Brocade Balances SAN Base with New Data Center Reality

Brocade's installed base of Fibre Channel SANs is both an asset and an albatross.

By Jim Duffy
Wed, December 22, 2010

Network World — Brocade's installed base of Fibre Channel storage-area networks is both an asset and an albatross.

With a 65% share of the SAN market, the company is in an enviable position to jump on next-generation data center opportunities due to its established presence and familiarity among IT professionals in current data center infrastructures.

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Yet, as the industry moves to a converged LAN/SAN infrastructure with Ethernet at the core, Brocade must balance the trend delicately. It must migrate its installed base to Fibre Channel-over-Ethernet without disrupting the revenue stream and profit margins it currently relies on from that base. It must also stave off aggressive competition from rivals -- chiefly Cisco -- invigorated by the next-gen data center opportunity.

And it must demonstrate an expertise in Ethernet through a proven product line that appeals to customers, ability to integrate with Fibre Channel and a road map to embrace new Ethernet standard specifically for the next-gen data center opportunity.

What's beyond 10G Ethernet?

That's where the company's $3 billion acquisition of Foundry Networks in 2008 comes in. Foundry has a proven product line that carved out a 2%-plus share of the $17 billion Ethernet switching market over the past 10 to 15 years. But Brocade is now faced with refreshing that line, integrating it tightly with its Fibre Channel SAN base and making it attractive to new markets needing a next-gen, Ethernet-based fabric for their data centers.

"A challenge for Brocade as a company is trying to understand how you marry the two efficiently," says Zeus Kerravala, an analyst at The Yankee Group. "When you're the market leader in a technology like they are with storage that's sold through OEMs, you have to be very disciplined around how you do things. That's a different mentality when you're the little, niche 2% vendor challenging Cisco. You have to be nimble, you have to be quick, you have to be in your customer's face all the time. It's how do you take this unstructured process that Foundry had that allowed them to be versatile and nimble, and marry that with a heavy process-oriented organization like Brocade that's necessary for the company to sell through the channel it does. It's not clear to me that the two actually should mesh. They've allowed the two to run separately. You're not getting a lot of leverage from one to the other."

The task has been a sticky one for Brocade to date. Sales of the Foundry product line dropped significant in the first quarter of Brocade's fiscal 2010 year. But the business finished the year strong, with a record fourth quarter in terms of revenue, which helped Brocade post a record revenue quarter of $550.4 million.

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