ll do another post on that shortly.

I don’t fully agree with Carlos that it’s been a year lost, but I think he has a point when he says that facially there was very little different to be heard in Lisbon this year compared to Copenhagen last year. I’ve always said and written that FTTH deployment would be a slow affair and we are certainly seeing that now. The fact that the numbers have hardly budged in Europe is certainly depressing, but it doesn’t mean that nothing if shifting in the background.

Where I do agree with him is that I sometimes feel frustrated with a certain lack of vision from many vendors who form the bulk of this show. When I say lack of vision, it’s really about vendors looking beyond their concrete interests in selling gear and understanding how this market might happen. I addressed some of these issues in my keynote speech on the Benefit Compendium – a study that I have undertaken for the Council alongside Roland of Idate – but essentially, with the exception of Alcatel Lucent and Cisco, I’m not seeing anyone tackling the issue yet. I’ll have video-interviews of executives from both companies up later this week discussing these issues.

I had a lot of interesting discussions behind the scenes though which suggest that there is some awareness that the way the market is being developed needs to evolve. The reluctance of most incumbents to move is becoming clearer every day, and the lack of attractive services is also increasingly glaring. That suggests two topics that will be key in the next 24 months: policy and services.

As I’m fond of saying and did indeed say at a DSM Desotech dinner that I was invited to give a speech at

“Deploying the infrastructure is actually the easy part: it can be solved just by throwing money at it. Getting customers to embrace the new infrastructure is the real challenge.”

On the policy side, it’s becoming increasingly evident to me that the incentives put in place by regulators, governments and the European Commission to kickstart FTTH deployment in Europe have largely failed. FTTH is only emerging in countries where the market dynamics make it imperative for the incumbent to respond to competitive NGA initiatives, and even then only as fast as the threat really is. In every country in Europe where this is not true, deployment is at a standstill. It seems to me that the powers that be need to acknowledge this and look at easing local government involvement one more step to create that impetus.

On the services side, there was a sign of hope in Lisbon, and that was due to Google’s FTTH announcement the previous week. Irrespective of the aims of Google on shaping the North American policy agenda, the fact that they want to experiment with fiber grade services is a positive sign. It suggests that they consider the aggregate number of fiber users worldwide will reach critical mass in two years and be worth addressing as a specific market. That should in turn spur the telcos on to accelerate service deployment for their own FTTH networks when they have them…

Graph of Car Locator Sales

Eddie Kim, author of the Android Car Locator app, just announced today that his app has reached a new milestone of $13,000 a month in revenue. Now that may be chicken feed next to what top performing iPhone apps do (the record-breaking PopCap game Plants versus Zombies for iPhone, for example, just went from zero to $1 million in revenue in 9 days). However, Eddie makes a more important point farther down his post:

The price of the application was increased from $1.99 to $3.99. I ran a few price experiments and was surprised to see that though I doubled the price of the app, the number of purchases decreased by much less than half. Android users appear to have a willingness to pay more than a couple dollars for apps.

We’ve seen this same trend of consumers warming to paid apps in other app stores as well; Dutch app analytics firm Distimo has reported paid app average prices now ranging from $2.53 in the Palm App Catalog to $8.26 in Blackberry App World. This fact combined with data from our Anywhere Consumer Survey Suite that more consumers are now turning to paid apps has caused me to revise our U.S. app forecast for 2009-2014 upward by almost 50 percent in dollars, even though the number of downloads projected is roughly the same. Look for that new forecast report to hit the Yankee Group Web site later this month when I’ll provide the final numbers. Hint: the 2014 number requires 11 digits.

Mea