The 10 Biggest Networking Stories Of 2016

Networking M&A, Cisco, SD-WAN Grabbed Network Headlines In 2016

The networking industry made some significant adjustments in 2016 to combat the rising tide of emerging technology like software-defined WAN, the Internet of Things and vendors shifted their focused toward software and security.

The vendor landscape itself was shaken up in 2016 as networking giant Cisco Systems restructured itself, Hewlett Packard Enterprise and Aruba Networks finally hit its stride, and wild M&A deals between the likes of Polycom and Mitel Networks as well as Brocade Communications and Ruckus Wireless stunned the channel community. What a year it's been.

CRN breaks down the 10 biggest networking stories of 2016 that captured the network world's attention.

(For more of our 2016 retrospective, check out 'CRN's 2016 Tech Year In Review.')

10. Polycom-Mitel Ups And Downs

Polycom, a longtime staple in the unified communications and collaboration market, had one of the most interesting years in the vendor's 26-year history, capped off by it being acquired by private equity firm Siris Capital Group and the replacement of its CEO.

Merger talks between Polycom and fellow UC&C vendor Mitel Networks started in October 2015 when Elliott Management – which owns a stake in both Polycom and Mitel – suggested that a merger would benefit the two companies. Fast forward to April 2016, when Mitel officially announced that it would acquire Polycom for nearly $2 billion.

As channel partners eagerly awaited for more news of the merger, Polycom stunned the industry in July by announcing the termination of its Mitel deal and instead opting to be purchased by Siris Capital Group for around $2 billion. Polycom later revealed its CEO, Peter Leav, would be stepping down and would be replaced by Mary McDowell, an executive partner at Siris Capital. With the New York-based private equity firm now behind it, 2017 will be an interesting year for Polycom.

9. Cisco Hits The Ground Running In Security

The San Jose, Calif.-based networking leader effectively leveraged its network footprint in 2016 to make security Cisco's fastest-growing market segment, while also becoming one of the largest cybersecurity companies in the world.

"Our competitive position in security is growing stronger as our integrated architecture approach and best-of-breed portfolio resonates with our customers," said CEO Chuck Robbins during the company's quarterly earnings call in November. "In fact, we're the only company with security product revenue exceeding a $2 billion annualized run rate with double-digit growth."

Cisco's strategy of embedding its security offerings into the network, while at the same time heavily incentivizing channel partners around security sales, has led to four consecutive quarters of double-digit growth in security. Robbins said Cisco also plans to keep up its security acquisition pace heading into 2017.

8. Service Providers Dig In Around SD-WAN

Momentum around software-defined wide-area networks grew in 2016 due to the emergence of Tier-1 service providers partnering with SD-WAN vendors to deploy over-the-top solutions.

For example, SD-WAN startup Velocloud recently scored technology partnerships with AT&T, Sprint, NetOne, Vonage and Earthlink. Velocloud CEO Sanjay Uppal told CRN that service provider wins will ultimately lead to new revenue opportunities in the enterprise for channel partners. Verizon, for its part, unveiled a SD-WAN platform and managed service via a partnership with SD-WAN startup Viptela.

The SD-WAN space historically has been led by networking vendors that specialized in hardware-based solutions, but carriers entered the market in droves this year hoping to add more value to their basic connectivity offerings. Networking vendors from Cisco to Riverbed launched new SD-WAN solutions in 2016, as the fast-growing market is expected to grow at a compound annual growth rate of 90 percent with the market topping $1.3 billion by 2020, according to research firm IHS.

7. SD-WAN Companies Dive Deep Into The Channel; Attract Top Talent

There was an explosion of SD-WAN companies this year that formed their very first partner program or programs geared specifically around the technology. SD-WAN provider CloudGenix launched its first-ever global partner program in August, which attracted dozens of Cisco channel partners. Viptela unveiled its inaugural partner program in October with assured margins and no partner levels.

Vendor Silver Peak saw a channel surge this year with its SD-WAN-specific partner program as the company's EdgeConnect SD-WAN business has doubled revenue quarter over quarter for the past four quarters, with 50 percent of net-new SD-WAN opportunities now partner initiated.

It's key to note that many of these SD-WAN companies have top executives and channel leaders who hail from the likes of Cisco and Hewlett Packard Enterprise. CloudGenix was founded by former Cisco networking executives, while SD-WAN and SD-security vendor Versa Networks recently appointed Cisco's longtime service provider leader, Kelly Ahuja, as its new CEO. Viptela's channel chief, Anthony D'Angelo, was a former channel leader at HP, Westcon and RSA.

6. Networking Vendors Place Huge Bets On Internet Of Things

The Internet of Things turned from a buzz ord in 2015 to front and center in the networking industry in 2016, with vendors pouring billions into IoT investments.

With the IoT market on the verge of explosion, vendors such as Extreme Networks invested heavily around IoT software, while Aruba Networks, a subsidiary of HPE, launched new IoT solutions aimed at enabling channel partners to more easily sell IoT. Cisco, meanwhile, acquired IoT specialist Jasper Technologies for $1.4 billion, while also forming IoT partnerships with Salesforce and IBM.

Networking vendors are expected to continue to invest in IoT next year as the market is projected to reach $1.7 trillion by 2020, according to research firm IDC.

5. Great Year For Arista Networks

Fast-growing Arista Networks continued to increase its quarterly revenue by double digits year over year, jumping 33 percent to $290 million in sales for its recent fiscal third quarter, which ended Sept. 30. The Santa Clara, Calif.-based company's stock hit an all-time high of $95.97 per share in November after a limited import ban on its products was lifted as part of Arista's ongoing patent infringement battle with Cisco.

Arista also formed a blockbuster strategic software-defined partnership and sales pact with HPE. HPE partners can now buy Arista networking products directly from Palo Alto, Calif.-based HPE.

In an interview with CRN, HPE CEO Meg Whitman said "Arista has taken 13 points of share from Cisco. No one has taken 13 points of share from Cisco in the last 30 years. So our partnership is designed to open the channel to Arista because they sell very little through the channel … Arista is a big opportunity for the partners."

4. UC Market Consolidates As UCaaS Blooms

The unified communications landscape was shaken up in 2016 as vendors scrambled to become cloud-oriented so they can meet the market's demand for more UC-as-a-Service.

ShoreTel acquired cloud-based UC specialist Corvisa, while Polycom was purchased by Siris Capital Group. Mitel acquired cloud-based UC provider Mavenir and said it is actively pursuing more acquisitions. Industry veterans like Avaya and ShoreTel hired financial advisers in 2016 to explore new strategic options, which could include the potential sales of the companies.

Gartner predicts that the UC market will only grow slightly, from $41 billion in 2014 to $42.4 billion by 2019. On the other hand, the UCaaS market grew from $15.1 billion in 2015 to $17.3 billion this year, according to market research firm MarketsandMarkets, which predicts annual UCaaS revenue will increase to nearly $25 billion by 2020.

3. Brocade-Ruckus Wireless Join Forces, Until Broadcom Gets In The Way

Channel partners were thrilled when Brocade Communications revealed that it would be acquiring Ruckus Wireless for $1.2 billion, as it would create a more formidable foe against larger competitors. In April, Brocade CEO Lloyd Carney said that the combined companies will create the No. 1 vendor in storage-area networking and service provider Wi-Fi; as well as the No. 2 player in data center networking.

Less than six months after acquiring Ruckus, semiconductor maker Broadcom announced its intent to acquire Brocade for $5.9 billion -- revealing plans to divest Ruckus as well as Brocade's networking business, leaving channel partners bewildered and confused.

"The way they handled this could stop sales dead in their tracks," said one CEO from a top Ruckus partner in a recent interview with CRN who did not want to be identified. Sources tell CRN that senior executives are negotiating the sale of Brocade and Ruckus' networking business to interested parties, which include private equity firms. With Brocade split into two and Ruckus eagerly waiting to find out its destiny, 2017 will be an interesting year for their channel partners.

2. Cisco Restructures

Cisco CEO Robbins shook up the networking giant this year unlike ever before, unveiling plans in March to completely reorganize the company's 25,000-member engineering unit, which was followed up by the departures of some of Cisco's most prominent leaders including Soni Jiandani, Mario Mazzola, Prem Jaim and Luca Cafiero -- all longtime Cisco veterans who led the research and development of several of Cisco "spin-ins" – as well as top service provider executive Kelly Ahuja.

In August, Cisco doubled down on its restructuring by launching an internal restructuring plan that includied the layoffs of 5,500 employees. Less than two months later, CRN discovered that Cisco's top technologist and cloud executive ,Zorawar Biri Singh, was leaving the company.

Robbins said the restructuring allows Cisco to "optimize our cost base in lower growth areas of our portfolio and further invest in key priority areas such as security, IoT, collaboration, next -eneration data center and cloud."

1. HPE-Aruba (Finally) Hits Its Stride

It took 16 months after HPE acquired Aruba Networks in May 2015 for the two companies to finally come together in a synergistic way. This happened in September at HPE's 2016 Global Partner Conference in Boston with the launch of its first-ever joint partner program – combining the best elements of the Aruba Partner Edge and HPE Partner Ready programs along with a new platform and consumption model aimed at driving recurring revenue for the channel.

In an interview with CRN, Aruba CEO Dominic Orr said his company plans to now accelerate its acquisition strategy around software as well as launch a new networking product line for the SMB market with the backing of HPE. The companies also launched in November a new Internet of Things strategy together alongside joint solutions.

Partners said organizations now see, for the first time in years, a company that can compete end to end with Cisco. "Aruba and HPE are really now competing against Cisco, and I'm seeing more companies becoming ABC -- 'Anything But Cisco," said Charles Koehler, the lead Aruba enterprise architect for Denver-based solution provider Optiv Security, ranked No. 25 on CRN's 2016 Solution Provider 500 list.