ACG Research

ACG Research
We focus on the Why before the What

Wednesday, May 30, 2012

Talking with Plexxi, Inc., Part 2

Eve Griliches, optical analyst for ACG Research, continues her interview with Mat Mathews, vice president of product management; and William R. Koss, vice president, to discuss the data center market, SDN and what Plexxi, Inc., is doing.

Click here to read Part 1 of the interview.

Click here to read Part 2 of the Interview.

For more information about ACG Research's packet optical transport syndicated and consulting service, click here or contact 

Friday, May 25, 2012

Juniper’s Strategic Investment in Vidyo: Why it Matters

Juniper Networks announced that it made a strategic investment in Vidyo, a software-based HD video conferencing provider. The terms of the deal were not disclosed, though it is in addition to the $97M already raised through the Series D round closed last September. This announcement is significant for Vidyo in that it provides additional momentum and credibility to its message of affordable telepresence. Additionally, the deal caught our attention because of its potential to alter the competitive landscape. 


Although Vidyo is not a household name, it has very interesting technology that many people have used. It is the base technology platform that Google uses for GTalk. Vidyo is able to deliver high-quality video conferencing to nearly any device under almost any network conditions. It does this in software, so it can scale to 100+ participants using existing network infrastructure and without the need for adding hardware multipoint conference units (MCUs). Vidyo’s approach changes the business model and is threatening to disrupt the telepresence market. 

How Vidyo threatens telepresence incumbency

Vidyo has developed and is delivering an alternate approach to HD videoconferencing. Instead of utilizing hardware MCUs to enable multipoint conferences, the company uses a software-based system. The software approach is much lower in capital cost as it can run on existing devices or off-the-shelf hardware. It also utilizes lower bandwidth, eliminating the need to purchase additional hardware when scaling. Vidyo’s claim is that it can provide multipoint HD conferencing for a 10X savings in both capital and operation expenses. 

Vidyo implements an interactive video standard called Scalable Video Codec (SVC, a part of the H.264/AVC standard).  SVC is an analogous to the adaptive streaming used in streaming (for example, Apple’s HLS and Microsoft’s Smooth Streaming), where several qualities are encoded simultaneously and the clients continuously negotiate to receive the maximum quality that the device and network can deliver at the moment. Like adaptive streaming, the resolution and bit rate can change very frequently and avoid the pixelization, artifacts and buffering delays that were common with older generation streaming. The effect is much more pleasing to watch as the change in resolution does not affect the picture as greatly as the delays or missing blocks.

SVC works by specifying a base layer encoding at the lowest acceptable quality for video conferencing. Typically, the base layer could be QCIF (Quarter Common Intermediate Format of 144 lines and 176 pixels per line) at 7.5 frames per second (FPS), which would require 64kbps, a speed that most networks can handle easily. In addition, the Codec simultaneously encodes enhancement layers for larger sizes, higher resolution and higher frame rates. The client and server continually monitor conditions, including network congestion and the size of the screen in the player, and negotiate the appropriate level of enhancement.  

Why this deal is important

Anytime a start up gets a strategic investment it is important; it is a validation of the company’s strategy/execution as a customer and as potential go-to-market partner. Although this investment provides those benefits to Vidyo, it also got our attention because Juniper goes beyond obtaining another Junos ecosystem partner. Juniper is not a telepresence vendor but competes heavily with Cisco, the market share leader in the space. Cisco has stated that telepresence is a strategic segment. Telepresence is a relatively high-growth and high-margin segment, and its high bandwidth consumption drives greater network equipment, Cisco’s core business. Accelerating adoption of the disruptive technology and shortening the life of existing telepresence products could impact Cisco in a material way. 

Even if Vidyo and SVC are successful in turning the telepresence market into a commodity segment, it is not necessarily a serious threat to Cisco. Cisco is a master at managing market transitions, is likely monitoring SVC and working on a response. Also, Cisco is expert at steering market perceptions around technologies. After all, it essentially redefined videoconferencing and created the telepresence segment.  

Juniper was very careful to position this as a strategic investment that makes sense for both promoting Junos and providing a return on investment and not as competitive shot across the bow to Cisco. We take Juniper on its word in this regard, even though it appears to be a smart, long-term competitive move. 

While the eventual outcome cannot be fully ascertained, this is investment by Juniper certainly caught our attention.

David Dines

Thursday, May 24, 2012

ShoreTel and M5: Change In the Wind

With its acquisition of M5, ShoreTel’s new cloud division faces some integration and positioning opportunities. Currently, ShoreTel (700 partners) and M5 (100 partners) only share a small number of partners that offers both hosted and on-premise resold VoIP offers. 

M5 considers its go-to-market offer completely channel friendly; 70 percent of its offers, for which they receive a referral fee, are partner identified offers. These partners are never or almost never involved in the long-term support for customer service or renewal. M5, ShoreTel’s cloud division, handles quality of service, billing and customer support. M5 differentiates through its management of call quality (it owns the soft switches and PBX), data and the hops, providing live support and a view of customers. M5 uses phone and calls as strategic assets; however, the company does face the same problems other providers have when moving to cloud offers. 

The size of the legacy systems has changed because of demands for VoIP hosted offers; seats that were 20 to 50 now have increased from 50 to 500. Service providers are strategically positioned to meet enterprises’ SLAs for connectivity, and the expectation may be for more applications built on the relationship with the providers. However, the ability for providers to add managed offers to their connectivity offers is also hampered by traditional carriers’ sales teams generally not understanding the cloud or VoIP needs of their customers. While M5 is both a “provider,” hosting offers, it also is a manufacturer, and today, does not have a progressive service provider white label program. To be successful in hosted offers, providers need to develop new models to target and understand customers, their VoIP needs or PBX replacement requirements and how to proactively sell or manage the customers directly or offer white label SaaS offering from a company such as M5.

There are some best practices in cloud or SaaS offers in the market from which M5 can take a cue. offers a fully integrated OSS and BSS offer, which looks like a fully integrated provider offer but does not require changing the infrastructure or direct customer support from SPs’ sales teams. offers a SaaS based support team that looks and feels like the “provider’s” customer service but is in reality a sold, billed, hosted and offered by staff.

This model allows companies that have hosted offers to take advantage of trends:
  • Enterprises moving to cloud offers
  • Enterprises demanding SLAs for new applications like the ones provided by their telecom or carrier 
  • Consolidation of providers will cause enterprises to demand more cloud offers from their providers
  • Ability for providers to offer cloud offers and knowledge about their customers’ business processes and requirements are limited

M5 can improve its strategic reach to new clients by taking a page from white label offers and market to and support noncustomers with its own quality of service and sales program to spur growth and add value for customers already getting connectivity from traditional Telcos. M5, according to Keith Nealon, “is directly involved with cloud customers to ensure quality of service, support and escalation of real-time issues during a call.”

For more information about  ACG Research cloud service, click here or contact

Tuesday, May 22, 2012

New Alcatel-Lucent Core Router Intensifies Competition

Alcatel-Lucent announced a new family of core routers, the 7950 XRS. They provide an integrated P-Router and Label Switched Router (LSR) solution with high port and slot density per chassis to deliver increased scale and higher efficiency to meet the requirements of 100G configurations. The 7950 XRS-20 will be the first product to ship (2Q2012) and features 20 system slots with 400 Gbps per slot capacity. The 7950 XRS-20 can be upgraded to the 7950 XRS-40 model, which doubles the number of slots and only requires an additional multichassis system shelf when three or more chassis are combined in a single node.

The new Alcatel-Lucent core router is designed to address the significant cost pressure on network infrastructure caused by high traffic growth rates and the failure of service providers’ revenues and profits to keep pace. Core network traffic is growing in excess of 50% per year, and new services such as content-rich digital media, cloud and mobile broadband place new requirements on the network for optimal distribution and delivery. Core routers, consequently, must scale rapidly and meet demanding network performance objectives with the lowest possible total cost of ownership (TCO). 

The 7950 XRS addresses the challenge to reduce TCO by featuring high port densities and the integrated P-Router and LSR solution. High port densities produce better scaling of capital and operations expense. In particular, network operations expenses that are not easily controlled by network operators such as space and power are reduced because fewer chassis and network elements are required. The integrated P-Router/LSR solution also helps to control cost by flexibly supporting optimization of higher cost IP routing versus lower cost label switching.

Alcatel-Lucent’s entry into the core router market will not be easy since Cisco with 62% market share and Juniper with 33% share hold a virtual market duopoly. Incumbency just as in politics provides substantial competitive advantages. There are few Greenfield deployment opportunities so new entrants must be compatible with the incumbents’ routers. Furthermore, the strategic nature of the network core strongly favors the well known incumbent over the unknown new entrant.

Alcatel-Lucent has a strong cost control business case to support its entry into the core routing market. We analyzed the TCO of the 7950 XRS core router and other leading core switch/router solutions when deployed on a simulated large core network subject to high traffic growth rates. We found that the OpEx of the 7950 XRS is 43% to 56% lower than the competitions’ core router solutions. Capital expense also is lower by 22% to 26%.

Although Alcatel-Lucent has tough competitive battles ahead in attempting entry into the core router market, it strong cost based business case and incumbency in the adjacent edge router market will most certainly intensify competition.

To download the Alcatel-Lucent TCO, click here.

To watch the HotSeat video of Ray Mota and Basil Alwan, discussing the 7950 XRS core router click here.

For more information about ACG Research's Business Case Analysis service, click here or contact

Michael Kennedy

Monday, May 21, 2012

Hard Data on the State of the Internet

In his FierceTelecom article, Michael Kennedy discusses the state of the Internet and cites Akamai's "State of the Internet" report, security issues, IPv4 exhaustion and performance statistics to give a view of Internet's actual behavior.  Click here to read the article.

For more information about Michael Kennedy, click here.

Michael Kennedy

Friday, May 18, 2012

Nielsen Report Cross Platform Report Q4 2011: What You Need To Know

Nielsen recently released its Cross Platform Report for Q4 2011. It has some excellent data on US households. David Dines distills the key points for executives who are concerned with service provider video infrastructure, STBs and other developments such as over the top and multiscreen video/TV everywhere.

Internet viewing of video is increasing but not as much as you think, only 4% y-y. Mobile video viewing, on the other hand, grew 36%. This is particularly important for mobile operators that are already talking about data congestion on their networks.

US TV households continue to shift away from cable, which were down over 1% sequentially and nearly 5% year over year. Telco TV grew 15% and satellite was almost flat for the year. This is likely to be indicative of the rest of the world because most of the new competition is from build-outs by Telcos, specifically, FTTH in developing economies such as China. 

Q4 10
Q3 11
Q4 11
Q-Q Change
Y-Y Change
Broadcast Only
Wired Cable
Total TV HHs

Source: Nielsen

Additional data from Nielsen also points to increasing cord cutting behavior. The number of households that use broadcast TV (no pay TV) with a broadband Internet connection rose 14% y-y to 5.1M; cable only (no broadband) declined nearly 13% y-y to 22.4M households. Cable and broadband customers held nearly steady, growing 1% y-y but down 2% sequentially. 

Q4 10
Q3 11
Q4 11
Q-Q Change
Y-Y Change
Broadcast Only and Broadband
Broadcast Only and No Internet/Narrowband
Cable and Broadband
Cable and No Internet/Narrowband
Source: Nielsen

Overall, these two indicators (the continued loss of cable subs and the increasing number of people with no cable but with broadband) are reinforcing our assertion (from two years ago) that OTT was a real potential threat to pay TV services. Even without the same quality, the price and convenience make OTT a credible substitution, especially among the Millennial group, tech savvy or cost-sensitive households.  Now that many of the quality problems have been solved with adaptive streaming and the immense popularity of tablets, SPs need to pay attention to consumers' behaviors. They need to be looking toward innovative services and bundling because “me too” types of services will not likely keep consumers’ interests for very long.

David Dines

LTE Networks Driving Global Market Growth

The emerging markets are providing growth across mobile infrastructure as 3G networks upgrade to advanced technologies and LTE begins to make more inroads across the globe.

Cisco bucked the downturn trend for Q1/2012 posting gains in the Worldwide Mobile Infrastructure market in every area, specifically in EPC. Cisco continues to gain global traction with its ASR 5000 and reported 20% y/y growth, including huge growth in Japan. The company has 30 EPC customers, including Bell Mobility in Canada, Reliance in India, Meagafon in Russia and Telefonica. EPC contracts are accelerating from a year ago as Ericsson has reported it signed 14 new EPC contracts. Huawei, ALU, and NSN also all report gains.

We see increased penetration of EPC in 3G installations and in the growing market for LTE networks around the world (via new spectrum auctions or announced plans for build outs). The IP backbone segment continues to grow because of the increasing data traffic on 3G, 4G and Wi-Fi networks, which ultimately traverse the core router backbone. We continue to expect SP Wi-Fi to be a major driver of backhaul installations and upgrades for the next several years as vendors and operators are learning how to implement new coverage models using Wi-Fi ahead of carrier-grade service standards of 802.11u and ANDSF.

The IP mobile backhaul market for both routing and switching continues to grow as the new 1 Gig and 10 Gig systems upgrade the access layer of the network as well as add IP-MPLS for traffic management and control. MPLS wins the Phoenix award as the technology resurrects itself to deliver traffic management and control in an All-IP world. We are also seeing a shift in the reporting and deployment of edge systems. We are starting to see larger chassis installations, which allow for future expansion (possibly as a result of aggressive pricing to normalize the cost of the chassis). The expectation is that revenue will be recovered as the slots are populated. This is not a new strategy, but one we are starting to see again in the mobile access area.


  • The continued introduction of new smart phones, tablets and other devices with faster processors, more memory and higher definition screens continues to push the capacity limits of the network resulting in two significant changes to the industry: 1) Vendors are starting to quote EPC system performance figures based on a propose device profile for individual operators, and 2) Second generation Signaling platforms are coming to market, significantly up-scaling signaling support figures. 
  • Service providers with existing LTE networks continue to upgrade their signaling and data capacities as more smart devices drive up demands on the network. TeliaSonera, Tele2 and Telstra launch LTE smartphone and tablet offers.
  • TD-LTE and radio backhaul will expand the market for wireless infrastructure over the next three years, completing the demise of WiMax for most applications and providing the WiMax operators with a clear technology path to LTE. 

For more information about ACG Research's Mobile Infrastructure service click here  or contact sales@

Chris Nicoll 

Ciphertex: Secure, Multiaccessible, Portable Portfolio

If you’re looking for a storage solution for your data center, branch offices or home that offers portability and encryption look no further than Ciphertex.

Ciphertex is a provider of portable data storage systems, which use advanced hardware encryption to ensure security. Available with DAS and NAS with VMware virtualization, Ciphertex offers high availability and high performance options for multiple uses and portability. Although small, the company has successfully penetrated the storage market with outstanding results for:
  • Encryption
  • Portability
  • Multiuser access
  • Data center to branch, vendor or home solutions
  • High performance
  • High availability
  • High IOPs
Ciphertex boasts a portfolio that scales for all needs. The company can scale from 1TB to 48TB in both NAS and RAID storage solutions. This scalability is perfect for such verticals as media and entertainment; oil and gas; healthcare; research; and government, which need large data storage capabilities.

The compact, rugged and portable system with a large portfolio delivers sustained transfer rate of up to 1000 MS/s and 100,000 IOPS with guaranteed security by the highest standard AES 256-bit encryption.  Perfect for media, entertainment, government, health care and oil and gas data protection.  Offering the product CX-10K-NAS VMware ready, Citrix XenServer ready and Windows Hyper-V compliant can provide storage for IP-SAN (iSCSI) and NAS file sharing implementations for fast data transfer directly to PC or MAC workstation through eSATA, USB-3 or datacenter network using 1Gb/E interface.

Ciphertex was given the best in show Digital Video Black Diamond award at NAB 2012. 

For more information about  ACG Research cloud serviceclick here or contact

Talking with Michael Yeager of QualiSystems

I recently had a chance to catch up with Michael Yeager, director of sales, North America, to discuss QualiSystems’ unique differentiation offer to providers, vendors and enterprises. The company has operated in Israel since 2004 and entered the North America market in 2010. Customers include Tier 1 and Tier 2 providers and vendors ATT, Bell Canada, Comcast, CenturyLink, TWC, Equinox, EMC and others.

QualiSystems’ product TestShell offers two-category coverage for lab management and testing automation environments. Any vendor, SP, Telecom, Carrier, Enterprise or Managed and Co-Location offering has needs for the benefits of this product.

It tackles the following challenges:
  • Equipment visibility
  • Multivendor environments
  • Tracking of assets
  • Tracking of data
  • Capacity of lab usage and testing environments
  • Scheduling and provisioning for utilization
These challenges are managed mainly by in-house offers that have been grown organically. Whether you have lab and test environments funded by a vendor or purchased or leased, your assets need to be effectively managed to return timely results and offer good insight so that companies can stay ahead of technology and address the next big infrastructure investment with confidence.

For most companies, the visibility and other capabilities of the platform create a test saving, time-to-implementation reduction that pays for itself very quickly.

  • Management of multivendor lab and test equipment
  • Visibility of usage and of capacity of equipment
  • Asset management 
  • Tracking and reporting
  • Remote usage for multiusers
  • Scheduling and provisioning of test and lab assets
  • Graphically enhanced interface
  • Improved productivity and quality
QualiSystems also supports your lab and test environments with professional services and integration services; licensing for software usage for the domain and customization.

Customers indicate that their environments are utilized better, more productive and they are able to return better reporting and quality testing and results for quicker and better decisions. That spells ROI in any book.

For more information about  ACG Research cloud serviceclick here or contact

Wednesday, May 16, 2012

Cisco Benefits from Service Providers’ Expansion and Capacity Build-out

Cisco reports that its quarter-over-quarter and year-over-year increases were due to service providers’ build outs and expansion of their networks. 

Although vendors cited weak economies and decreased demand from service providers as factors that contributed to their weak revenue increases in Q1, ACG Research still anticipates solid growth in the Worldwide Carrier Routing and Switching markets in 2012 as mobility and demand for video continues to drive providers to invest in wireless networks. “Service providers have certainly held tight reins on their CapEx, but they are still spending and vendors need to fully understand the their buying patterns, market trends and consumers’ demands to capitalize on SPs’ limited spend,” states Ray Mota, managing partner. “Yes, some service providers are taking a wait and see approach on expansion, but although it might feel comfortable to wait it is rarely a successful investment strategy. Providers should look at long-term investments in new services.”

Q1 Total Worldwide Carrier Routing & Switching market posted revenue of $2.7B. The global market decreased 4.5% q/q and 0.6% y/y. Core Routing revenues were down 0.8% q/q and down 8.2% y/y. Edge Routing and Switching revenues were down 5.6% q/q but up 1.9% y/y. 

Cisco posted total worldwide growth at 2% q/q and 14% y/y. Cisco continues to gain traction with the CSR-3, reporting triple-digit growth and that the company “has achieved $1 billion in total orders to more than 190 SP customers in 30 countries in just 1.5 years, 20 new customers in Q1 alone.” Brocade also posted positive increases, 30% q/q and 57% y/y. Juniper decreased worldwide routing revenue 4.8% q/q and 28.3% year over year; however, the company posted 39% q/q increase in access aggregation switching, which is in part due to solid sales of infrastructure products. Alcatel-Lucent, which is benefiting from the market momentum for 100G IP/optical as well as providers replacing and leveraging 100GE and IPv6 transition technologies decreased 11% q/q but increased 11% y/y.

Market Share ($)
 Q-Q MS Point +/-

  • Emerging markets are fueling growth in most telecomm sectors and the rapidly growing demand for services and products is fragmenting the customer base and putting pressure on market leaders to innovate to maintain market share.
  • Service providers held tight reins on their CapEx in 2011, and vendors are approaching 2012 with caution as they anticipate that this trend will continue.
  • The strong growth in IP traffic is driving the demand for switches and routers in service providers’ networks. This growth will most likely increase in 2012 as fixed and mobile broadband subscriber penetration rates increase. The growth in demand by consumers for video applications will also fuel the demand for more switches and routers. The result will be that carriers will need to continue investing in their IP infrastructures or risk losing subscribers.  The market is seeing the build-out of 3G wireless networks in developing countries; in developed nations carriers are investing in LTE to meet the demands for mobile bandwidth.
For more information about ACG Research's Router and Switching services, click here or contact