It Is Not An Inflection Point…It Is An Inflection Process

By Jim McCluney, CEO of Emulex

In Andy Grove's book, "Only the Paranoid Survive," he introduced the technology market to the term "strategic inflection point." This term is used to describe when a technology market transitions from one technology to the next.

I think the ideas in Andy Grove's book support the strategic thinking used by Emulex, and I'd like to present you with my views on how the concept of the strategic inflection point is playing out in our market. The reality is that a strategic inflection point is not a point in time, but a process that the industry undergoes to achieve a transition across the entire ecosystem. As our market has gravitated towards more horizontal technology solutions, no single point in time can define the strategic inflection point. Only the ecosystem can define the inflection process, which includes a bridge for legacy technologies, a viable implementation model for the short-term and a roadmap into the future that protects new investments.

Network convergence is now going through the inflection process, which I believe typically lasts 3-4 years. At this time, as shown in the graphic below, I think we are about half way through the process and will soon be moving above the revenue line – where design wins lead to ecosystem maturity and the prerequisites for revenue generation are being met.

Phase 1: Technology Concept - In this phase we saw a variety of competing ideas and concepts to solve business and technology problems. For example, both Enhanced Ethernet and InfiniBand have been competing for several years to be the chosen converged fabric. However, the industry has clearly rallied around Enhanced Ethernet vs. InfiniBand due to the ubiquity and economies of scale of Ethernet.

Phase 2: Standards Development - This phase of the market evolution typically includes early first-generation products, such as our LP21000 Fibre Channel over Ethernet (FCoE) Converged Network Adapters (CNAs), and is where the early ecosystem leaders emerge. We recently saw the approval of the Enhanced Ethernet standards that are leading to lower-cost, OEM-ready second-generation products.

Phase 3: OEM Designs Wins - This is where we are today, with OEM vendors preparing for their next-generation of integrated solutions based on second-generation Enhanced Ethernet products. This phase typically lasts 9-12 months before we see true end user implementations.

Phase 4: Ecosystem Maturity - We should be entering this phase in early calendar year 2010. Many OEMs will be shipping integrated second-generation solutions, ecosystem partners will have developed solutions that bridge legacy installations and the technology will have a clear path forward.

Phase 5: Customer Evaluation - This should start in mid-2010 as major end users begin testing and making technology decisions for implementing network convergence. They should begin pilot deployments and start retiring capital equipment that has been fully amortized over the past 3 years.

Phase 6: Revenue Ramp – I believe this phase should start in 2011 and I expect to see major deployments and full data center transitions to network convergence. This is when I think the early technology leaders will have the ability to become the market share leaders for the next 4-5 years.

Obviously, being a leader in the early phases of the inflection process is vital to becoming the market share leader in the "Revenue Ramp" phase. I believe Emulex is very well positioned to become the market share leader with many strategic OEM design wins and its active engagement development and interoperability with our Emulex Connect ecosystem partners.

SOURCE: Emulex Corporation