How Would Junos Disaggregation Work For Juniper?

In the wake of growing adoption of software-defined networking (SDN), Juniper (NYSE:JNPR) disaggregated its Junos network operating system from its hardware last month, in order to make it available for white-box products. ^[1] This move is likely to open up more options for enterprise customers, who will be able to use Junos on third-party hardware and third-party applications on Juniper’s hardware, in addition to Junos on the company’s proprietary hardware. While decoupling Junos from hardware will help the company address a larger client base, it is likely to face some challenges given that Junos was initially designed to work on proprietary Juniper hardware, and customizing it for white-label hardware may be difficult. Nevertheless, considering the ongoing industry-wide shift from hardware to software, this appears to be a potentially lucrative move.

Networking companies have traditionally made money by providing complete hardware to software solutions, but with growing competition and the emergence of cheaper white-label hardware vendors, SDN gained substantial momentum. Over the next three years, the SDN market is expected to increase by around five times driven by cloud computing, big data and mobility. ^[2] This represents a significant opportunity for both network hardware and software vendors.

With the argument that third party hardware can compromise network security, Juniper’s bigger counterpart Cisco (NASDAQ:CSCO) has managed to convince its customers to buy its proprietary hardware and bundled products. However, it makes more sense for Juniper to focus on software considering that customers willing to pay a higher amount for network solutions are likely to prefer Cisco anyway, due to its solid focus on security. And the separation of Junos from the hardware is indicative of Juniper’s software focus.

Our $30 price estimate for Juniper is just ahead of the current market price.

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The SDN Opportunity

There is an industry-wide shift in demand from hardware networking solutions to software-based ones, and this is likely to accelerate going forward. SDxCentral, along with Plexxi and Lightspeed Ventures Partners, estimated the global SDN market size at $3.4 billion in 2014 and they expect the market to jump to $35 billion by the end of 2018. In 2014, only 4% of total network spending was for SDN, which is projected to go up to 40% over the next three years. ^[3] The emergence and growth of cloud computing, big data and mobility is responsible for this rapid hardware to software shift. The aforementioned metrics reflect massive growth potential for companies focused on SDN, which explains why Juniper is interested in pushing its software ahead of hardware.

Junos Separation

Junos is Juniper’s common operating system that runs across its routing, switching and security devices. The disaggregation from hardware will allow customers to use the operating system in a heterogeneous network environment. Juniper mentioned that developers will be able to directly program its systems using various application program interfaces (APIs). The company said it identified a growing need for flexibility within IT organizations, where they can make long term software investments and replace hardware whenever needed. ^[4] The disaggregated Junos, which is based on Linux, can serve this purpose. The software can maintain data center switches just as a server would do, and run third-party applications, virtualized services and tools. It can allow DevOps and NetOps teams to work together, which can reduce delivery times and costs of various IT services. By running Junos on a virtual machine, the network infrastructure can be highly reliable and have an in-service software upgrade feature. Overall, the Junos software offers a multitude of benefits to organizations.

Potential Challenges

While the Junos disaggregation appears to be a good move on the surface, certain issues could make it less so if they are not addressed properly. Junos was developed for Juniper’s proprietary hardware, and a decoupled version of the software may not work well with all white labels. Even a customized version of the operating system could face unexpected bugs and errors in different hardware-software combinations. Such a scenario would defeat the purpose of the disaggregation. So, in addition to ensuring that the operating software is customized to function efficiently with a range of white-label hardware, Juniper would have to provide ample support services. It is likely that Junos will not be compatible with every white-label product, and the hardware would have to meet certain compatibility specifications. ^[5] Hypothetically, if the list of specifications is extensive, only a few white-labels would fit the bill, which could limit the adoption for Junos.

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1. Disaggregating Junos software for data center innovation, Juniper [↩]
2. Infographic: SDN Market Size to reach $35 billion by 2018, SDX Central [↩]
3. Infographic: SDN Market Size to reach $35 billion by 2018, SDxCentral [↩]
4. Juniper Disaggregates Junos Software from Hardware, Boosts NFV Efforts, Virtualization Review, Nov 6 2015 [↩]
5. Juniper Networks embraces SDN, decouples Junos from the hardware, Tech Republic, Dec 10 2015 [↩]