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

Paul Parker-Johnson

pparkerjohnson@acgcc.com 

www.acgcc.com

Nokia-ALU: Long-Term Market Share Impact Will Definitely Shake Up the Market

Before we discuss Nokia-ALU and the impact this new company will have on the market, let me first clarify in case there is any doubt: this is an acquisition, not a merger. As for Alcatel Lucent, well, there are $5 billion reasons (Nokia’s cash) as to why this acquisition makes sense for the company. ALU has been cash strapped for years and had initiated its Shift Plan to reduce its costs and improve its margins.

What does this buyout mean for ALU? The company’s IPD (routing/IP technology group) will see a major impact and benefit albeit slowly. Recently, Juniper Networks stated that the company does $190 million in router revenue through Nokia, which will now transition to ALU.

Nokia fully intends to transition ALU into its company, having learned a lesson that Ericsson failed to learn with its Redback acquisition. Rather than assimilate the acquisition, Ericsson stayed too agnostic. Their failure has resulted in Ericsson selling more Cisco/Juniper routers than their own.

Nokia has learned from this failure and intends to transition 100 percent of the $190 million to ALU’s IPD group. Nokia will no longer promote Juniper and will offer refresh rates, but the goal is to move this revenue to ALU, which will result in a significant market share shift.

Another positive: Although Nokia has trended down many of its groups, the company has focused on mobility. There will be slight overlaps with ALU but together they will bring in more segments of mobility that they were not in before.

An impact? Definitely, but not immediately. When two companies of this size merge there are long-term adjustments. The market will not see anything in the short-term but by 2020 this acquisition will have a definite affect on the market and will cause major shifts in shares.

A word of caution, when Ericsson bought Redback neither company retained its IP talent. The result was a lack of visionaries in the IP segment. When ALU bought TiMetra, having learned from the Ericsson debacle, ALU kept its staff and successfully assimilated the new staff into its group. Whether this happens with Nokia, who knows? Merging the existing Nokia group with ALU’s IPD group, which has a 2.4 billion run rate, could end up being a big challenge because you now have a Swiss company and a French company, and it is anyone’s guess how personnel will shake out. Insiders, however, state that only 12 percent of ALU’s workforce is in France, and a there is a similar number out of Finland, which indicates that they will have less exposure and affect to hiring practices and HR related issues.

Again, time will tell.

For more information about ACG’s routing and switching services contact information@acgcc.com.

For more information about Ray Mota, click here.

Ray Mota

rmota@acgcc.com

www.acgcc.com

Nokia and Alcatel-Lucent: Which Should Buy Which?

Seeking Alpha reported that Nokia confirmed it is in talks to acquire all or part of Alcatel-Lucent and it is no surprise the companies are quibbling over valuation. Alcatel-Lucent has gone through some tough times and appears to be executing well on its Shift plan. Arguably, they are undervalued but investors are waiting for more tangible results, which will indicate that the plan is working. Current shareholders and employees can sense this positive momentum and are remiss to “sell-out” before the results of their hard work and commitment are fully realized. 

Consolidation in the equipment market is not unexpected. Communication service providers are consolidating too and are getting bigger. When this occurs large equipment providers tend to consolidate as well as they have fewer large customers and need economies of scale to be successful. This is truly a zero-sum game. Either you get 70 percent of the business, 30 percent as a second, keep the first one honest, source or you get zero percent. With the inherent complexities of SDN, NFV and virtualization, particularly in multi-vendor integration, it may be years before the “second’ source is even added.

Driving this buyout could be Huawei. The company is disrupting the entire global telecommunication equipment market. The industry has been aware of the company's “grey area” business practices such as outright appropriating technology and intellectual property to giving eNodeBs away for free, with customers just paying the yearly maintenance fees (with a bonus of dozens of undocumented back doors). Although this is disturbing to the industry what really is of concern is Huawei’s huge product portfolio, their ability to throw “armies” at initiatives and their ability to take a long-term view to market (and global) domination.

The big issue for either Nokia or Alcatel-Lucent is who is going to compete with Huawei? Communication networks are a fundamental asset to nation states. They drive economic development, entertainment, education, national security, etc. Perhaps it’s time all governments treat them as national assets.

Click for information about Greg Whelan. 

Contact sales@acgcc.com for more information about ACG's products and services.

Greg Whelan

gwhelan@acgcc.com

acgcc.com

ACG Announces 2014 Omega Award Winners

ACG Research announces the 2014 winners of the company’s first ever Omega Awards. The award honors excellence in two categories: message marketing with HotSeat, Whiteboard and Spotlight Innovation videos and operational excellence.

Juniper Networks earned the award for its HotSeat video “Defining High IQ Networking.” Rami Rahim, EVP/GM of the Juniper Development and Innovation team at Juniper Networks, and Ray Mota, CEO of ACG, discuss the definition of a high IQ network architecture and the significance to service providers and their customers. They recap Juniper’s recent announcement of new solutions that will help service providers automate networks, enable them to scale and dynamically create new services. The new NorthStar Network Controller is highlighted with use cases, as well as Juniper’s position and market differentiation on open standards.

Whiteboard Winner Nuage Networks was awarded the Omega for its “Seamless enterprise networking; data center to branch” video. Sunil Khandekar, CEO, Nuage Networks, and Ray Mota, CEO of ACG, discuss how the cloud is changing the way businesses consume and share information: for internal use or for sharing information with customers and business partners. The trouble with the cloud is it’s not ubiquitous; it is made up of distinct islands of capability. The compute resides in the data center, and the consumers reside remotely. Nuage Networks has shown that with SDN we can remove the static constraints within and across the data center to unleash the speed of consumption of information within the cloud. We now need to provide the same seamless environment for the branch environment and to improve the dynamic nature of the wide area network.

Trusted Vendor Award went to Cisco. The company continues to demonstrate operational excellence as measured by ACG’s financial index. Some of Cisco’s strengths include:    

• Very high operating margins because of sales, solid gross margin, & expense  discipline; operating margin increased by 47.3% 
• US commercial and enterprise orders increased by 10% YoY
• Highest R&D potential (31.6%); allocated more than $1.4 B to R&D each quarter in past two years
• High receivables efficiency ratio: 2.6; aligned credit policy
• Effective asset utilization yielded $3.5 for each fixed-asset dollar
• Dependency on debt is low; can acquire less expensive loans
• QoQ Operating income jumped 52.5% in 3Q

The vendors’ performance scores are calculated using 11 ratios and Z scores, subdivided into two categories: sustainability and operational; the data originates from annual reports, and quarterly filings. The index examines standard financial ratios related to profitability and liquidity, which are validated by Wall Street. An average of all ratios across all vendors was defined as the index. The goal of the index service is to create an industry baseline that takes all of the vendors in targeted sectors and creates an industry average to determine vendors’ risk levels.

Check out the video of Ray Mota, CEO of ACG, giving out the awards.

Interested in becoming a star in your own video? Want to find out which vendors demonstrate operational excellence and sustainability? Check out our services or contact ACG at sales@acgcc.com for more information about services and products.

Congratulations to the 2014 Omega Award winners!

Ray Mota

rmota@acgcc.com
www.acgcc.com

Nuage/ALU on the VNS Solution in an SP Context

Accelerating time to deployment, enabling differentiation, achieving policy continuity for services and applications from the endpoint to the cloud, and streamlining operations with the same automation and elastic system architecture at every key point in a network deployment aspirations widely pursued by both enterprise IT teams as well as service providers providing cloud and network services to business and enterprise customers. With the introduction of its Virtualized Network Services solution, building on the strengths of its already available Virtualized Services Platform for cloud and virtual data center networks, Nuage Networks is enabling the kind of pervasive agility its enterprise and SP customers have been searching for by bringing the benefits of cloud and virtual infrastructure technologies to enterprise branch and distributed network sites. 

Click here to download report of ACG’s analysis of the VNS offering and its contribution to achieving these goals in its Research Note on VNS.

For more information about ACG's SDN services, contact sales@acgresearch.net.

Paul Parker-Johnson

pparkerjohnson@acgresearch.net 

www.acgresearch.net

ACG HotSeat Whiteboard on Nuage Networks: Seamless enterprise networking; data center to branch

Ray Mota, ACG Research, and Sunil Khandekar, CEO, Nuage Networks, discuss how the cloud is changing the way businesses consume and share information: for internal use or for sharing information with customers and business partners.The trouble with the cloud is its not ubiquitous; it is made up of distinct islands of capability. The compute resides in the data center, and the consumers reside remotely.

Nuage Networks has shown that with SDN we can remove the static constraints within and across the data center to unleash the speed of consumption of information within the cloud. We now need to provide the same seamless environment for the branch environment and to improve the dynamic nature of the wide area network.

Click to watch the video.

For more information about ACG's router services, contact sales@acgcc.com.

Ray Mota

rmota@acgresearch.net

www.acgresearch.net

ACG Innovation Spotlight with Rotem Salomonovitch of Nuage Networks

Paul Parker-Johnson, ACG Research, and Rotem Salomonovitch, Nuage Networks, discuss the cloud and how it is changing the way businesses consume and share information. The trouble with the cloud is its not ubiquitous; it is made up of distinct islands of capability. The compute resides in the data center, and the consumers reside remotely, in the offices and branches of corporations or at the households and on the move. In the car, on the train, at the airport (or even on the plane). These users, the consumers of the data in the cloud are mobile and that means this is a global problem.

The fabric that links the information flow across and through the cloud is based on static networking models, models that have not fundamentally changed for over 20 years; technology has evolved but the fundamental architectures have remained the same.

Nuage Networks has shown that with SDN we can remove the static constraints within and across the data center to unleash the speed of consumption of information within the cloud. We now need to provide the same seamless environment for the branch environment and to improve the dynamic nature of the wide area network.

Click to watch the video.

For more information about ACG's SDN services, contact sales@acgresearch.net.

Paul Parker-Johnson

pparkerjohnson@acgresearch.net 

www.acgresearch.net

The Word on Nuage Networks' VNS Solution

Paul Parker-Johnson catches up with Nuage Networks on the strengths of their new Virtualized Networking Services Solution. Find out what he has to say.

For more information about ACG's SDN services, contact sales@acgresearch.net.

Paul Parker-Johnson

pparkerjohnson@acgresearch.net 

www.acgresearch.net

Looming Fiscal Cliff and Europe Uncertainties Continue to Undercut Router Market Growth

In addition to economic uncertainty, vendors in the router and switching market are dealing with more intensive competition, diminishing service provider’s profit margins, and their largest customers cutting spending and delaying purchases of new equipment.

Against a backdrop of global economic instability and political unrest, the Worldwide Carrier Routing & Switching markets reflected typical cyclical performance, remaining slightly flat in Q3. ACG Research anticipates global economic uncertainty, a challenging market and aggressive competition will continue to put pressure on vendors’ pricing and margins. “Enterprise CEOs will, most likely, remain conservative and more focused in their IT spending and hiring for the remainder of the year,” states Ray Mota, managing partner. “These factors will continue to force vendors to innovate and develop technology that can deliver significant operational savings as well as address market demands for new and cutting-edge services that are application focused. Despite some vendors providing low guidance for Q4, AT&T announced a CapEx increase of $2.5 billion per year.”

Q3 Total Worldwide Carrier Routing & Switching market posted revenue of $2.75B. The global market decreased 1.7% q/q and 2.5% y/y. Core Routing revenues were down 1.9% q/q and 9.6% y/y. Edge Routing and Switching revenues were down 1.7% q/q and down 0.4% y/y.

Cisco posted a total worldwide decline of 0.3% q/q and a decrease of 0.8% y/y. In spite of the decrease Cisco reports that its CRS and ASR series continue to demonstrate strong traction. Alcatel-Lucent decreased 2.16% q/q but was solidly up 8.2% y/y. ALU’s 100 Gig is a big differentiator for the company, and the company continues to see more sales traction with this port for core solutions, edge and metro. Juniper increased worldwide routing revenue 1.2%, q/q but was down 7.7% y/y. The company cited the reduction in service providers purchasing high-end networking equipment, difficulty penetrating new markets with new products and strong competition from Cisco as factors influencing its quarterly results. 

Vendor	Q-Q MS Point +/-	Y-Y MS Point +/-
Cisco	+0.8	+1.0
Alcatel-Lucent	-0.1	+1.8
Juniper	+0.5	-1.0
Tellabs	-0.1	-0.4
Huawei	-0.2	-0.2

In the US the threat of the “fiscal cliff” is creating a tremendous uncertainty and service providers are monitoring it closely in order to get some visibility on what kind of impact it will have on consumer, small, mid and enterprise business spending. The threat of another recession could potentially extend service providers’ build-out of new services that, in turn, could impact their CapEx spending. ACG plans to monitor this closely in 2013 with our service provider capacity index service, which tracks the rate of change in capacity and how “hot” SPs are running their networks.

QUARTERLY TREND and DRIVER HIGHLIGHTS

• Core network traffic is growing in excess of 50% per year and new services such as content-rich digital media, cloud and mobile placing new requirements on the network.
• Competitive factors such as lower pricing and reduced margins are putting pressure on the routing segment.
• Interest in mobility and cloud computing continues to grow, especially with SPs that recognize that to have a cost-effective, scalable, automated data center that enables them to offer new services/products they need technology that can deliver significant operational savings.
• In a recent ACG survey, 78% of respondents reported that they have SDN plans that were either under discussion or were planned deployment. Interest in SDN has increased in momentum for two primary reasons: 1) a less than positive macroeconomic environment and 2) providers are searching for a new way to deliver new services and realize significant operational savings while increasing service velocity.

For more information about ACG Research's Router and Switching service, click here or contact sales@acgresearch.net.

Ray Mota

rmota@acgresearch.net

www.acgresearch.net

Partnering or Vendor Outsourcing: Speed Your Time to Market

All major vendors offer some limited to complete outsourcing capabilities in either advanced services or outsourcing of management of the network operations center. The goal of outsourcing is to allow a provider to focus on other priorities like; customer acquisition, increase value to customers and deliver value add services such as cloud computing or other up-sell services.

Service providers are either true telco or a carrier and tend to be very slow to move to a new technology or offerings potentially missing inflections in the market. Their internal silos and sales teams are set up to sell connectivity and access and less able to sell the advanced offers, such as unified communications, cloud offers and video services, demanded by the market.

• ACG Research investigated nine companies with unique profiles and ranked them on their ability to address key factors:

• Communication and Unified Communication: Offers which build on connectivity and take IP communications and convergence to the next level.

• Technology Portfolio: Virtualization end-to-end portfolio and technology that creates value and customer stickiness.

• Multivendor: Capabilities to address service providers’ environment to deal with outsourcing all or part of their infrastructures.

• Connectivity Capability: Knowing what the outsourcer’s capability is in providing robust connectivity to meet demands of providers as a customer.

• Customer Service: The ability to create value for on demand, on time resolution and coverage in the markets the providers do business.

• Change Management: What are the processes to change the current do-it-yourself in-house provider IT to outsourcing or out-tasking parts of the network? Does the outsourcer have change management processes tuned to carriers?

• SP Specific Offers: The outsourcer’s ability to have a dedicated team and tune multitenancy offers to handle the environment of the providers.

• System Integration Skills: The ability for the outsourcer to offer system integration to customers of the providers or to the provider to address gaps in migrating a customer or provider to a virtualized infrastructure or process.

• System Integration Experience: What use cases and customer lists can the outsourcer cite?

• Cloud Vision: What is the outsourcer’s ability to outline the cloud reference architecture and deliver technology, thought leadership and understanding of the provider’s cloud opportunity?

• Cloud Experience: In looking to an outsourcer for quick time to market there are requirements that dictate that the outsourcer has done this before and in many instances. What use cases can the outsourcer cite?

Our Outsourcing report covers the following: Cisco, HP, IBM, Globecomm, Avaya, CSC, Ericsson, Alcatel-Lucent, and NSN. For more information about this document contact ACG Research at sales@acgresearch.net.

Click here to download Gaining the Edge in Cloud Computing and other articles.

Click here to download Business Deep Dives.

Lauren Robinette
lrobinette@acgresearch.net
www.acgresearch.net

Chris on the Spot: Mobile World Congress Day 1

Mobile World Congress is reporting more than 50,000 attendees, and fortunately the metro and bus drivers reached an agreement and are not striking – helping both the traffic and the mood of the attendees immeasurably.

Speaking of traffic, this is the second show in a row, after CES, where automobiles again take the stage. Walking around the Fira (conference center) one can alternatively browse through a new connected Ford or if something sportier is what you are after, a connected BMW. Love to take a test drive in one of THOSE.

Nokia got the show off to a good start with CEO Stephan Elop highlighting the speed of Nokia’s innovation this past year: four new Lumia devices as well as a range of other devices for the emerging markets. Elop cited the increased clock speed at which Nokia is operating today – a nod to what many perceive is Nokia falling behind in the smartphone wars to Samsung, Motorola and Apple, among others.

However, Nokia has said it will be a leader in bringing location to the market as a value-added service, a point that was underscored by the announcement of a partnership with Groupon.

Groupon benefits from knowing where its members are exactly rather than in a general geographic area, allowing for the more specific targeting of its offers and allowing for immediate offers to pop up to nearby users.

NSN’s Rajeev Suri announced his prediction that by 2020 users will be consuming 1Gb of data per day. That is for each user the equivalent of an hour of HD video every day. I understand how much traffic video generates, but until video content becomes more searchable or better targeted to information delivery I’m not sure I buy it. I still find it much easier to browse Flipboard or CNN for headlines and then click through to get more detail. And not every phone call I make will be a video call either. I could be wrong however.

NSN also expects that applications will become more intelligent, self learning and connecting when and how the app needs to connect. This I can see, along with an intelligent voice interface that figures out what apps IT needs to access to find me the best deal on a pair of shoes or the closest theater/restaurant pairing for a movie I want to see. I already do a lot of voice interface with my phones, relieving me of typing and navigation, but I would like to see it more intuitive to my preferences.

However, ALU points out the downside of intelligent apps or at least the current crop of intelligent applications such as Suri: IOS5 has 50 percent more signaling load than IOS4 has, and Ericsson highlights that signaling capacity not throughput is one of the top concerns of the operators. In fact, an unexpectedly high signaling load is said to be the cause of most of Verizon’s LTE network issues.

This leads us to service provider WiFi, probably the one topic at which nearly all of the mobile operators are looking and certainly a hot topic for the infrastructure vendors too. But that is a topic for tomorrow. Until then!

Stay tuned for other topics/themes emerging from the show, which center on connected things, 4G (LTE and HSPA+), "easy and simple" and monetizing the Internet.

Chris Nicoll
cnicoll@acgresearch.net
www.acgresearch

Juniper Recovers #2 Spot from Alcatel-Lucent in Q1/11 Service Provider Routing & Switching Market Share Report: ACG Research

The Worldwide Carrier Routing & Switching markets have seen typical 1Q seasonality, declining 14.2% sequentially but growing 9.0% year over year, according to ACG Research. The Total Worldwide Carrier Routing & Switching market grew revenue $2.7B in Q1/11. Core Routing revenues were down 11.2% q/q and up 9.5% y/y. Edge Routing & Switching revenues down 15.1% q/q and up 8.9% y/y.

Cisco continues to hold the number one position with 50.3% of total market share. In a dramatic market shift, Juniper reclaimed its number two spot, bumping Alcatel-Lucent to number three. According to Ray Mota, managing partner, “this seasonal decline was expected, especially after the strong growth posted in Q4.” ACG is cautiously optimistic about the future outlook of the market. “We see service providers spending on cloud computing and video services and managed services will help drive growth in the remainder of 2011. Vendors that execute on their strategy stand to gain good market share of CapEx spend associated with those services.”

Top Vendors: Worldwide Carrier Routing & Switching
Vendor	1Q11
	Rank	Q-Q MS Point +/-
Cisco	1	1.9
Juniper	2	(2.3)
Alcatel-Lucent	3	(4.0)
Tellabs	4	0.3
Ericsson	5	(0.1)

QUARTERLY TREND and DRIVER HIGHLIGHTS

• Carriers are reducing their CapEx this quarter but still spending in mobility and new services creation opportunities.
• Many providers have exhausted or will soon exhaust their IP addresses. Service providers have to decide about IPV6 now and gradually increase their costs or continue to employ band aid solutions to NAP and risk their business continuity.
• Security is the number one concern of enterprises as they continue to move toward virtualization and cloud offerings.
• Carriers are looking to Carrier Ethernet, QoS, CDN, IPV6, and end-to-end technologies to address their pain points associated with the increasing amount of video traffic.

ACG focuses on providing market analysis and consulting to help service providers and vendors monetize their existing infrastructures and increase operational efficiency and profitability. ACG is uniquely qualified to develop the TCO analysis and white paper. ACG applies multi-disciplinary expertise and multidimensional solutions to complex business and technology issues, delivering greater strategic value than a one-dimensional firm. Each consulting engagement is uniquely structured — no forced methodologies or canned reports are employed. Our consultants’ collective experience is derived from leading firms across a broad spectrum of professional disciplines including management consulting, engineering, marketing, financial analysis, and IT management and operations. We combine advanced academic degrees with practical business experience.

ACG has extensive experience assisting vendors and service providers define and execute their marketing programs from determining their value proposition, positioning and messaging; to prioritizing marketing programs; to supporting execution by designing seminar series and developing and delivering compelling content such as keynote presentations, sales and analyst presentations, white papers, videos and articles.

Our strong relationships with vendor market leaders and innovative start-ups, enables ACG to offer extensive knowledge of product portfolios and strategies as well as emerging architectural shifts. We have a strong track record of predicting market trends and separating hype from practical reality.

Karen Grenier, Marketing and Communications
kgrenier@acgresearch.net
Desk: +1 408-200-0967