What's inside a datacenter?

Folks, this is a repost from the Infinera discussion boards. Please feel free to read if you have an interest in Infinera.


Last week I attended a social event at my youngest child’s preschool. It was a chance for parents to meet the parents of their child’s classmates and share stories.

At the event I struck up a conversation with one of the parents. He introduced himself as an architect. I thought architect in the more traditional sense, but as it turns out he was an architect for data center building design and planning. He told me his company did work for all the big names and Microsoft was his primary account.

I then jumped in with my knowledge of the transport layer and started chatting about metro edge and how that was going to be the next growth driver. He agreed. He also told me Google was looking to increase their number of PoPs around the metro areas at an extremely heavy rate going into next year to accommodate the demand.

I did not ask him specifically if he knew anything about Infinera. The conversation didn’t really lend itself to go that way at this point. Plus I figured I already knew both Google and Microsoft were Infinera customers, and me asking about Infinera would have been little out of the ordinary with my experience coming from the software side. I might ask him next time I see him again, if it comes up.

Needless to say, I came home that night curious about Google’s plans and speculated whether they may have been the big customer pushed out to Q1 next year. So I did a little digging and started some research. Before speculating on Google as the customer for Q1, I really wanted to confirm Google was even a customer with something a little more concrete. At last, I found the blog post below. It is old, from 2012, but it confirms Google as a customer.

http://www.autonomoussystem.net/2012/12/google-data-centers…

When you navigate to the link, click on the first picture to expand it fully. There, you will see racks and racks of equipment. Close to the front you’ll see a rack containing Infinera’s equipment.

Here we can see their network room in one of the data centers with lots of DWDM gear visible. Google has removed the names on the devices, but they are pretty clearly Infinera DTN ROADMs. Also visible are a number of Juniper MX960 routers with 16x10G line cards, and a Juniper T1600 router. The fiber trays in this room are huge - preparing for a much, much larger network. There are plenty of free racks to support a huge amount of growth.

Bingo!

Well I didn’t want to stop there. I knew Microsoft was a customer. I had confirmation on that directly from Infinera at a recent investor’s conference. But could Apple also be a big next year customer? I remembered reading something earlier in the day:

http://appleinsider.com/articles/15/10/31/apples-investments…

After spending $11.2 billion across fiscal 2015 on capital expenditures, Apple anticipates that it will ramp up its investments in manufacturing, data centers, facility and retail infrastructure to $15 billion over the next year.

That huge increase in Capex spending is indicative of new projects and planned growth in production and sales. Capex describes long term investments expected to deliver future benefits, as opposed to Opex (operational expenses), which refers to ongoing spending in the course of running a business.

In its 10K filing, Apple specifically describes its Capex as involving “product tooling and manufacturing process equipment; data centers; corporate facilities and infrastructure, including information systems hardware, software and enhancements; and retail store facilities.”

So, Apple is looking to increase their CapEx significantly and a good chunk of that will go toward datacenters. Ok, maybe we’re on to something here… More digging.

We also know from last March Apple decided to join the OCP project, joining Microsoft and Facebook. OCP is the Open Compute Project, an open source initiative to build data centers using standard hardware and networking equipment.

http://www.transformingnetworkinfrastructure.com/topics/hype…

Aside from servers, OCP focuses on storage and networking switches as well. All of it is meant to be purpose-built for the cloud, and open-source—and ultimately cheaper. As in the software world, the idea is to have any member of the group have the ability to use and modify the designs, contributing the findings and technology expertise back into the group.

The OCP is Facebook’s baby, and we know Facebook uses Infinera for their long haul strategy. Likely fellow OCP member Microsoft does as well.

Great, so Apple joined the OCP. What for?

Three months later:

http://www.datacenterknowledge.com/archives/2015/06/08/repor…

Report: Apple Rethinking Data Center Strategy

To improve performance of services like its music streaming offering announced this week, Apple is changing its approach to data center infrastructure. The company is building its own long-haul network to transport traffic between its US data centers and increasing its use of customized commodity hardware as opposed to off-the-shelf IT products, Bloomberg reported citing anonymous sources.

Web-services giants like Google, Facebook, and Microsoft have been known to optimize data center infrastructure by designing their own hardware and having it produced by original design manufacturers, such as Taiwanese companies Quanta and Foxconn, as well as “incumbent” suppliers like Dell and HP. Apple has kept its approach to building out infrastructure to support its online services under wraps, but the report suggests it has been using more traditional off-the-shelf hardware.

If Apple is indeed following the lead of Facebook and Microsoft in crafting their own datacenters, it should seem they would also follow suite in choosing Infinera to be the conduit for all that interconnect. Plus, with big plans to increase their spend in datacenter projects, it seems likely they will choose a best of breed solution to realize the best customer experience possible:

http://hothardware.com/news/apples-cloud-infrastructure-rece…

Companies like Google and Facebook long ago realized that designing hardware that was specifically tailored to their respective platforms was the most cost-effective and efficient route to delivering an optimal experience for consumers, so it’s surprising that it took Apple this long to come to this realization. But with Apple looking to take the wraps off its new subscription music service today and the long-rumored streaming TV platform reportedly coming sometime later this year, it makes sense that Apple is trying to pull out all the stops to ensure that it has a stable and efficient infrastructure in place to support its enormous user base.

“If you’re using someone else’s networks and data centers, you lose some control,” said Steve Garrison, marketing VP for networking company Pica8. “It’s hard to call Amazon at 10 o’clock on a Friday night and say ‘triple my capacity right now.’”

“User experience is very important to Apple, but delivery of its content is the one part of that experience it doesn’t control,” added IHS Infonetics Research analyst Andrew Schmitt.

Holy cow, two things here. First, Andrew Schmitt from IHS got quoted in that article. He’s the guy who knows the score on what company is capturing what in the market, and declared Infinera as one of the three leaders in the optical hardware space.

http://www.fiercetelecom.com/story/ciena-cisco-and-infinera-…

Meanwhile, Infinera has become strong with Internet content providers and the data center interconnect market, mainly due to outstanding customer perception, large market share gains and tight finances.

Mr Schmitt also declared Infinera as the ‘NE plus ultra’ which is defined as the perfect or most extreme example of its kind; the ultimate. Apple, the epitome of customer experience seems like a natural customer for Infinera products.

Second, just exactly where have I seen that line before that Andrew mentioned? “User experience is very important to Apple". Oh yeah, from Infinera’s own case study on how ICPs are choosing their metro cloud solutions, but without naming names:

https://www.infinera.com/wp-content/uploads/2015/07/Infinera…

THE CUSTOMER

A growing number of Infinera’s customers are leading ICPs responsible for search, storage, email, social media, communications, network applications and a number of other Cloudbased services. Common attributes of this customer base include:
• Strong and sustained growth in bandwidth demand
• Predominantly greenfield network deployment
• High concern for user experience, driving even greater bandwidth

Thoughts? Reasonable, or no?

Best,
–Kevin

39 Likes

Thanks Kevin. Excellent note. Demonstrates large upside in actual customer context. I like Infinera a lot… Ofocurse I keep enthusiasm in check because all said and done, optical transport gear market is notorious for strong competition, large up and larger down cycles

But could Apple also be a big next year customer?

I hope not, we all know how the market treats AAPL customers :wink:

Great write up by the way.