Big Switch Networks
Data centers represent the heart and lungs of the information technology industry, and typically include three major infrastructure components: servers, networking, and storage. Servers are organized into cabinets, and connect to each other, to storage, and to the Internet via a network of hardware devices known as Ethernet switches and routers. Big Switch Networks was founded by Kyle Forster and Guido Appenzeller in late 2009 based on technology known as software defined networking, or SDN, originally developed out of Stanford. SDN aimed to make network management within the data center more efficient by centralizing control of a group of switches into one logical “big switch” controlled by a single software program known as the “control plane.”
Though the technology itself was challenging to develop, the cofounders quickly gained traction with their idea, and industry hype around SDN began to ramp by the early part of 2012. Shortly after closing its Series B financing round in the summer of 2012, Big Switch faced its first major hurdle—VMware, the 800-pound gorilla in the server virtualization space, had just acquired Big Switch’s largest competitor, Nicira. Big Switch soon found itself in the midst of organizational turmoil as it struggled to redefine its path, which had included a future partnership with VMware as a key component. Over the next 18 months, Big Switch faced an exodus of key employees (including its cofounder and CEO, Appenzeller), ongoing challenges with its technology, and uncertainty about the best way forward. By 2015, Big Switch had a new management team in place and was taking a gamble on bundling its software into an unbranded “white box” switch as its play for entering the market.
This case is intended for use in a course entitled Strategic Management of Technology and Innovation. The purpose of the course is to provide students with concepts, frameworks, and experiences that are useful for taking part in the management of innovation processes in both startups and large technology organizations. The course examines how leaders can manage fast-changing technological innovations most effectively. The case highlights Big Switch’s tumultuous journey as it navigates the challenges of launching a technology startup. Along the way, the cofounders and team must make decisions that, while not always ideal or planned, allow the company to survive amidst unexpected strategic and tactical challenges that have the potential to take the company down. The students are asked to view critical decisions from the point of view of Big Switch’s management team, considering the tradeoffs they would, or would not, be willing to make to keep the company moving forward. By highlighting the numerous hurdles Big Switch has faced, the case also explores the motivations of key stakeholders—founders, board members, employees, customers—to stand by the company during the darkest days.