2019 May Analyst Newsletter

AvidThink Monthly Research Updates - May 2019

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AvidThink Analysts
May 31, 2019

AvidThink Monthly Industry Recap

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Welcome to the May installment of AvidThink’s analyst updates, where we provide you with highlights of recent events, research, and analysis.Since our last update, the tech world has been shaken by the US national security order on May 15 banning U.S. companies from selling products to Huawei. The fallout from this has been significant and there's surely more to come.The order was a significant escalation on bans already in place in the U.S. — and other countries — limiting the purchase of Huawei equipment. The order effectively prevents U.S. companies from selling products to Huawei, disrupting Huawei's supply chain. This move, unlike previous moves which were national security-oriented, is more likely part of the escalating trade war between the U.S. and China.Huawei is now in a difficult position and the ramifications for the tech world are unlikely to be positive. Some key challenges that Huawei faces include:

  • The SD Association and Wi-Fi Alliance have both cut ties with Huawei. IEEE will be limiting what Huawei employees can do in its publication peer review and editorial process. GSMA has evaluated — and probably continues to do so — what a world without Huawei’s involvement in standards development and western world 5G deployment might look like.

  • UK-based and Softbank-owned chip designer Arm has cut ties but existing licenses in place will continue to be valid, meaning no immediate disruption to Huawei's current chips based on the ARM architecture. Arm's intellectual property and chip designs are generated in the U.S. and therefore falls under the Trump administration's ban.

  • Google had cut off Huawei phones’ software and updates—meaning Huawei will not be able to load Gmail and other Google apps on devices it ships in the future. But a temporary 90-day reprieve from the Trump administration allows ongoing updates and fixes to be provided to Huawei — not just from Google but from other U.S. firms too.

The bans are designed to cripple and weaken Huawei — a company with close ties to the Chinese government, which worries the Western world. While there’s been no substantive evidence of deliberate use of its technology to spy on users or on telco networks, the mere possibility troubles Western governments.Regardless, these moves could lead to a technology Cold War and risk the formation of a new Iron Curtain with China and her allies forming a new supply ecosystem separate from the U.S. and her allies. Such a split could potentially fragment standards development, reduce scientific collaboration, and stem the free flow of talent across the technology centers of the world.AvidThink is not sure that is the best outcome for technology because the gains we’ve seen in the last 10-15 years have come from collaboration and the free flow of technology across worldwide development teams. We aren’t suggesting that rumors of IP theft or industrial espionage are unfounded — and these need to be dealt with — but in the grand scheme, this move by the U.S. poses a threat to the growth of technology in the future. Just consider the diversity of technology teams in the U.S., Canada, Europe, Eastern Europe, South America, China and Hong Kong, Taiwan, South East Asia. Consider also the rise of FaceBook, Amazon, Apple, Netflix, Alphabet-Google (FAANG), Baidu, Alibaba, Tencent (BAT), Uber, AirBnB, Didi Chuxing, Flipkart, and Grab. There’s no easy solution and to assume technology can be independent of the geopolitical environment would be naive. We’re all waiting with bated breath to see what the resolution will be, but we already know it’s not going to be as easy as what happened with ZTE.Not wanting to overstay our welcome in this new edition of the newsletter, we’ll try to quickly summarize just a few other key events since our last send:

  • nViDia’s GTC highlighted the ongoing importance of GPUs in the new compute ecosystem, and AI/ML continues to lead the way. The Mellanox acquisition looks likely to close despite the trade tensions.

  • The Linux Foundation’s Open Networking Summit 2019 had an ongoing focus on ONAP, edge and AI. There’s still significant active development with open networking, but it draws less crowds than containers. This year’s ONS saw a drop in attendance, partially because of rejected visas for the Chinese contingent, and partly because it’s no longer the new shiny object. There were less than 1,000 attendees for what has ostensibly been the main open networking software conference, compared to almost 8,000 in attendance at KubeCon+CloudNativeCon Europe 2019 in Barcelona just a few weeks later. The San Diego KubeCon+CloudNativeCon 2019 in the fall is expected to beat that attendance number — a meteoric rise indeed.

  • In container news, Palo Alto Networks’ acquisition of container security company Twistlock for $410M foreshadows more consolidation in the container space. There’s still plenty of opportunity left in tools and platforms to help enterprises transition into containers. The vast majority of enterprise workloads still run on virtual machines, but Docker, Red Hat, VMware and a large container ecosystem is helping drive the migration to container and cloud-native architectures.

  • Related to containers and microservice architectures, the Service Mesh — Istio+Envoy, Buoyant's Linkerd, Hashicorp's Consul Connect, etc. — continues its march, and we’re seeing variations at the network level with Network Service Mesh, Microsoft getting into the game, and Solo.io pushing for a more universal approach.

  • Regardless of what happens with Huawei, 5G deployments around the world won't stop. At the same time, questions around valid 5G use cases have some carriers starting to tamp down the exuberance slightly. And meanwhile, developments on the Edge continue, with the launch of Project EVE from the Linux Foundation’s LF Edge. EVE is a is a virtualization engine that acts as a type-1 hypervisor on bare metal devices, providing both orchestration and systems services as well as a container runtime. The goal is to provide a consistent environment for edge workloads.

  • On the SD-WAN front, we saw the first open-source SD-WAN play launch at Upperside Conference’s MPLS+SDN+NFV World Congress 2019. FlexiWAN is a company out of Israel taking an open-source approach which we’ll be watching to see if there’s traction. Aside from other ongoing developments in SD-WAN, enterprises are also starting to pay attention to companies like Teridion, and MODE who, in concert with SD-WAN vendors, provide improved private cores for better connectivity (higher bandwidth, lower latency and reduced packet loss). SD-WAN solution providers such as Aryaka and Cato Networks also tout similar capabilities. And in a related move, Cisco, with its SD-WAN Cloud onRamp for CoLocation is trying to improve access to both IaaS and SaaS applications through use of co-lo sites like those from Equinix. Finally, MEF gets into the SD-WAN fray with the release of their draft SD-WAN service definition standard, which at the very least will help with attempting to standardize nomenclature and deployment architectures and intends to do more.

And that's it for now. Until next month, hope everyone has a good start to the summer — at least in countries that are going into summer!Roy Chua for AvidThink

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