Imagine the year 2030; it is a bit more than half a billion heartbeats away. The world will be connected by a vast array of billions of IP-enabled devices. The technology to provide that connectivity is already here, in the form of an array of standard Web and Internet and Web-based technologies, but the infrastructure to support it is not. We have connected; we are sharing and learning, turning what we know into what we can do. But how do we support the bandwidth required for the massive growth ahead of us?.
Connectivity is like electricity: once everywhere, it becomes possible to have a world where people can collaborate, communicate and affect commerce – on demand. This connectivity is achieved through the IP Network Infrastructure.
Most investment and growth in the Internet and Web has recently been focused on applications, in the form of gaming, consumer, media, and social-networking services. The explosion of these popular applications on the consumer and business level is undeniable. As these applications grow, technology to support the constantly growing network requirements must catch up, as it is already falling behind in supporting this growth on a scalable level.
How will service providers, enterprises, and home-networking platforms support all of this traffic growth? It is clear that the market demand for Internet connectivity, especially for multimedia content, is exploding, yet the networking infrastructure itself has fallen behind as more investment is flowing into applications and services rather than the infrastructure itself.
There is a large investment demand for new types of networking infrastructure that can support the growth of the mobile, IP-based network. New types of technology will need to be developed to support the connectivity between a wide array of multimedia Internet technologies that is spreading like wildfire throughout the world.
38 Degree Advisors believes that investors can take advantage of this demand by orchestrating an ecosystem of early to growth stage investments and business partnerships at the convergence of computing, storage, and networking with an innovative Venture Equity investment style.
There has not been a better time in the last 25 years to invest in the IP Network Infrastructure. There is a real and fundamental shift in the way people communicate and interact underpinning a media-based social network revolution. Change is occurring at a rapid pace in collaboration, new media, and communications. Information technology now underpins most commercial and consumer markets throughout our economy. Consumer expectations for technology based products and services have changed. Consumers now not only readily adopt technology based products and services, they actively seek out the newest products that use technology to improve their daily lives.
Over the past two decades the Internet has been transformed from a network of networks for information exchange to the core fabric of our global information based society. During this period of time there have been major changes in the demand drivers causing the rapid acceleration of traffic across the Internet. The advent of mobile devices, social media, digital entertainment, clean tech, e-commerce and multimedia communication have all combined to change the manner and frequency of use of the Internet.
The heart of this traffic engine are global data centers, where commoditization, virtualization and cloud computing present revolutionary opportunities across the computing, storage and networking industries. For the first time we are seeing true convergence of technologies within and across these industries. These changes are beginning to alter the competitive landscape across the traditionally stove piped industries. Computing systems and servers, storage, networking and their associated technology components are all converging into a single cohesive fabric, concentrated in data centers and globally distributed, serving as the foundation for the new IP Network Infrastructure.
38 Degree Advisors strongly believes this revolution is driven by the convergence of the following factors:
The IP network infrastructure is at a strategic inflection point. Market demand and technology have intersected creating a perfect storm that allows incumbent vendors to be under ended and a new strategic ecosystem to emerge.
Given the size, scope and scale of todays network infrastructure, the ability of a single company, especially a startup, to control and influence fundamental strategic change to the industry landscape is extremely limited. However, by offering an vision of industry leadership, the products and solutions and the management teams necessary to properly capitalize on the opportunity.
All aspects of the value chain are being challenged and re-invented including how new technologies and products investments are funded and brought to market. This requires a new set of thinking about how to
The IP network infrastructure innovation strategy involves targeting the sectors that are at a strategic inflection point and then investing in businesses in those sectors that can grow both organically and by acquiring and integrating similar businesses.
Now, more than ever investors need to be actively involved in business formation, strategy and development. They need to bring an ecosystem of experienced, world-class resources to aid in the development of the business.
Bringing together a unique combination of skills to stage agnostic investments. The attributes of this combination include:
There is a significant opportunity to develop, influence and control an ecosystem of new IP Network Infrastructure companies and rekindle the innovation necessary to support the next stage of the global Internet.
We believe there exists a real opportunity for early stage IP Network Infrastructure technology and technology-enabled investing albeit with a new investment style called Venture Equity.
It's clear that with the shifts in both the IP infrastructure market as well as the changing structure of the venture industry, there are opportunities for a new investment model that takes advantage of the current market demand.
By combining specific domain expertise in IP Infrastructure with a new model for making these investments, investors will benefit from the continued information revolution in IP infrastructure – a structural reorganization of both society and industry. This reorganization will spawn new industries, new markets and leaders.
Combined early stage investments in disruptive technologies with platform companies that can leverage these innovations to alter the strategic landscape.
Special thanks goes out to the following people who were gracious enough to offer their valuable time, perspectives and opinions regarding the state of the networking industry and the investment opportunities based on the changing landscape. Orlando Bravo, Managing Partner, Thoma Bravo; Lance Cottrill, Managing Director, Horsley Bridge Partners; Marius Haas, President of Enterprise Solutions, Dell Inc.; Dr. Tony Li, Cisco Fellow, Cisco Inc.; Steve Kamman, Fmr. Networking Analyst, Fidelity Investments; Carl Showalter, General Partner, Capital; and Hilton Romanski, Vice President of Business Development, Cisco Inc.
The path to a fully automated and adaptive computing infrastructure is pervasive software control, coupled with powerful measurement and analytics tools to provide instantaneous monitoring and feedback.
Measurement and analytics tools are the next step to making this happen. If the system can’t watch itself, how does it know what to do? The real key to the value creation in network virtualization and automation will be the measurement and analytics tools put into place to monitor the system and build a self-adaptive infrastructure.
The result, in the future, will be a fully automated and adaptive data center – one that can measure performance activity and respond in real time to problems and security risks. This report looks at the technology to deliver this goal, including a number of companies working on the next wave of analytics & data-center automation.