¶ Megaport Introduces AI Exchange Connectivity
People that follow this stuff can kind of read the tea leaves a little bit on what the expectation is . So Cisco's betting hard on security , cisco's letting I think I don't know if they're letting or just allowing or just have no control of the complete decline in networking products . So I don't know what do you guys think ?
I feel like the industry is very much in the pendulum mode , and the pendulum is swinging pretty hard towards simplicity over complexity , and people are looking at networking as something that's like they'd rather get rid of than own . Welcome to the Cables to Clouds podcast , your one-stop shop for all things hybrid and multi-cloud networking .
Now here are your hosts Tim .
Chris and Alex . Now here are your hosts , tim , chris and Alex . Hello and welcome back to another episode of the Cables to Clouds fortnightly news episode . So on this episode we'll be covering a few articles that we found interesting that came out in the last couple weeks since we last talked to you . My name is Chris Miles .
I am your host today , but as always , that I am experiencing , as I just came back from Texas for a week where I was hanging out with Tim , but luckily he's probably closer to his sleep schedule , so he should be fine today He'll sound like his usual lovely self . No , we're still working All right . First up , we have an article here .
Well , not even really an article . That was kind of the weird thing about this . I couldn't find any article announcing this . All I could find was the actual web page that they put up talking about this and a post from the CEO . But Megaport have launched something that they are calling the AI Exchange , so I know it's yet another .
AI story I know it's yet another AI story it's also called AIX , right but I really did want to talk about this , though , because I feel like this is actually the manifestation of something that we've talked about on the show a few times , whereas these kind of hybrid connectivity providers coming in and playing into the AI game and offering customers a way to
interact and do things like train models , do inference , probably do RAG as well , so I think this is one of the first iterations that we're seeing of this .
So they're working on building an ecosystem amongst their footprint that they have across the globe , which , if you're not familiar with Megaport , they have about 850 locations across the entire world , because they don't necessarily own the physical infrastructure in these data centers , they're able to just leverage a stack of that within each data center .
So they have a very , very large footprint across the globe , and this ecosystem that they're building is supposed to be an easy way for customers to get access to things like GPU as a service provider , which didn't really know that was a thing just yet We'll probably talk about that in a little bit Things like third-party AI models , and then the easy one being
storage and compute , right , so the storage piece . I feel like that was always going to be in play . But this concept of getting access to GPU as a service providers as well as third-party models is what I find interesting .
If you look at the connectivity models that they post into this page for the AI Exchange , the use cases they're focusing on are typically around GPU as a service right . So there's from cloud to GPU as from data center , and from edge up to GPU as well .
In my research , I will say , if I try to look up who's providing GPU as a service today , 99% of the research results I got were the public cloud provider . So I wonder if the day one iteration of this is just something that's like oh well , we have connectivity to Direct Connect or ExpressRoute to get you up to the .
You know , maybe you're using NVIDIA based GPUs up in those cloud providers , or AWS's Tranium chip or what have you . So I'm curious to see where this goes . I don't really know what it means right now . Today there's not a lot of detail out there . But how about you guys ? How do you feel about this ?
This whole thing is a little confusing . To follow the GPU as a service thing is comical to me , because I was wondering . Eventually , I knew this was going to come out something like this and I didn't know if it was going to be AI as a service or GPU as a service or whatever marketing term they decided to go with .
I think a lot of this , though I think they're ahead of the curve actually in announcing some of this stuff , because if you think of a lot of the bottlenecks that the bigger companies are having right now , or even getting GPUs like , a lot of them don't even have them .
So I don't think you're going to find many third-party places that are providing a GPU as a service kind of offering yet Now , maybe in a couple of years .
That's what they're banking on here and they're kind of just counting on that coming to fruition in time , but I don't think that really exists right now , and I think that's probably why you found just a lot of the hyperscalers in there . And same thing with third-party AI models . What are the third-party AI models most likely going to be running on ?
They're going to be running on the public clouds , at least currently , right . Maybe they'll run on some of the smaller clouds , like Linode or Vulture or whatever some of the other small ones are . So to me this seems more like a bet against the future . I think is how I'm looking at this .
So when you said something about how there's no third-party providers for GPU as a service , what I immediately thought of actually was like oh , there's plenty of them . They're all just too busy mining Bitcoin . That's true .
Some crypto people .
There's a lot of crypto bros out there with the farms . Adrian Cantrell is always on Twitter railing against whatever the Bitcoin provider that he uses . The GPUs are going down and stuff .
So I'm kind of curious now because at what point now that I've vocalized it , I'm kind of thinking through it what point , if ever , do the crypto , the people running these farms , do the math and figure out whether or not something like , uh , being able to use their GPUs sub , sublet , if you will , their GPUs would be more , uh , make more money than just
mining . I mean , there's gotta be an end to , you know to to crypto at some point . Uh , in terms of what value , uh , a coin is worth so , or how coin , so I don't know . That's an interesting thought , and so I've been working with Megaport essays for a while now on Aviatrix as a partnership with Megaport .
So I've been working with some really smart essays there , and so I've learned a lot about how Megaport works actually and the network . Folks will be probably unsurprised to find out that the Megaport fabric it's a lot of point-to-point connectivity , like logical point-to-point connectivity , a lot of tunnels .
So this idea of basically extending connectivity to GPU as a service , third-party models , whatever this is using infrastructure they already have . As it is , you can already log into Megaport's console and get your Direct Connect up and running in five minutes . So if they're just , I wonder if they're just extending it another leg to like give you to build .
I'm kind of curious how far within the cloud provider to get to that , you know , is it like okay , I've got your direct connect and then do they then make the connection to like SageMaker or something Like if I'm AWS perspective to give you access to the infrastructure ? I I'm curious to see how far Megaport builds that road to do that subletting .
Yeah , actually , Alex , I think you make a great point is that there are a lot of people struggling to even get them now . But , however , if you think about Megaport's model , they have this pretty robust fabric that's built across all these 800 locations . Right ?
So wherever the people are that are getting them , they're probably already in those facilities where Megaport is , so facilitating the connectivity to them is probably very easy . Right , Because , across the globe , if that provider is located in Equinix or Digital Realty or Global Switch , Next DC , whoever right , Because they're all Megaport-enabled locations right .
So connecting to those is probably going to be very easy . And then that might be , you know , they're very competitive in their connectivity model on what they can provide in terms of bandwidth and things like that .
So maybe you know , going outside of a certain geo , you might be able to get , you know , these GPU as a service offerings not too far from where you're at , at a fraction of the cost , right ? I mean , I highly doubt that's going to be the case , but it allows for this kind of competitive ecosystem within that realm , right .
So I think you make a great point .
I think that's probably what they're banking on is the future state of this right and how people are actually going to leverage this moving forward yeah , and last thing , real quick um , they do mention that there's a marketplace , but you can't like at least I can't find it you can't look at what's on the marketplace currently .
So that's just even more evidence of like they're building this out for when it does come , and it's , it's smart , it's really
¶ Global Access to AI Models
smart .
So okay , uh , speaking of , uh , this idea of commoditizing uh , gpus and and stuff and making it available globally , uh , our next story is actually kind of a follow-up to something we did back in january .
So back in january , um , there was a uh an article that we covered about , basically , the us trying to find ways to keep China and other adversaries from accessing and using cloud provider GPUs and AI models and everything to you know , basically to catch up technologically .
So at that time , of course , the article , again back in January , was saying you know there needs to be , they're trying to figure out what is the regulation going to look like and what does get together on a law or some kind of executive order or something .
So this new article that comes to us from Reuters is actually talking about how Chinese entities have turned to ADBS and other rivals to do exactly what was warned about back in January .
So China is currently using boatloads of the AI capabilities within AWS , and this article also mentions that they've sought to use OpenAI , and the CSPs are doing the late stage capitalism game , of course , throwing up their hands and saying , hey , we comply with all the laws and sorry , nothing we could do , and just kind of letting it happen because there's money
to be made . So it's a little disappointing , I have to say personally . Little disappointing , I have to say personally .
This is me on my soapbox a little bit because , as much as everybody likes to talk about things like responsible AI and putting country before profits and all of this , at the end of the day , a lot of these companies they just want money and that's all they really care about . What do you guys think about this one ?
Yeah , it's a good point to call out because , while there , so this article talks about how the government has restricted the export of high-end AI chips Right , but there's nothing providing nothing restricting access through the cloud to these models , which is , like anyone that has read this can understand , that that's probably the intention here and now .
We have to wait for politicians and lawmakers and all that to come back and rewrite it to include this use case that I'm sure they didn't really think anybody was going to try to skirt around . And , like you said , aws is just oh , we didn't know . I just don't buy it .
Yeah , one thing I didn't read the article extensively , so did they mention in there whether or not this is happening within AWS China , which is its own kind of limited footprint for AWS , or are they going outside to the global AWS environment to do these things ?
Yeah , sorry , this isn't actually being done with AWS China because AWS China is in China , right , and we have export restrictions . So , just like Alex had mentioned , so this is them consuming services with chips and all of that good stuff , gpus and everything that exists , of course , in other countries where there's no export restriction .
I mean , this is I don't know . I feel like this is just like the newest version of using a VPN to watch something that's geo-restricted .
Exactly , that's perfect .
Like , I feel like , as you know , kind of practitioners of networking and things like that , we always know there's a way to obfuscate where you're coming from in order to do the thing that you want to do .
Right , you know , these apps have gotten a little smarter , but , like , if you had , like I would have just said , like how the fuck would you prevent this from happening in the first place ? Right , nobody , nobody knows . There's very easy way to , or very easy ways to kind of trick the end , I mean .
But then maybe that's why AWS isn't really putting the guardrails up in front of that Cause . At the end of the day , from a liability perspective , how would they restrict it ? How would they know ? Um , you know , I don't know if you have a counterpart to that , tim , but no , I mean , it's uh .
The only thing I can say to that is , uh , that they've , they haven't basically tried . Their answer basically is just , hey , we comply with all the laws , so , too bad , go make a law .
Basically , and you're right , of course , we talked about this even back then , I think back in January , when we covered this what would you do to restrict a foreign entity from consuming this ? But I can tell you that , as of right now , there's absolutely nothing being done .
So , should there be , Probably I don't know necessarily what it would be Maybe they would just go to a third party like another country or like a VPN or something , I don't know to try to obfuscate that , but right now it's just , it's open door .
So I'm curious to see how long it will take the US to well , even think of how to make a restriction , much less make a restriction .
Yeah , so basically the recommendation is do something , but do what we don't know .
Yeah , which is very much , I think , what we said back in January . Yeah , actually .
Yeah , that's . What is funny about it is , this is basically exactly our conversation from January . Come to reality eight months later .
Last thing to point out here is they do say that AWS I don't know the exact wording , I don't have in front of me right now , but it's something like AWS was a favorable option because of things like Bedrock , where they can access a bunch of different models , and they don't have to just be stuck to one Like they called out . Anthropic specifically .
That's right , yeah , and well , so like Bedrock is like a PaaS model version , right ? So like SageMaker , of course , is just , here's access to the infrastructure . Q is the SaaS version of you know , and then ? So PaaS model makes probably the most sense if you want to essentially do all that work using different models . So it makes sense .
I am curious to see what the US can come up with because ultimately , you know , it does no good to do things like export restrictions if they can just come over the Internet and get access to the same technology .
You know , OK , moving on to Cisco , who is in the news this week because they have announced that they're cutting 7% of their global workforce , even though the shares , or rather the revenues , are slightly up above expectations this quarter . To be fair to Cisco , this is not an unusual thing . This is pretty much a once a year for them .
So their fiscal year just ended , which means that they put together a new fiscal plan every year and they restructure things at Cisco to kind of support the new fiscal plan . You know they'll kill , you know underperforming teams , products , they'll reorganize territories , all that stuff in support of the new go-to-market that they're pushing for the next year .
So now this is obviously even though this is an expected and normal cycle for them . This is still , I think , the second one this year , with another one planned later this year . So there was another one back in February that was like 5% or something . So 7% is , if I remember correctly from my time at Cisco .
It's a little higher than normal , but it's not crazy . What's interesting is that some of the numbers in this article and I just want to bring up the numbers because I didn't memorize them here so I can read them because they're pretty interesting , so yeah , so the actual in the fourth quarter .
So , even though they're up year over year or over last year , barely the revenue in the fourth quarter actually dropped 10 percent from the year before , which , when you're dealing with the law of large numbers , that's actually a pretty good amount of money .
You know it's 15 billion dollars the year before , so 10 percent is it's 10% , is not lunch money , and so sales for this specifically mentioned sales for the fiscal year declined for the first time since 2020 .
Now 2020 , everybody knows in 2020 there's a lot of hardware being thrown around and also there's a lot of hardware not available to be thrown around as well at the same time . So they do say that they expect this backsliding to continue for another quarter , and then I guess maybe they're thinking they can turn it around , so maybe second quarter of next year .
So what particularly is interesting to me interesting , but not surprising is that they mentioned that the latest quarter , networking revenue was down by 28% , which is that's a chunk of change for your core business essentially to be down , but the security revenue had gone up 81% . So again , a little bit of that's crazy .
Yeah , I mean that's a little more law of small numbers among large numbers , if you will , because the security business obviously is not the same size as the network business . Put that in perspective . What do they say here ? 6.8 billion was the slide , the 30% slide in networking , but 81% rise in security is 1.8 billion . So put that in perspective .
¶ Cisco's Shift Towards Security and Acquisitions
Networking is still very much Cisco's core business , right , but I am not surprised to see security grow by this amount . Like security , I think they're leaning very hard and heavy into security . Look at all their acquisitions for the year . For the past year it's been almost exclusively security acquisitions . So this is interesting stuff .
People that follow this stuff can kind of read the tea leaves a little bit on what the expectation is . So Cisco's betting hard on security . Cisco's letting I think I don't know if they're letting or just allowing or just have no control of the complete decline in networking products . So I don't know what do you guys think ?
I feel like the industry is is very much in the pendulum mode and the pendulum is swinging pretty hard towards simplicity over complexity and people are looking at networking as something that's like they'd rather get rid of than than own .
I very much , very much agree with that . Um I , and this is evident . So actually , this isn't in the article . This is um the motley fool . I'm looking at it .
It's like a transcript , basically , of the presentation that they did for this earnings call , and Chuck Robbins mentions that they're bringing their networking , security and collaboration teams together as one organization going forward .
Is it going to be in our G2 ? Does it mention that it'll be in our G2 ? Yeah , it actually does .
Yeah , that's what I thought , and it's G2 in an expanded role as chief product officer , yep , so they are focusing . And then it also says they're focusing heavily on AI , cloud and cybersecurity . Networking is not listed in that little three items .
So there's a lot of big shift happening and , yeah , I don't know if it's representative of the larger networking industry , but it's definitely . At least they're doing something . It's good to see them actually trying to pivot and save what you know their namesake , I guess , if you want to call it .
One thing that I'm a little unsure of is so they say security revenue rose from 81% and then Splunk contributed over $960 million just based on that acquisition . So does that fall within security ?
That's how they classified it , I believe .
Well , he specified multiple times in the call , though they said excluding Splunk .
Oh , so they didn't even mention it .
I don't know in all cases . I don't want to speak to that , but there's a lot of things I was reading where it's like he specifically said , excluding Splunk , when he was talking about certain things .
It's probably too early to start counting .
Splunk's revenue . And all of that Almost a billion , though , in subscriptions .
No , no just in terms of the , because , if you think about it , they paid $28 billion for the company . When did it close ? They've been with Cisco for a little bit now , but I don't know if it's been long enough that it belongs in the numbers or not . I'm not sure on when exactly . I expect to see it pretty soon .
It closed in March , yeah , so not what six months .
Yeah , five , six months .
That sounds about right . I do think that it was security that they put it under , though I think they classified it as security . But I'm kind of curious . Now I've got to go look . I don't want to say that for sure . I think you're right . I think you're right .
So we'll probably see different numbers essentially next year , but 81% growth in the security B , which is funny because we're talking about 81% to $1.8 billion , and then a 30% drop to $6.8 billion in the networking side .
Yeah , so the net is a lot lower .
Yeah , exactly . But yeah , I see this pivot . They've been trying to move the ship for a long time , I mean even since before I left Cisco , which was over almost three years ago , now coming up . So they're finally making these moves , a lot of them through acquisitions , because Cisco lacks the agility to truly move these days .
So , yeah , I guess it's going to have to see if it pays off , because they're just basically trying to stay with their , their market and the market's moving that way . And yeah , but 30% loss in in networking gear , yeah , you kind of wonder how they're coming after the cause . I mean 31, .
A 30% loss of 6.8 billion is a lot more than an 81% gain to 1.8 billion you know what I mean than an 81% gain up to 1.8 billion .
You know what I mean . Yeah , right , right . Maybe Cisco's going to be a security company , maybe that's going to have to be the new tagline .
They mentioned the HyperShield and HyperFabric a couple times too specifically .
That makes sense actually .
Yeah , it makes you wonder about what a company like Arista is doing . Obviously , juniper is a different story , because they're getting bought by HPE and we'll talk about that in a second , but it makes you wonder about Arista .
I think they're still of the size like Arista's , still of the size where they could make a comfortable living just eating market share from Cisco for a while . Yet yeah , true , for what that's worth . I mean as long as their thing is easier , right ? I mean as long as whatever they're buying is easier than Cisco . I think that's the thing , man .
Everybody's leaning into simplicity networks . I don't know if network as a service is really truly taking off yet . I think people are still trying to decide if it's going to work or not . But people really , really want to essentially abstract away as much networking as possible these days .
Yeah for sure . And speaking of abstraction , this is the last one we got here . So HPE is going to acquire a company called Morpheus Data .
For those that don't know what this is , they essentially they have an IDP , which is an internal developer platform , and to kind of explain what this is , it's like a product that provides a front end , kind of like a marketplace , where a developer could come in and request a piece of infrastructure , right , and they just there's a workflow kind of built into the
product and on the backend it's got like plugins that can spin up this infrastructure . Now someone has to create , right like that , that script or whatever is used to spin this up . But the point is that it's all like an integrated platform that provides that front end , coordinates the workflow and has all these plugins for the backside .
I have a couple thoughts here , but I want to , just before I get into that . You guys , if you have anything here , please speak up now .
Yeah , I mean , this is albeit'll be at . This is a realm I don't have a lot of experience in , but if you kind of just as you put it there , obviously the , the , the specific use case and the opportunity there seems very valuable from my perspective .
Just seeing how cloud teams interact on a daily basis , right , and if we can make that kind of self-service thing with some abstraction built in to make it more generalized , I think that's obviously a step in the direction of simplifying your operations and service delivery that everyone would like .
So it seems like there must be meat on the bone if , if , if , HPE is is going this far . Um but um . Yeah , I'd like to hear Alex's opinions . I want to get a get a take from Tim .
Yeah , I think Alex has got the most experience with it , so I'm very interested to see what his opinion is of it . Um , when I read the article , I'll be completely honest I read through this and I was like who the hell is Morpheus Data ? They're small .
I had not heard of it .
I like the idea , like the website , the idea of like okay , well , we're going to write a front end that will orchestrate essentially any backend , whether it be a hybrid backend , whether it be a cloud backend .
If you can truly have such a product that can orchestrate everything on the backend , that would be really useful , Although probably only really useful a few times , depending on how often you've really changed things up , like you would be really helpful to set it up and then maybe you could forget it afterwards , although that maybe the value is all right there ,
right , like just doing that piece . We've talked about lots of times about how cool , how , how , how hard it is to bring that cloud , that that on-demand service , on-prem and into hybrid land where you have multiple , multiple , multi-vendor stuff going on . So I don't know man , how does it work ?
So I forgot to mention this when I was explaining what it is . But also if you know what Backstage is , which is basically an open source IDP that was created by Spotify . A lot of people just use Backstage , but Morpheus is like an actual I guess like an enterprise version of Backstage kind of .
So I laugh about this because I've actually used this at a customer and they've had a lot of issues getting it to actually work and kind of show value , as it was kind of sold right .
So it sounds amazing and if HPE can get it to work like , they're going to obviously get all the talent they already have a lot of people with the Juniper acquisition like in all their products and all the automation skill there . I am somewhat optimistic that they can figure out how to make this thing work .
But from what I've heard , a lot of the plugins just don't work . There's like integrations that are kind of broken . So it seems like it's not really a state-of-the-art product and this is part of the reason why a lot of people just use Backstage and do it themselves and that's why you don't hear much about Morpheus .
But I don't want to shit on them too much for it because I actually think it's a really great move for them , especially after they just bought Juniper . And the very first bullet point in this press release by HPE says new cloud management software will solidify HPE as the first vendor with a full suite of capabilities across the hybrid cloud stack .
Now , a lot of that is just marketing , but it's also true .
Like there is no one else that has a product that has a front end and can integrate with all the backend stuff and can do this on-prem and on uh in in public cloud , like , like Tim was saying , there's we've we've been talking about this forever and there's not really anyone out there that provides that whole experience . Um , so this is kind of like .
You know I love talking about platform teams . This is perfect for platform teams . This is like a tailor-made entire ecosystem just for a platform team . So it's a good move overall . I just hope they fix a lot of the issues that I've heard .
Yeah , I mean we see this all the time , right when acquisitions happen , when it's not based on the current state efficiency and beauty , I'll say of an existing solution . It's more about like , hey , the skeleton is there , the framework is there , the vision is there . Exactly , I think that's exactly what you just mentioned . Obviously , there's value .
I mean hearing about it for five seconds . We can extract that . There's value there . So it's again people banking on the future .
I feel like yeah , which is in this day and age , right now , with all the AI craziness and everything moving so quickly , that's all you can do .
All right , and with that I believe we will go ahead and wrap it up for today . So thank you again for joining us , for your fortnightly dose of news that we find interesting . As you can tell , it's not always about networking anymore , so we're kind of trying to expand , because networking is not the end . All be all within cloud Right there's .
There's a lot more happenings outside of that realm , so hopefully you found this enjoyable . If you did , please like , share all that good stuff . Share it with a friend . That's very important . Get the word out there . Follow us on all the socials . Be nice to us , be mean to us . Whatever you want to do , we'll take it all .
So with that , I'll bid you a fair . Do A fair , do I did it again ?
Dude , I did that . I did that months ago , Dude .
I did that . I did that months ago . Oh my God , Fuck man . Bid you farewell and , yeah , maybe I'll make the same mistake next time we do this . But with that , bye-bye . Hi everyone , it's Chris and this has been the Cables to Clouds podcast . Thanks for tuning in today .
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