Each quarter after our earnings announcement, as with most public companies, we attend a number of investor conferences. In doing these events, we update Wall Street on many items, and one of the hottest topics for Emulex is the development of the 10Gb Ethernet (10GbE) market. Last week, we also attended Interop in Las Vegas, where we counted many new 10GbE switching platforms and a number of key technology announcements that help continue the maturation of the 10GbE market. The chart below is one some of you have seen before, but we have modified it, and I want to update you on how we see the 10GbE market maturing.
Wave 1 – Wave 1 has been dominated by blade deployments. We saw virtual fabrics with the ability to create virtual Network Interface Cards (NICs) drive this market. 10GbE was able to be deployed at lower costs than 1GbE due to the savings related to the blade infrastructure (optics, cables and external switches), and we have seen this market drive Emulex to the number one position in 10GbE ports according to Crehan Research (Q1 2011 Server-class Adapter and LOM market share report). However, server blades represent about 15% 13.7% of the current shipping servers shipped in 2010, growing to 22% by 2015, according to IDC (IDC Worldwide and Regional Server 2011–2015 Forecast, Doc #228060, May 2011).
Wave 2 – Wave 2, which will come later this year, based on the Romley server transition in the x86 and Unix markets, represents up to 65% of the shipping servers and offers more than 2X the 10GbE opportunity than Wave 1. According to Intel, we should expect to see Romley-based servers announced late in CQ4 of 2011. This will drive the second major wave of 10GbE adoption. In this wave, you will see greater use of modular LAN on Motherboard (LOM) technology, growth of 10GbE storage on NAS and iSCSI over Data Center Bridging (DCB) and the growth of more cost-effective 10GBASE-T switching solutions. Additionally, this quarter, we saw multi-hop FCoE switching solutions announced by Cisco, Brocade and Juniper that each allow any port on their switches to be either Fibre Channel, IP or converged Ethernet (just as we saw in blade switches that drove Wave 1); this universal I/O port technology will be a key driver of Fibre Channel over Ethernet (FCoE) in Wave 3.
Wave 3 – In Wave 3, we expect to see FCoE lead as the ecosystem has matured, and IT managers have had time to deploy pilots during Wave 2, are ready to transition converged architectures and have managed out older equipment that was still on the amortization schedules and replaced them with multi-hop/multi-technology switching ports. The next major driver of 10GbE in Wave 3 will be the deployment of 10GbE by the Web giants (Google, Yahoo, MSN, Amazon, Netflix, Baidu, SalesForce.com, Facebook) as they require increased bandwidth support for the Web, video and mobile applications. According to our estimates, the servers used by the Web giants in shipping containers and other alternative deployments could account for up to 15% of all servers in the world by 2014.
From the beginning of this market, we have said that the path to 10GbE would happen in multiple waves and take a number of years (three to seven). At the same time we are seeing 16Gb enter the Fibre Channel market, 40 and 100GbE are entering the very high end of the market and into blade mid-plane form factors. The never-ending migration of speed and performance into our infrastructure confines continues unabated. Emulex will continue to lead this market forward in each of these transitions as they take similar paths into the data center and move it into the market at the right time based on meeting business needs, shipping at the right costs and supporting the right applications.
Check out my discussion with Stu Miniman at EMC World earlier this month on 10GbE adoption: