ACG Research

ACG Research
We focus on the Why before the What

Sunday, September 28, 2014

Business Case for Virtual Managed Services

Cisco Evolved Services Platform provides automated, optimized, and personalized services via orchestrating virtualized network functions running on cloud data center technology. It allows fast introduction of new services and reduces the TCO of managed services sales and service delivery processes. Virtual managed services provided via ESP reduce costs and increase operational efficiency to the point where service providers can now profitably sell to smaller businesses.

ACG Research compared the total cost of ownership of the present mode of operations with the virtual managed service solution for two managed services offerings: 1) Cloud VPN service, and 2) Security service. It found that operation expenses (opex) were about 78 percent less for virtual managed service for both offers and that return on investment (ROI) for both virtual managed services offerings was more than 200 percent over a five-year planning period. The three largest sources of reduced opex are elimination of most truck rolls, many onsite maintenance and installation activities, and minimization of the costs to support onsite software.

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Thursday, September 18, 2014

Infinera’s Cloud Xpress: Impressive Contribution to Cloud Providers’ DCI

Growth of cloud-based services shows no real signs of slowing down. This adoption rate is propelling providers of cloud services to construct new data center capacity, work to make data centers they already have run more efficiently and improve how they network their data centers internally.

In early adoption phases of cloud, there have been two dominant uses of data center interconnection (DCI). First is for connecting enterprise data centers to service providers’ data centers for hybrid and public cloud computing services.  The second use has been to connect providers’ ecosystem partner data centers to SPs’ data centers to mash up applications and federate cloud services.

As usage has grown, though, a new set of DCI requirements has emerged. These involve connecting providers’ own data centers at very high capacities. Two scenarios dominate this trend. The first is in metro or nearby data center connections, and the second is in hyper-scale data centers deployed at great distances from other sites and running at remarkable scale.

In the first use case operators will run out of power or space in existing sites and need to create additional capacity nearby. This can be in a metro area footprint or in an extended campus. DCI is critical in these deployments because many cloud applications work in a highly distributed model. They often need access to resources in neighboring data centers many times over before responding to a single user’s request. Thus, interconnections need to be simple and fast.

In the second deployment scenario, hyper-scale operators such as Google, Facebook and Microsoft search for remote locations where land and power are less expensive and build some of the world’s largest data centers there to run their services. Server counts in these sites range from 200,000 to 500,000 or more. The need for integration with systems in the providers’ other data centers is strong in mega-site deployments as well. This leads to extremely large capacities of DCI bandwidth being deployed both locally in clustered DC locations as well as over long haul transport for sites that are a half a continent or more away.

DCI capacities required in the intra-provider configurations range from 10s of tb/s in medium-to-large scale sites to several hundred tb/s in the largest mega-center locations. Because of the ongoing growth in the use of providers’ services, the unique needs of these DCI deployments have led to the emergence of a new type of high-capacity DCI solution.

Five requirements define the new breed:
  • Efficient and flexible scaling to 100s of tb/s of transport
  • Compact, rackable form factors
  • Low power consumption
  • Simple operation
  • Programmability for integration with service automation 

Underpinnings of these requirements
A dominant aspect of cloud data centers is use of infrastructure such as servers and storage systems that are modest in unit size but able to be pooled in wide ranges of capacity to serve the needs of application or service. This leads to a bias for systems installable in compact, rackable form factors that are easy to install and expand, often leveraging auto-configuration for integration into infrastructures at very large scale.

Form factor compactness demands low power consumption. If an individual server consumes, say, 150 watts in ongoing use, a rack of 40 such servers might consume 6 kilowatts, sustained. A data center with 100,000 such servers might consume 15 megawatts (approximately estimated). It’s easy to understand why cloud providers focus on wringing every possible watt out of solutions they deploy. DCI platforms designed in a more server-like package (versus a telco office orientation) are likely to consume less power, perhaps drawing a third less power per rack than alternatives. Across 10 racks’ worth of devices, if 150-200 kilowatts of power can be saved, a solution is heading in the right direction.

A final objective that fits with the ability to pool resources goal is to support open, programmable software for DCI capacity to be dynamically provisioned according to application needs. A variety of approaches can be taken to achieve this, including plug-ins for service control software rapidly evolving for use in cloud and virtual networking infrastructures as well as API toolkits to let large cloud providers integrate with their own service management platforms. In the end, programmability to support adaptation to providers’ goals for resiliency, path allocation, and application-driven solutions are the key requirements.

This new breed of DCI solution will complement other transport solutions that implement shared network transport of various types in metro and long haul configurations. The two styles will be used by providers for different types of connections. Both will be used to support higher level service requirements for customer, partner, and internal operator data center connections.

The Cloud Xpress family introduced by Infinera is an innovative example of the kind of high capacity, small form factor, programmable DCI platform cloud operators are leaning toward for their internal DCI deployments. Cloud Xpress is initially targeted for metro deployments. Leveraging optical innovations Infinera has previously introduced and engineering them into a platform capable of 20+ tb/s in a single rack, Cloud Xpress is an impressive contribution to the state of the DCI art. If trials prove out successfully, Cloud Xpress has every prospect of helping cloud operators scale out their data center deployments and interconnect them with the capacity and elasticity they desire.

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Paul Parker-Johnson

Metacloud Adds Versatility and Strength to Cisco’s InterCloud

Among the best promises of the cloud are flexibility in workload deployment and efficient, scalable orchestration of deployments regardless of location or underlying infrastructure. 

Cisco’s acquisition of Metacloud for integration into its InterCloud portfolio is an important step toward the InterCloud realizing these promises. Metacloud adds versatility and strength to the InterCloud service offering in at least three ways:

1. Metacloud’s innovative OpenStack as a Service solution allows businesses to deploy private clouds using OpenStack software without needing to invest in developing in-house OpenStack expertise (because their cloud is managed by Metacloud as a service).  This is a very powerful way to open up use of OpenStack software in business private clouds for companies that have not been ready to make that commitment to date. Although OpenStack is very appealing as a service delivery environment because of its rich open source community of technical contributors, it is still relatively young in terms of delivery packaging and integration options for adopters who do not have the resources to develop that expertise. Making the OpenStack environment available on an efficiently managed basis by Metacloud as the manager takes the sting out of adopting OpenStack for many businesses and allows them to concentrate fully on implementing the applications they’re interested in on a powerful open software base.

2. OpenStack as a Service, now from the InterCloud, can be deployed on top of infrastructures other than Cisco’s, in addition to being deployable on Cisco infrastructure systems (such as UCS and Nexus). This opens up access to the InterCloud ecosystem for customers without having to meet the criterion of running on Cisco underlying hardware in every case. In its truest sense, that is a crucial criterion for a serious cloud computing framework to meet: by being able to instantiate virtual compute, network, storage, and related applications in a truly open software environment without regard to specific underlying hardware implementations (other than that they integrate successfully into the OpenStack software framework) the flexibility of adoption paths available to customers for engaging with the InterCloud ecosystem of operators and application suppliers is multiplied by an order of magnitude. It doesn’t prevent the use of parallel ACI-based Cisco infrastructure systems. Rather, it opens up the option of using additional infrastructure environments quickly and efficiently by introducing the managed OpenStack as a Service framework.

3. By bringing a managed OpenStack solution to its InterCloud portfolio in support of private clouds, Cisco is laying the groundwork for extending the InterCloud’s services based on OpenStack to include hybrid and public services leveraging the OpenStack technology base. Making this additional implementation option available to end customers significantly enhances the versatility and appeal of the ecosystem it is developing. 

Time will tell how seamless and robust the OpenStack additions to the InterCloud portfolio will be. Customers will decide. However, if one were looking for signs that the InterCloud fabric might have the versatility and flexibility in deployment options the cloud computing community so highly values, the Metacloud acquisition would appear to be a compelling signal heading in that direction.

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Paul Parker-Johnson

Wednesday, September 17, 2014

Worldwide Mobile IP Infrastructure Market Continues to Rebound

Wireless is fueling capex, which indicates continued positive growth in the second half of the year

The Worldwide Mobile IP Infrastructure market grew in 2Q and increased to $1.25 billion, 9.6 percent quarter over quarter. Evolved Packet Core (MME, PGW, SGW, and PCRF) also grew this quarter to $123 million, 7.2% quarter over quarter. Online video continues to fuel mobile data traffic and the industry expects a tenfold increase in five years.  

Cisco continues to lead in the Worldwide Mobile IP Infrastructure market with nearly 40 percent share. Tracking its dominance in core routers, Cisco leads the IP Backbone market with 67.4 percent share. Cisco was number one in Mobile IP Backhaul with 40.3 percent share and in first place in Packet Core with 29.7 percent share. Ericsson holds 2nd place position in Packet Core (MPC + EPC) with 25.7 percent and 3rd place in total IP Infrastructure market with 12 percent share. Alcatel-Lucent, which claims 75+ IP mobile core customers worldwide, is second in the total IP Infrastructure market with 15.8 percent share.

Mobile spending continues is increasing globally as carriers in developed countries vie for top billing for fastest carrier, fueling LTE spending. 3G remains strong and continues to grow as developing economies upgrade and invest in this technology. Mobile infrastructure will continue to be a highly dynamic market for the next several years as vendors and carriers work through new technologies. Vendors will need to have solid strategies and execution plans in this demanding environment.
For more information about ACG's Mobile IP Infrastructure services, contact

For more information about ACG's Mobile IP Infrastructure services, contact

Monday, September 15, 2014

2Q Financial Vendor Index Results

ACG Research has released its 2Q Vendor Financial Index report, which delivers independent information about the sustainability of a vendor or company to help providers assess the risk of selecting the right vendor to meet their business requirements and to ascertain a risk level on the stability of the vendor regardless of technology innovations.

For more information about ACG 2Q Research's Vendor Financial Index click

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Thursday, September 11, 2014

Enlarging the Managed Network Services Opportunity through Virtual CPE

Virtual business CPE has the potential to create a win-win situation for small and midsize businesses and network operators. Small and midsize businesses are trying to develop network-centric business models, but networks present challenges that are beyond these businesses’ managerial and technical capabilities. Read more.

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Tuesday, August 26, 2014

First Half Spending Boosts 2Q Router and Switching Market

Service providers are requiring more capacity because of an increase in mobility and agile cloud solutions, which are stimulating growth.

The Worldwide Carrier Routing & Switching markets increased revenue 7.0% in Q2 but remained flat 0.0% year over year. Global capex was up 5% q/q, and IT spending increased 6% q/q. In spite of this positive growth, ACG Research anticipates a challenging market in the second half of the year and lower service provider routing spend in Q3 with projects being pushed out to 2015. “AT&T and Verizon continue to surpass the industry average for operating margin. AT&T posted 17.2% operating margin while Verizon posted 24.4%. Many other SPs also saw solid margin gains, which had a positive impact for service provider equipment vendors in the first half of 2014,” states Ray Mota, CEO of ACG. “The router market outlook is uncertain because of architectural transitions, consolidations and larger then expected spending in the first half. The good news is that projects are not being cancelled but just pushed out.”

The rise in fixed broadband traffic and mobile broadband traffic on 3G/4G and LTE networks will continue to put pressure on providers’ networks. Streaming residential video is rapidly driving average household bandwidth requirements: 31% CAGR from 2.9 Mbps in 2014 to 7.3 Mbps by 2018. Smart phones, tablet, and next-generation devices as well as pressure on service providers to provide content-rich applications will force many service providers to upgrade their access, aggregation, and core networks, and mobile backhaul.

Q2 Total Worldwide Carrier Routing & Switching market posted revenue of $2.9 billion. Core Routing revenues were up 3.0% q/q but down 3.8% y/y. Edge Routing and Switching revenues increased 8.0% q/q and slightly up 1.0% y/y. 

Alcatel-Lucent reported routing and switching revenue of $603 million, increasing 17.3% q/q and 2.8% y/y. ALU’s solid quarter in routing is primarily attributed to the company’s gains in the IP Edge Routing segment, Multiservice edge routing and mobile backhaul. Cisco posted router and switching revenue of $1.46 billion, flat -0.05% q/q and -4.3% y-y. Cisco, which had a solid Q1, is transitioning from a hardware-based revenue to an annuity model, which impacted Q2. Juniper Networks has router revenue of $579.8 million, increasing 12.2% q/q and 12.5% y/y. Juniper continues to focus on launching new products and initiating cost reductions to drive growth. With software defined networking gaining traction as a solution for deployment, Juniper expects to capitalize on the anticipated increase of SDN and network function virtualization.

  • Data center interconnect is a vital part of the service provider edge; 6% of the overall edge market is dedicated to data center interconnect. 
  • Operators are more focused on the drivers in the edge of the network. The outlook for routers: the edge segment, which is projected to reach $12.2 B in 2018, is three times the size of the core router market, which will increase $3.3 billion in 2018.
  • Service providers are struggling with both internal and external challenges: rapid technology adoption, ongoing support for legacy technologies, heterogeneity of technologies and multivendor networks. External challenges include loss of high-margin legacy services, over-the-top providers, low-cost providers, regulations, increasing traffic, and competition from their own suppliers.
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Wednesday, August 13, 2014

Business Case for NFV/SDN Programmable Networks

ACG Research analyzes three programmable High-IQ network use cases that were created by Juniper Networks. The analyses show the benefits derived from the deployment of programmable networks for service providers. A cloud customer premise equipment and virtual firewall (vCPE) use case replaces physical CPE with a simple on-premise Ethernet device and moves IP virtual private network  and firewall functions to the cloud. This produces a 36 percent five-year net present value increase as compared to the physical CPE solution. A real-time network self-optimization use case replaces manual traffic engineering processes. This produces a 27 percent five-year total cost of ownership  savings compared to the manual processes. An elastic traffic engineering use case for a national all IP core network demonstrates the advantages of an SDN solution as compared to the present mode of operations. The SDN solution reduces bandwidth and associated link capital expenses by 35 percent while maintaining all network service level agreements.

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Wednesday, August 6, 2014

Demand for All Things Video, the Implications

Although video has transformed public and private networks and continues to drive network deployments it also dwarfs all other network traffic types, for example, Netflix can account for upwards of 40 percent of local Internet traffic. The massive amount of bandwidth required drives the need for capacity in all parts of the end-to-end network. If you solve this problem for video all other traffic, voice, email, web and even IoT benefits as well.  

Consumers have an unending appetite for all things video. They are watching TV shows, movies, YouTube, Vines, Facetime or Skype on every device they have. Advertisers are increasingly moving to video ads and away from static banners. Truly live TV is exclusively sports and news. Appointment TV is a thing of the past. Everything is becoming on demand.

The implications of these trends cannot be underestimated. Not only do they impact all aspects of the telecommunication and Internet ecosystem, they impact the movie and television industries in a major transformation way. As these businesses struggle to adapt to overwhelming innovative forces they only know one thing for certain: They don’t want video assets to go the way of music.

Service providers, facing a hypercompetitive zero-sum market, are attempting to adapt and upgrade their physical networks, data center, core, metro and access to support video traffic. The race to 1Gbps per home is well underway. Back office systems are adapting as well. Marketing departments are creating new service bundles with higher data caps and source funded noncap traffic, such as taking an order to sending a bill, all of which need to be supported. Legal departments are impacted too. Issues such as net neutrality, asymmetrical interconnects, must carry and spectrum acquisition are just of few of the array of legal issues facing service providers globally.

Mobile operators are in no way immune from video. As they address their coverage and capacity issues video traffic is front and center. More smart phones mean more handheld video screens, which use more bandwidth and have much longer connection times. Here too, all aspects of the mobile operators business are impacted. Small cell deployments, WiFi integration and SON plus the emerging requirements of 5G must address the demand for video.

Video might just be a lot of ones and zeros, but the impact of massive amounts of video is disrupting the entire telecommunication industry. It is safe to say that decisions made by the entire ecosystem, service providers, equipment vendors, software vendors, semiconductor vendors, must address the onslaught of video traffic.

Tuesday, July 29, 2014

Cisco NCS 6000: Building Converged and Application Intelligent Networks

To address its increasing traffic growth on its fixed and wireless networks, Telstra recently announced it will utilize the Cisco NCS 6000 platform in its network. Driving this need—which is not limited to Telstra—is the growing demand for cloud services, video and media services. Service providers are looking for cost-efficient solutions that address this growth as well as solutions that scale for the Internet of Everything and M2M networks.

Why the Cisco NCS 6000? Although other products enable intelligence on the network, Cisco differentiates by offering a solution that gives providers a programmable and intelligent network. The NCS 6000 has 1 TB/s per slot line cards with 10 port 100GE line, offering high density that can decrease the per unit cost for data transported, which results in a smaller/lower carbon footprint. This unit decrease further supports Telstra’s “green goal” of reducing its carbon footprint. 

When looking to build a converged network, it makes sense that Telstra would turn to Cisco, its trusted partner. The company has been using Cisco’s products in the core and is also a strategic partner for new cloud services. The NCS 6000 will provide Telstra with a platform to build an intelligent network that dynamically enables new products and services within the network.  

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