Amazon Reportedly Developing Network Switches, Sending Cisco Shares Down

Amazon is preparing to shake-up the networking market with a hush-hush project developing low-cost switches, according to a report published Friday in The Information.

The cloud leader is looking to undercut comparable networking products by 70 or 80 percent with the first white-box switch on the commercial market—an unprecedented foray into the corporate data center that would deliver streamlined connectivity to its public cloud.

Such a move could amount to a broadside against networking giants like Cisco. The report, citing one source directly involved and another briefed on the project, was enough to send Cisco shares down more than 4 percent to $41.81 on Friday afternoon. Juniper Networks and Arista Networks stock also immediately slumped.

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An Amazon spokesperson did not immediately respond to a request for comment.

The low-cost devices will come with pre-installed software that establishes connections to AWS compute and storage resources, reducing networking challenges that plague many enterprises adopting hybrid cloud postures.

AWS plans on launching the product in the next 18 months, according to the source with direct knowledge of the project. Current manufacturing partners include Celestica, Edgecore Networks and Delta Networks.

Development of the technology is informed by Amazon's experience running similar white-box switches within its own massive data centers. James Hamilton, the cloud leader's data center guru, is directly involved in the project's management, The Information reported.

A Cisco executive told CRN the networking leader has a close relationship with AWS, and development of an AWS data center switch neither jeopardizes that relationship, nor threatens Cisco's market position.

"We've got solutions that help our customers connect to AWS, optimize AWS environments, protect and secure AWS environments, manage and consume that AWS environment. We're working together jointly to help customers," the executive, who asked to remain anonymous, said.

Cisco dominates market share in nearly every category it offers products in, and has strong relationships with all hyperscale clouds, including AWS rivals Google Cloud Platform and Microsoft Azure. Those providers are always looking to innovate and invest in developing reference architectures, the Cisco executive said.

Those working relationships carry great opportunities for partners, the executive said, and AWS's development of its own switch could simply be "one more arrow in partners' quivers."

"Cisco has embraced all the web-scale cloud providers, and our partners have tremendous opportunity to merge the two together and be successful in a multi-cloud environment. We're helping partners accelerate with multi-cloud advisory services. If anything, this is another example of more that partners can do across Cisco and AWS and drive the kind of innovation customers want to see."

Cisco is always ready to meet customers where they want to be met, the executive said. "Some customers just want to buy the car, other customers are like an F1 racing company and want to put all the pieces together themselves, and we'll work with them too," the executive said.

A top executive at one U.S. solution provider that works with Cisco and other industry heavyweights said competing with Cisco will be a tall order if AWS does opt to bring to market a line of enterprise switches.

"Cisco always responds to competition," the solution provider told CRN. "It'll be a challenge to provide the functionality, product development and switch IP that Cisco has developed over the past two decades."

Amazon, once hostile to the hybrid cloud, has accepted in recent years that private infrastructure isn't going anywhere for the time being.

Adding hardware switches to its portfolio could bolster the provider's position in the hybrid cloud market, which is already being advanced by an alliance with VMware.

White-box products are built from commodity components, including off-the-shelf chips and open source software. Such devices typically lack features, but route network traffic at pace with proprietary devices.

Matt Brown contributed to this report