ACG Research

ACG Research
We focus on the Why before the What

Tuesday, December 8, 2015

SDN/NFV: Intelligent Transport Networking

Tim Doiron, principal analyst, Intelligent Transport Networking, ACG Research, leads an SDN/NFV panel at Layer123 SDN & OpenFlow World Congress in Dusseldorf, Germany.  Tim introduced the panel participants and shared some of the recent findings of ACG Research as part of the panel kickoff.  In working closely with a number of customers, ACG Research has found that through software automation, service providers cannot only accelerate new service introduction, but also substantially increase revenue.  With more rapid service introduction, service providers can expedite time to revenue, enable reduced services pricing, thus attracting more trial customers and finally obtain more paying customers faster.  In total, ACG Research analysis indicates that this virtuous software-enabled cycle can deliver as much as 400% higher revenue generation over a five year period vs. today’s highly manual new-service introduction processes. 


Click for more information about Tim Doiron or to discuss this topic contact Tim at tdoiron@acgcc.com.  

Sunday, November 29, 2015

Juniper Networks Cloud CPE Solution: Helping Providers Transition to Software-Centric Network

Vice President of Service Provider Portfolio Marketing at Juniper Networks Paul Obsitnik and Ray Mota, CEO, ACG Research, discuss the recent expansion of Juniper’s Network Functions Virtualization portfolio. Cloud CPE, which is a fully automated, end-to-end network functions virtualization solution, enables service providers to create and automatically deploy new services faster than ever at scale. The solution includes Contrail Service Orchestration, a comprehensive management and orchestration platform that delivers and manages virtualized network services and the NFX250, the first in a series of network services platforms that can operate as secure, on-premises devices running multiple virtual network functions from both Juniper and third parties. They also discuss the lineup of new Juniper professional services offerings to help customers and partners evaluate technology choices and develop a plan to integrate them within existing network infrastructures. Listen to Paul and Ray outline the four key benefits of the Cloud CPE solution for service providers and their customers.

Click for more information about ACG's video services.


Click for more information about ACG's video services.

rmota@acgcc.com
www.acgcc.com

Monday, November 23, 2015

100% Visibility: An ACG HotSeat with with Dennis Cox

Dennis Cox, chief product officer of Ixia, and Ray Mota, CEO of ACG Research, discuss the need for true 100% visibility. Today, many vendors claim to provide 100% visibility, but many drop packets and create blind spots in your application performance. Understand what is needed for true visibility and providing a secure network for optimal application performance.


For more information about ACG’s HotSeat videos, contact sales@acgcc.com.

rmota@acgcc.com
www.acgcc.com

Thursday, November 19, 2015

Juniper Analyst Day Report

Juniper Networks’ full commitment to virtualization of the network was clear at the NXTWORK 2015. Juniper introduced Cloud CPE, a fully automated end-to-end NFV solution to enable its customers to implement a smooth migration strategy for their existing purpose-built networks to a virtualized, more efficient infrastructure. 

Key Findings
  • Juniper’s Cloud CPE solution includes Contrail Service Orchestration, an important feature for both service creation and automation, that can greatly benefit their customers to gain competitive advantage in service introduction with faster time to market.
  • Juniper’s Cloud CPE solution is the first of many NFV use cases that blends both physical and virtual network services together to simplify the service creation process and automate the entire service delivery process.
  • Junos disaggregation is a good move by Juniper to decouple its software and hardware and place more value on Junos rather it hardware.
  • Juniper’s competitors are also working on similar solutions. Juniper’s professional services becomes a major team to ensure its customer can roll out their virtualized infrastructure in a predictable time frame.


Click for more information about ACG’s business case analysis services or contact sales@acgcc.com.

 
         Robert Haim
     rhaim@acgcc.com
       www.acgcc.com

Innovation Drives Evolution: Video Industry No Exception

Analog over the air, on-demand and OTT experience are pushing vendors to evolve video technology and develop more sophisticated and viable business models

The first successfully demonstrated simple electronic television designed by Philo Taylor Farnsworth in 1927 transmitted a simple line. Philo T. Farnsworth, Vladimir Zworykin, C. Harles Jenkins and John Baird all made important contribution to this invention and contributed to what finally became television as we know it now, and which has helped spawn the huge video industry.

Back in time: TV history
In 1950 only nine percent of U.S. households owned a TV, but by 1960 87 percent owned one! Today, according to Nielsen, the number of TV households in the United States from 2010 to 2011 was estimated at 115.9 million and the average house has at least two televisions per household. 

In the 1950s the delivery method for content was over the air or terrestrial television in which the signal was transmitted by radio waves to the TV receiver from a television station, and received with an antenna. Viewers received significant benefit from this deliver method as content was easily accessible for the public. Using the antennas on the television, viewers would literally pull the signal out of the air. However, because the content was delivered over the air, there were distance limitations. An antenna could only transmit a signal so far, and if one was not within that range, one could not get the signal. Another limitation was that there was no way to institute a pay for access model. As the signals were being transmitted freely over the air, anyone with a reception antenna could view the signal. 

Next step in the evolution was the advent of cable television which delivered the video content to individual homes using coaxial cable. Large antennas were erected and coaxial cable ran from the antenna to individual homes. In coaxial cable transport, quality does not significantly deteriorate over distance, this delivery method also offered the ability for broadcasters and cable companies to create a subscription based model.

Then came satellite television, which delivered the video content to individual homes using signals relayed from communication satellites. The signals were received by  satellite dish which was then fed from the reception dish to inside the home through a coaxial cable. A satellite receiver, either a set-top box or a built-in TV tuner then decoded the program for viewing on a television set.
In 1984 digital video was invented and like OTA used radio frequencies to deliver video through the air. This technology allowed providers to compress video channels so that they take up less frequency space and offered two-way communication capabilities.

The most recent development is IPTV (live television, time-shifted television and VOD) which uses Internet Protocol for the delivery of video. This involves using hardware or software to encode the video and audio signals into an acceptable IP format that is then streamed in one direction or in a two-way scenario to provide users with interactive television. This development offers two advantages: Interactive ability where viewers can determine exactly what content they want to view and when and convenience. With wireless Internet and streaming capabilities, viewers can watch video content from their TV, laptops, tablets, and even their phones.

In IPTV, the subscribers have set-top boxes or other customer-premises equipment that talks directly over company-owned or dedicated leased lines with central-office servers. Packets never travel over the public Internet, so the television provider can guarantee enough local bandwidth for each customer's needs.

Shifting tide
Access on any device anywhere has prompted a shift from watching shows on TV to watching content on multiple devices. Additionally, high subscription costs, poor service, and the dismissive behavior from call centers are increasing the migration away from traditional cable services. Over-the-top content—film and TV services delivered directly over the internet to connected devices—has become a key part of the evolution of Video. Many consumers are opting to become “cord cutters” or are “cord nevers,” a generation raised on social media and Netflix that are used to any content, any time, on any device.

So how did OTT service become so enticing?
Convenience: Anytime anywhere consumption
Control: To choose what ,when and how to watch 
Content: Availability of large existing content libraries

Where do we go from here?
The industry is on the cusp of the next major evolutionary phase in visual entertainment People are switching from traditional cable companies to watching videos online on their mobile phones, or through streaming services such as Netflix, Hulu, etc. Cord-cutting has grown by 44 percent in the past four years, with 7.6 million households using high-speed Internet for streaming or downloading videos instead of traditional cable or satellite television. The OTT market, already showing huge consumer uptake is expected to increase fourfold by 2019.

By leveraging OTT technologies and new business models, vendors and service providers are creating happier consumers, more profitable advertising, and a more efficient system overall. 

For more information about ACG’s video services, contact info@acgcc.com.


Meghna Zutshi
mzutshi@acgcc.com
www.acgcc.com

Tuesday, November 10, 2015

Migration of Services to the Data Center Driving Optical DCI Growth

ACG Research has released its Q2/2015 worldwide Optical Data Center Interconnect (DCI) market share analysis as well as its 2014–2019 worldwide forecast for Optical infrastructure platforms purchased by service providers for use in data center interconnect applications. Optical DCI product segmentation includes products designed for both long-haul and metro deployments, as well as a parallel view of the market based on large-scale multi-slot chassis platforms and small-form factor (SFF) optical appliances. The top three optical DCI suppliers worldwide in Q2/2015 are Ciena, Infinera and Alcatel-Lucent, respectively.

Purchases of Optical DCI equipment are expected to grow at a compound annual growth rate (CAGR) of 44.9% during the forecast period from just over $1.1 billion in 2014 to $4.7 billion in 2019. Sales of metro DCI platforms (supporting DCI connections up to 150 km) will continue to dominate over long-haul; both metro and long-haul will experience considerable growth at 51.5% and 24.6% CAGRs, respectively. Throughout the forecast period, the Americas and specifically North America remain the dominant geographical location for Optical DCI. EMEA and APAC regions demonstrate considerable optical DCI growth, but each remains about half the size of the Americas market.

Although the majority of Optical DCI deployments to date have been with multi-slotted chassis products, small-form factor Optical DCI appliances are entering the market at a rapid pace, led by Infinera’s two rack-unit (2RU) Cloud Xpress, which debuted in late 2014. Recent announcements from other vendors in the optical appliance category include Ciena’s Waveserver™ and Fujitsu’s 1Finity™ platforms. Adva also recently debuted its FSP3000 CloudConnect™ platform, though Adva is espousing a modular, 4RU chassis as “right-sized” for Optical DCI applications. Expect to see more product announcements in the future for this fast-growing product segment as revenue is projected to approach parity with large multi-slot chassis solutions in the last year of the forecast period.

“Uptake of Optical DCI is being driven by the migration of services to data centers and the cloud as service providers simplify deployment models and accelerate delivery of new and differentiated services,” says Tim Doiron, practice lead for Intelligent Transport Networking at ACG. “New and expanded data center deployments are being driven by a variety of service providers including Internet content providers (ICPs), network service providers (NSPs) and interexchange providers (IXPs) as well as enterprises themselves. As more functions become automated and virtualized, the need to interconnect data centers for capacity, resiliency and versatility will continue to grow and increase the need for reliable, cost-effective, high-speed data center interconnections.”

For more information about ACG’s data center interconnect services contact tdoiron@acgcc.com or info@acgcc.com.

Click for more information about Tim Doiron or to discuss this topic contact Tim at tdoiron@acgcc.com.

Friday, November 6, 2015

1Mainstream Acquisition Will Drive Cisco’s Infinite Video Roadmap

Cisco Systems has announced its intent to buy OTT cloud streaming service provider 1Mainstream to deliver improved cloud-based and live-streaming services

The San Jose-based startup 1Mainstream was formed in 2012 to eliminate obstacles for content providers to create compelling, ala carte, HD channels and applications. It operates on an OTT platform that uses sophisticated templating technology to enable companies to launch OTT services across multiple platforms. Although far from being a household name, 1 Mainstream has partnerships with top companies, including Apple TV, Samsung, Roku, Amazon Fire TV, and Chromecast, to provide seamless integration of their products to a customer base that includes Sky News, NOW TV, Acacia TV, etc.

Cisco has a strong portfolio with videos for PCs, tablets and smartphones but the company was unable to serve both the service provider customers and OTT players that wanted to get to the big primary screen and get there fast. With the acquisition of 1 Mainstream, Cisco will now have the startup’s platform. 1Mainstream’s technology complements Cisco’s new Infinite suite of cloud-powered video entertainment solutions, which are designed to help customers deliver TV services to multiple screens utilizing one cloud on any access network within and beyond the home. 1Mainstream's platform will allow service providers, broadcasters and media companies to configure and roll out the entire channel and content library available to their customers anywhere and on any device.

Acquisition of 1Mainstream is a good move for Cisco as IPTV supporting OTT video content viewing has significantly disrupted the pay TV industry and has become a primary channel for content consumption. The acquisition is expected to be complete in the second quarter of Cisco’s current fiscal year and once the acquisition is complete, 1Mainstream will join the Service Provider Video Software and Solutions Cloud Engineering Group under the leadership of Conrad Clemson, senior vice president and general manager. Rajeev Raman, CEO of 1Mainstream, will become director of cloud engineering at Cisco.

For more information about ACG’s video services, contact info@acgcc.com.


Meghna Zutshi
mzutshi@acgcc.com
www.acgcc.com

Thursday, November 5, 2015

Accelerating the Transformation to Virtual Network Services

The relentless pace of innovation is driving developers and service providers to redefine how they bring applications and services to users. Users’ demand for new applications is forcing a transformation away from limited function, tightly integrated and proprietary solutions toward a more fluid, programmable, adaptable service delivery environment. At the same time, competition for user engagement is fierce and operators need to find ways to become dramatically more efficient while they are also accelerating their pace of innovation.

Download Paul Parker-Johnson's whitepaper on what will fuel innovation and what F5 Networks is doing to unlock the potential in the always-on, fully-connected world and Accelerating the Transformation to Virtual Network Services.



www.acgcc.com

Thursday, October 22, 2015

SDN & Multi-layer Transport SDN: Notes from Layer123 SDN OpenFlow World Congress

This year’s Layer123 SDN OpenFlow World Congress in Dusseldorf, Germany, was quite an expanded event from last year with over more than 1,500 people registering.

There was a great mix of presentations from equipment suppliers, services providers and open source organizations at the event. SDN and NFV were, of course, top of mind at the event. The number of SDN and NFV PoCs and trials continue to grow rapidly, but live commercial deployments outside the data center remain elusive. Our ideas and thinking about the application of this technology in our networks has, however, matured. The focus has shifted, correctly I believe, from minimizing capital costs with COTS hardware to agile revenue generation via network automation and programmability.

Although many challenges remain, the single biggest barrier to mass SDN commercial deployment is operationalization of the technology. It is not just commissioning either. A virtualized and programmable network must still be operated and managed throughout its life-cycle to meet changing networking demands and customer service level agreements. In one conversation with an equipment manufacture, we discussed the simple scenario of a fan failure in a server running multiple VMs and VNFs. Who would know of the failure? How would they know and when would they know? Part of the beauty of an NFV environment is that the VM/VNF can simply be moved to other physical machines. However, financial considerations will always dictate that there is a limit to the number of physical machines (COTS or otherwise) installed in a service provider network. The underlying physical network will have to be maintained and failures addressed lest they eventually lead to poor network performance and customer satisfaction.

The fact that there was broad acknowledgment about the need to close the operational gaps is encouraging and a major step toward increasing commercial deployments.

Multi-layer Transport SDN was another topic that generated a lot of chatter in both Layer123 sessions and at a lunch-time debating table. Is multi-layer only through Layer 2 or 2.5? Or does it involve Layer 3 and IP?

After some discussion, the general consensus emerged that in order to maximize the value of an agile SDN-enabled network, multi-layer SDN and associated path computation must be Layer 0-3. The value of a multi-layer control plane is significantly diminished if IP is not a part of the solution. Independent fault detection and recovery mechanisms (think path computation) is exactly what we have in today’s networks with the packet-optical layers doing their own detection and restoration while IP executes its own Layer 3 detection and restoration mechanisms with protocols such as BFD and EMCP. Break a fiber in a network and all layers work almost completely independently to restore paths and services at their respective protocol layer.

With SDN and centralized control, we have the opportunity to ensure that wavelengths, ports and paths are coordinated and utilized for maximum efficiency. We can simplify our networks and drive out complexity and operational costs. Must a supplier’s controller and path computation element (PCE) contain Layer 0-3 functionality? Not necessarily. The hierarchical nature of SDN control means that hierarchical-PCE across multiple PCEs is a viable option. Packet optical suppliers could focus on Layer 0-2 PCE but then interface in a hierarchical manner with a Layer 3 PCE partner/supplier. Alternatively, a monolithic Layer 0-3 PCE is also possible but might require tighter coordination and integration than an equipment supplier may want to pursue. Either way, packet optical suppliers need to drive their PCE thinking from a Layer 0-3 perspective if we are to simplify the network, improve equipment utilization/efficiency and create agility for the future.

Click for more information about Tim Doiron or to discuss this topic contact Tim at tdoiron@acgcc.com.


   Tim Doiron
   tdoiron@acgcc.com
   www.acgcc.com

Monday, October 19, 2015

Evolution of Mobile Network Visibility: ACG HotSeat with Sanjay Munshi, Brocade

Sanjay Munshi, Senior Director of Product Management at Brocade Communications, and Ray Mota, CEO of ACG Research, discuss Brocade’s significant new network visibility product announcement: carrier-grade, physical and virtual network packet brokers, virtual TAPs, an SDN based session director and a single pane of glass management application. Sanjay highlights the challenges operators have in 4G/LTE visibility, how to address them in a cost effective manner and the critical need for new, next-generation network visibility architectures as mobile operators ramp up to virtual EPC and 5G with billions of M2M connections and Internet of Things in the not too distant future.



Click for more information about ACG’s video packages.

rmota@acgcc.com
www.acgcc.com

Tuesday, October 13, 2015

Deliver Dynamic Network Services: The Business Case for Carrier SDN, Webinar

Join ACG's Paul Parker-Johnson as he and other participants discuss traditional networks and why they are not optimized to deliver the on-demand bandwidth that enterprises need today. Traditional business processes used to plan, build and operate network infrastructure present obstacles to implementing an on-demand model. Read more about ACG's study and register for the Light Reading webinar.

Date: Wednesday, November 4, 2015,
Time: 2:00 p.m. New York / 7:00 p.m. London
Sponsored by Alcatel-Lucent








Thursday, October 8, 2015

Set-top Box to Cloud: Thinking Outside of the Box

Until recently video viewing was done via a cable converter set-top box was required to receive extra analog cable TV channels and convert them to content capable of being displayed on a television screen. Although most U.S. customers still use cable boxes, video consumption is rapidly changing to “TV Everywhere,” where a streaming service allows you to see shows from networks and content creators anywhere, anytime and on any devices. 

Set-top boxes are no longer needed to perform the processing or recording when all these functions can now be done in the cloud. The delivery path for IP video is a direct IP connection from a consumer’s device to the content in the operator’s network. With high bandwidth and low-latency networks made possible by the roll out of fiber and the current DOCSIS standards, wireline operators are able to leverage these capabilities to offer cloud virtualization of set-top box.

Content has now migrated into the television with smart TVs offering Netflix, Roku, etc. With the growing popularity of streaming devices and the launch of new online TV subscription services from companies such as Sling and Sony, cord-cutters are increasingly moving from cable to stream everything to the screens of their devices of choice. Cable boxes may eventually become obsolete altogether, as pay TV evolves to become an app or online service. This is the virtualization of the STB in which all application execution and video streaming are in the cloud and by clicking a remote, the application is delivered as a running video stream to a client. 

There are various benefits of virtualization of STB:
Simplifies the STB, thus  drastically reducing  CPE complexity and cost 
Offers unlimited number of applications to customers 
Able to run applications from multiple, different operating systems on the same client hardware
Change the interface easily

Charter is one example; the company is upgrading its aging set-tops by using a cloud-based technology. Instead of replacing boxes in every single household, the company has built a user interface in the cloud that is being sent to existing boxes in the form of a video stream. A Charter customer can even continue to use an old remote control; the set-top box simply sends each key stroke to servers that take milliseconds to register updates as the customer browses the list of channels or programs a DVR.

ARRIS and TiVo have partnered to integrate TiVo software and cloud-based services with ARRIS’ set-top boxes to offer global service providers a variety of platform options for delivering multiscreen, TV everywhere, and DVR experiences to subscribers. The first product of this collaboration is the DCX3635 Video Gateway, which features six video tuners with eight DOCSIS downstream channels, carries one terabit of onboard storage and is capable of supporting dual simultaneous HD video transcoding sessions.

Consumers have demonstrated that they are willing to pay for high-quality premium content that meets their interests, witness the success of HBO, Showtime and other pay for content providers. The versatility of having numerous monetization options for these platforms creates the optimal climate for broadcasters to create a profitable business by streaming video through branded applications. The winners in the video race “are companies who can integrate across all devices, across all platforms with a common interface.” 

The cloud offers this opportunity, especially for those providers willing to think outside of the box.

For more information about ACG’s video services, contact info@acgcc.com.


Meghna Zutshi
mzutshi@acgcc.com
www.acgcc.com

Tuesday, September 15, 2015

ACG Research Talks Capex and Opex Challenges for NFV and SDN Deployments

ACG's Robert Haim business case analyst, talks with RCR Wireless News about  the telecom industry continues push towards increased reliance on software solutions using virtualization technologies such as network functions virtualization, software-defined networking and cloud platforms, questions surrounding the financial implications of the move remain.
Robert discusses a recent ACG report that shines a more critical light on the financial implications of NFV, SDN and cloud deployments. Haim talks about how telecom operators should view the capex/opex trade off in terms of NFV/SDN deployments; the importance of service innovation gains in terms of the view on costs associated with virtualization platform deployments; and the potential impact “double opex” cost issue might have on how telecom operators approach their NFV and SDN plans.

Click to read more and listen to Robert's interview.

Click for more information about ACG’s business case analysis services or contact information@acgcc.com.

 
         Robert Haim
     rhaim@acgcc.com
       www.acgcc.com

Regardless of Technology, SPs’ Requirement Fundamentals Don’t Change

A basic tenet for infrastructure deployment for service providers and operators is to avoid introducing any platform, system or software that could potentially destabilize their network operation. For a consistent and smooth network operation, service providers demand platforms that offer 99.999 percent availability for a down time of no longer than five minutes per year. It has been demonstrated that network outages that last 10 minutes to several hours can and will have a direct negative impact on a service provider’s business. The cost of long down times can be quantified by SLA penalty clauses, as well as to an inherent opportunity cost in terms of higher customer churn rate and a poor image in the industry.

NFV and Virtualized Network Functions have complicated this issue further. While the promise of a lower TCO is naturally tempting, service providers’ fundamentals in their requirements do not change. VNF or not, they demand carrier-grade, highly available (5 9s or better) systems to ensure that mission-critical applications are protected.

Techniques to ensure high availability there should be redundancy at the network (a shadow network), system (for example, a backup router), hardware (for example, a backup control plane card), processors or other chips. For an NFV based solution, any virtualized function that happens to perform network- and application-critical functions must also offer 5 9s availability.

Examples are:
1. Network protocols that handle the control planes (routing, signaling)
2. Network services (application delivery controllers, for example, DPI, CDN, firewall, load balancers)
3. Packet core SGSN-MME, S/P gateways
4. Subscriber/Business connectivity (PPP, DHCP, GTP connections and tunnels)

The advantage of SDN/VNF based software is in its capability to scale out programmatically based on a priori set of rules. However, to ensure that a connection is not lost or the network does not have to go through a major re-convergence of resources, for example, routes, the time frame for scale out must be of O (milliseconds). This could be challenging to address via scale-outs only. It is better to assign virtual machines that back up critical parts of the network operation. The VMs must reside on a different board and preferably on different servers to protect the network from software crashes that could bring a board or the entire system down. Naturally, the active VM and the stateful backup VM will communicate via some sort of “hello” protocol to be aware of each other’s state, and share updated database of resources, for example, routing tables. The backup VM could be a standby or preferably an active one for load balancing. Of course, an efficient design would include only those software entities that need protection and are afforded a separate backup VM. For example, the control plane of a router needs 1+1 backup whereas the forwarding plane can afford an N+1 backup scheme.

ETSI NFV Expert Group on Availability and Resiliency stipulated its requirement in its specification: [paraphrasing] Single point of failures for the VNFs must be prevented by deployment of “independent” NFVI domains. The implementation of NFV should consider a geographically redundant deployment to introduce high availability to VNFs.

Vendors have followed this directive, and there are some novel and viable approaches that can implement it. Two examples are Wind River’s Titanium server, which introduces both hardware redundancy and software resiliency to the VNF that run on it. Another novel approach has been taken by Stratus Computers with its Software Defined Availability, which moves downtime prevention and recovery from the hardware or the OS to an “automated” software layer. When a failure occurs, a previously paired VM is brought back up, leveraging the cloud to run the application under protection. Stratus claims that with their SDA “any application with any availability need can be run in the cloud with application transparency.” The novel design stems from the company’s claim that no application code changes are required to benefit from SDA. Pairs of VMs are created between servers and the state of VMs is captured regularly and asynchronously, offering a stateful operational mode.

Clearly, the industry is on the right track for ensuring protection of VNFs that need it. The approach that is taken by vendors can be leveraged as a competitive advantage if they can demonstrate 5 9s simultaneously with efficient use of resources.

Click for more information about Robert Haim.


         Robert Haim
     rhaim@acgcc.com
       www.acgcc.com

Friday, August 28, 2015

2Q Vendor Financial Index: Highest Number in Low-Risk Category

Strong revenue outlook, high operating margins and other factors put Adtran, Brocade, Cisco, Infinera, and Juniper into low-risk category
ACG Research has released its 2Q 2015 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.
Low-risk vendors for the quarter are Adtran, Brocade, Cisco, Infinera and Juniper. Characteristics of low-risk vendors include strong revenue outlook, high operating margins because of sales, solid gross margin and expense discipline, low debt dependency, and high receivable efficiency ratio. Medium risk were Alcatel-Lucent, Ericsson and Fujitsu.
Adtran has the highest equity to debt ratio (2.32) in the industry and financing its assets with more shareholders’ equity than debt. The company’s financial performance is predicted to improve in the second half of 2015 as a result of higher carrier expenditure in U.S. However, weakness in Europe will continue to impact Adtran’s revenue. Brocade’s operating margin is 20.9 percent, one of the highest in the industry. However, the company’s operating income decreased by 18 percent QoQ. Brocade’s growing data center presence, positioning as storage networking experts and innovation in software-enabled networking, will be the focus in 3Q15 as well. Cisco’s a very high operating margins because of sales, solid gross margin, improved productivity and expense discipline led to its operating income increased 4.3 percent YoY. Application Centric Infrastructure and APIC are predicted to be the cornerstone of the Cisco’s next generation of networking architectures. Infinera's operating margin (8.0 percent) is high compared to industry average, driven by cost decline because of vertically integrated model and improved services profitability. Revenue for 3Q15 is estimated at $215 M, a 30 percent YoY growth and will be mainly driven by continued acceptance of DTN-X. Juniper’s revenue was up 14.5 percent QoQ, mainly driven by better demand from its cloud and cable service providers. The company’s services revenue increased 7.4 percent on YoY. Juniper’s partnership with VMware will enable highly automated cloud data center solutions for both service provider and mission-critical enterprise network.
The same as last quarter, Ciena, Cyan and ZTE remain in the high-risk category. ZTE, healthy but fluctuating net cash ratio, has had Difficulty establishing presence in North America markets. The company will focus on three key markets in the second half of 2015: carriers, government and corporate sectors and consumers. Cyan has the lowest operating margin in the industry. The company suffers from lack of customer diversification and revenue is concentration in one company, Windstream, which represented 52 percent of its revenue; two other companies accounted for more than 10 percent revenue each. Ciena has very low net cash ratio at $(6 M) and has substantial segment of revenue continues to come from sales to a small number of service providers. However, higher spending on optical upgrades and increased international orders will positively impact revenue.
“This is the highest number of vendors in the low-risk category we have seen since we started tracking vendor financial ratios and launched this report,” says Ray Mota, CEO, ACG Research. “Network vendors are taking operational efficiency and sustainability more seriously and the numbers show that they are running more efficient companies.”
For more information about ACG Research’s Vendor Financial Index service or other syndicated and consulting services, contact sales@acgcc.com.
rmota@acgcc.com
www.acgcc.com

Total Cost of Ownership Study:Network Packet Brokers

This study compares the total cost of ownership of hardware-based first generation network visibility solutions with Brocade’s next generation network visibility architecture. 

For information about ACG's business case analysis services, contact information@acgcc.com.

mkennedy@acgresearch.net
www.acgresearch

Wednesday, August 26, 2015

Tremendous Packet Core Momentum Fuels 2Q Worldwide Mobile Infrastructure Market, Surpasses $1 Billion

LTE-Advanced deployment, Packet Core deployments, VoWiFi trials and the high interest in end-to-end VoLTE solutions are driving the mobility market

The Worldwide Mobile Infrastructure market grew revenue in Q2 quarter over quarter. The Q2 Total Worldwide Mobile Infrastructure market surpassed $1 billion in revenues. The APAC region, mainly China, led this growth during this quarter, followed by EMEA. Mobile broadband net sales were primarily driven by overall radio technologies, specifically LTE. In the North American region the market managed to stabilize, helping most vendors to maintain flat revenues. Although most operators have completed their LTE deployments, it is anticipated that the fast-rising data traffic will definitely require further upgrades of U.S. wireless networks to add more capacity and avoid congestion experiences such as those recently witnessed in New York and Chicago, and generate opportunities for vendors.

Global mobile infrastructure spending posted single digit growth with most carriers adopting a “wait and see” status for new deployments and services. However, Packet Core, specifically EPC, grew in double digits and it is expected this growth will continue in the next quarters as operators modernize the network with new services. We anticipate more spending into EPC but also into virtual solutions, vEPC, in the coming quarters as the trials will start scaling up into commercial accounts. Services virtualization continues to gain traction because of the savings and the short time to market service delivery. More VoLTE and VoWiFi deployments are expected in the next quarters as most operators understand that these services are complementary and offer different benefits for indoor and outdoor support.

“There are three interesting points to note this quarter. The focus of Mobile IP Infrastructure spending has shifted to the Asia-Pacific region, coming mainly from China; the Evolved Packet Core market is the fastest growing segment. This trend will maintain momentum in the next quarters, and it will gain traction even more in North America with significant LTE network expansions,” states Elias Aravantinos, principal analyst, ACG Wireless and Mobility.

“The second point relates to another interesting trend related to the previous trend, the large scale of virtual service trials that are becoming commercial because operators have realized the savings and the advantages when virtualizing certain parts of the network. The first commercial Virtual EPC projects are expected to massively scale by the end of 2015. Finally, there is special focus on Voice over WiFi service adaptation and spending on the Evolved Packet Data Gateway or ePDG, which is a native part of this new infrastructure and ensures the call connectivity between the WiFi and the cellular network. Operators have already understood that there is no competition between VoWiFi and VoLTE and that these services complement, helping them to face coverage, traffic offload and churn issues,” says Aravantinos.

Click for more information about ACG’s mobility services or contact information@acgcc.com.


Vendors Report Solid Growth in 2Q15 Worldwide Router and Switching Markets

Increases in fixed broadband traffic and mobile broadband traffic on 3G and LTE networks are driving infrastructure growth

The Q215 total Worldwide Carrier Routing and Switching market increased 9.2 percent quarter over quarter and 3.1 percent year over year. The core routing segment had revenues of $638 million, increasing 11.1 percent q-q and up 12.5 percent y-y. The edge/switching segment posted revenue of $2.4 billion, up 8.7 percent q-q and up 0.9 percent y-y.

New applications, increases in Internet data and video traffic continue to drive global router and switching markets. Cloud and content service providers have been rapidly expanding their data center capacities to handle the demand for new services. These drivers require flexible and scalable networks and vendors are seeing the benefits; the 2Q total Worldwide Carrier Routing and Switching market posted revenue of $3.0 billion. 

One trend that continues to gain traction is providers focusing on their networks that connect the data centers. Inter-data center networks are changing to support new services and network requirements for bandwidth scalability, low latency, security, virtualization and automation. It is anticipated that by 2019 there will be 60 percent more data centers in the world’s metropolitan areas than there are today, and data center interconnect volumes will increase by more than 400 percent.

“Despite so many POCs in SDN and NFV being deployed, the overall market still needs scalable reliable routers for providers’ critical services,” states Ray Mota, CEO of ACG. “Routers aren't going away any time soon. What we will see is a variety of physical and virtual deployments with expanded TAM into Webscalers that need carrier-grade virtual routers and high-performance MPLS switching.” 

TREND and DRIVER HIGHLIGHTS
  • Increasingly, operators are turning to NFV as an enabler of new services, short service innovation cycles, and as a means to drastically reduce the operational cost of new and existing services.
  • Traditional architectures are not capable of delivering a sustainable business model because of long deployment times and the resulting complex manual and proprietary systems interfaces required to support. These factors have been identified as the major causes of high-cost, poor capacity scaling and long innovation cycles. Traditional appliance-based solutions are unable to react quickly to new and changing service opportunities and requirements, thus limiting revenue opportunity and increasing customer churn. Deploying multiple technology silos to deliver a mixed portfolio of services plus the operational implications of multiple specialist teams, adds further opex expense.
  • Internet of Things is starting to generate some real revenue for many service providers and the need for more security and scalable big data analytics will help offset the market with higher margins than traditional hardware equipment.
For more information about ACG’s services, contact info@acgcc.com.


rmota@acgcc.com
www.acgcc.com

Wednesday, August 19, 2015

Business Case for a Common NFV Platform

The potential of NFV to improve service agility and reduce total cost of ownership requires an approach that allocates hardware, software, and human resources to meet the requirements for all services in an on-demand approach. ACG Research has written a whitepaper, sponsored by VMWare and Affirmed Networks, that explores two emerging models of NFV deployment: 1) custom software stacks that aim to integrate as much of the model as possible into a single solution by a vendor and 2) a modular approach based on the deployment of a common virtualization platform where multiple VNFs and other NFV components are provided independently. The analysis evaluates each approach by comparing its TCO to the TCO of the traditional (appliance-based) approach where all approaches are serving identical functional requirements demand. The analysis determines that only one of these approaches will result in sustainable benefits to the operator.



mkennedy@acgresearch.net
www.acgresearch

Cisco Shifts Focus on Cloud Video: Selling Its Traditional Video Products

Technicolor and Cisco have also signed a long-term patent cross licensing agreement and a strategic partnership to develop and deliver next-generation video and broadband technologies on IoT solutions and services

In November 2005, Scientific Atlanta, Inc., a Georgia-based developer and manufacturer of consumer video and data services products, was acquired by Cisco Systems for $6.9 billion cash deal. Cisco already had products that let service providers deliver data, voice and mobility. With this acquisition it added the video component, the missing element, in this bundle, which gave a unique integrated architecture to the market and helped Cisco sell products to carriers developing “quadruple-play” services, a technology that encompasses voice, video, Internet and wireless.

The plan was to integrate TV set-top boxes with Cisco’s other main consumer product, Linksys WiFi routers, thus evolving a new “connected device” that combined voice, video and data. What nobody could predict at that time was that this acquisition would not yield revenue, margin and share gains, which at then looked possible.

Gaining market share, expanding customer base
During the last 10 years, the Scientific Atlanta acquisition brought in cumulative nondiscounted revenue of $27B to Cisco; however. In the past few years the company has seen revenue declines and more importantly profitability shrink irreversibly. Additionally, one of the key issues that Cisco faced was where this consumer business fit within Cisco’s mostly service provider, enterprise and public sector customer base where the margins have been traditionally robust for Cisco. And with rumors swirling for a while around Cisco’s SP video future, the announcement was not a surprise to industry watchers.

Cisco exited the business by selling to Technicolor SA, a French media and entertainment technology group, which has led the market in delivering advanced video services. Technicolor SA will acquire the business for $600 M to $450 M in cash and $150 million in newly issued Technicolor shares. The agreement is expected to close by the end of calendar 2016. The acquisition will give Technicolor an estimated 15 percent share of the global CPE market, with 60 million devices shipped each year, an installed base of 290 million set-tops and 185 million gateway devices across 100 countries. Starting in the first full year after completion, Technicolor expects the acquisition will add at least 10 percent to its earnings per share as well as double annual revenues at Technicolor’s connected-home division. As part of the strategic agreement and after the transaction has closed, Hilton Romanski, senior vice-president and chief strategy officer of Cisco, will join Technicolor’s board of directors.


Moving forward Cisco will focus on key transitions that align with its overall cloud strategy: to provide customers with video, IP access, wireless, cloud and software services, security, and IoT technologies to innovate the next generation of connected home experiences.

Mending Achilles heel
The set-top box business has struggled because of consumers’ shift toward other devices to access video. Service providers have adopted new cloud technologies to offer programming. Although the business generated $27 billion of cumulative revenues for the company, it has been an Achilles for the company for a long time, losing sales to competitors such as Arris Group Inc. and Casa Systems Inc. In the third quarter of fiscal 2015, revenues from its service provider video segment declined 5 percent because of lower set-top box sales.

The much awaited announcement has provided a clearer path for Cisco and how it plans to address the video market to align with its overall cloud strategy for products and services. Cisco’s exit from this low-margin business is sure to cheer up the investor community, which will look to the company for greater cloud-based revenues and growth.

For more information about ACG's video technology services, click here.

           Megna Zutshi
         www.acgcc.com


Tuesday, August 11, 2015

SDN/NFV: Gold Rush or Fool’s Gold?

Another gold rush has brought a high level of excitement to the network infrastructure producers and consumers alike. The mad dash to SDN/NFV feels like déjà vu, for example, mid 1990s for ATM and late 1990s for MPLS. See Paul Parker Johnson’sHow SDN (Today) Is Like MPLS Was (Then).” There are huge expectations from all stakeholders to offer and implement infrastructures that reduce both capital and operational expenditures, in addition to opening new doors for rapid deployment of innovative and lucrative business services.

Intuitively, the SDN/NFV combination should reduce the total cost of ownership (TCO), both capex (COTS versus purpose-built hardware) and opex (cost of provisioning and network maintenance). In evaluating TCO, there are other costs that could favor one approach versus the other.

Most often, capex savings are only discussed in terms of COTS hardware versus physical or purpose-built hardware. Basically, capex includes any upfront nonrecurring cost; that includes the cost of “network roll-out” (NRO), which is the cost of integration, testing and verification of the incremental hardware into the existing infrastructure. Unlike the cost of hardware, this cost component is not usually depreciable unless the NRO is done by the hardware vendor, and the cost is negotiated in advance. Other capex costs can include the cost of the underlying transmission network (in some countries this is leased). For NFV, the transmission network (and eventually the hardware maintenance) can be leased from the owner of the data center, which turns this cost into an opex component as it becomes a recurring cost.

A major advantage of SDN/NFV is in its opex, which gives the operators the ability to rapidly provision new services. Service roll-out is reduced by an order of magnitude of months to days. Moreover, with fast service roll-out, a new service can be tested with a limited set of customers first, and then upon favorable feedback it can be introduced to the entire target market. This can save a lot of headache (and money) later if the service turns out to be not as well received as it was expected.

Today, most infrastructures that are built on purpose-built hardware are going to stay in operation for a while and in many cases even after they are fully depreciated. Therefore, while migration to function virtualization is moving forward, operators will face a period of a “double opex” cost factor. This is not lost on anyone, and it can become a factor in delaying the decision to virtualization.

The move to virtualization requires a close study of the intermediate and long-term goals of the organization: customer needs, market penetration goals, and service offering to name a few. Although cost containment is a big factor, the revenue side of the equation must be given a much higher weight to remain competitive. After all, costs cannot go below zero, but the sky is the proverbial limit for revenue generation! And this is where SDN/NFV based infrastructures shine: rapid deployment of new and potentially lucrative services.


 
         Robert Haim
     rhaim@acgcc.com
       www.acgcc.com