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Friday, December 20, 2013

F5 Hits the Agile Button and Accelerates its Path to NFV

It is a well-established goal for service providers to maximize their agility in creating services and at the same time increase their efficiency and reduce the marginal costs of scaling. This is true for cloud and media and mobile and residential and social networking and the Internet of Things and, well, in every important area of service and application innovation providers are pursuing.

With an eye on those goals, an explosion of energy and talent has been unleashed in the past three years to make progress on them in cloud computing and the various dimensions of network infrastructures that need increased agility and scale. Most recently a broad effort to define the best paths in virtualization of critical network service functions has been put into full gear in the Network Functions Virtualization (NFV) initiative under leadership of the world’s most prominent service providers and participation by a wide array of vendors to chart the course. Progress has been made at a torrid pace in NFV throughout 2013 and gives every indication of continuing.

As is true in the formative stages of most legitimate paradigm shifts, the outlines of new architectural approaches and the best practices for pursuing them in the new solutions are starting to emerge. The ETSI groups are starting to yield important NFV specifications, and early stage use cases are starting to get implementation designs from suppliers. It’s the right time for innovators to begin showing their colors and putting new designs in play. Some of the most important areas where innovations will start making the new services possible are in the fine touches of intelligent traffic steering, service chaining for value added services, and flexible combinations of modules in heavily virtualized processing pools that will retain the behaviors advanced applications require and still achieve the efficiency and scaling goals required to support the world’s relentless growth in utilization.

Last week, at the Carrier Network Virtualization conference in Palo Alto, F5 conveyed a powerful and compelling blueprint for navigating the transitions in moving to a more virtualized service delivery infrastructure and providing important categories of service processing intelligence at the appropriate points in network designs. What’s relevant about the blueprint is not that individual solution components would be virtualized as required in the appropriate VM pools—those are table stakes in the process. The special ingredients in the F5 blueprint are the breadth of functionality and mix of deployment points articulated as addressable by its portfolio; the appropriateness of fit at each point for the capabilities required; and the attention to steps in the evolution cycle that make pragmatic sense in each targeted service area for the journey to virtualization to yield results.

For example, a path for transitioning the Internet to mobile integration point so important in mobile operator networks (the SGi interface) into a flexible, modular and scalable combination logic pools for data plane, control plane, and value-add services processing that can each be virtualized at their own pace, remain consistent with the architectural requirements of 3G/4G, and add value to the applications being provided was clearly outlined. In parallel and at a different point in the service delivery topology, a similar blueprint for incorporating intelligent service processing functions in the appropriate contexts in cloud data center sites was described. In this case, modular versions of firewall, load balancer, NAT, and other functions are deployable in the context of whole applications being offered to wide subscriber bases (such as media delivery or rich communication services) or through use of virtual editions of similar modules, in individual tenant computing segments for their particular needs.

Examples could continue. The point is, at a time when the need for clear articulation of practical paths to achieving network virtualization is poignant, one set of blueprints for navigating that transition is being articulated by F5 with the especially appealing attribute of being manageable and targeted at the right functional goals.

Will F5’s integration with key orchestration and SDN suppliers be effective? Will integrations with ecosystem partners for revenue services such as mobile IP and residential media delivery be successful? These are important execution questions that remain to be determined. However, before those questions can even be asked, the compelling vision for how to approach the transition and achieve the economic and functionality goals the journey to virtualization is calling for has to be in place. For F5’s purposes, it is. 

For more information about ACG's NfV services or SDN services, contact

Getting to Know OpenStack Neutron: Open Networking in Cloud Services

The OpenStack Foundation has established a bold mission for itself: to harness the cloud community's many talents in developing a robust, open and agile software suite that supports cloud computing in a wide variety of environments, including public, private and hybrid clouds. Read more.

For more information about ACG Research's SDN services and cloud services, contact sales at

Wednesday, December 18, 2013

NFV Is an Opportunity Change Network Operators' Business Models

Network Functions Virtualization explicitly targets the two biggest problems facing network operators: bringing costs in line with revenue growth expectations and improving service velocity. The basis of Network Functions Virtualization is that industry standard IT virtualization technology (servers, switches, and storage) located in data centers, network nodes or end-users' premises can be used to reduce the cost and increase the speed of service delivery for fixed and mobile networking functions. Read More.

For more information about ACG's business case analysis services, contact

Monday, December 16, 2013

Q3 Optical Networking Market Update

The optical infrastructure market continues to exhibit its cyclic nature with the 3Q Worldwide Total Optical Networking market dropping 7.4% quarter-over-quarter but still managing to yield a year-over-year gain of 5.7% with revenues of $3.36 billion. POTS and Metro WDM were the only two segments reporting positive quarterly growth, and for the first time the Metro WDM segment surpassed the Long Haul DWDM segment to become number one on a revenue basis. Traffic in the Metro WDM segment is closely tied to user demand and applications, and more traffic is staying within a metro, partially by network design and architecture. This growth will drive the need for higher performing Metro networks.  

The POTS segment, the fastest growing segment as both a percentage of revenue and total dollar contribution, saw strong demand, growing 8.3% quarter-over-quarter and 42.1% year-over-year. MSPP, Long Haul DWDM and SONET/SDH segments, however, saw demand decrease; all posted negative quarter-over-quarter growth. The Long Haul DWDM segment did grow 5.2% year-over-year and was number two in terms of total revenue contribution.

In 3Q the vendors’ performance did not vary as widely as observed in previous quarters, enabling most of the top 10 vendors to keep their relative positions. There was, however, enough variation to reshuffle positions 5–10 within the Optical Networking market.

3Q, 2013 Worldwide Total Optical Networking Market
3Q Revenue ($M)
$ 710.8
$ 427.0
$ 376.2
$ 368.2
$ 260.5
$ 247.0
$ 147.6
$ 128.0
$ 126.6
$ 120.8

Huawei and ZTE maintained their lock on positions one and two. Alcatel-Lucent and Ciena both are vying for the third place and are within 2% of one another. A similar situation exists for Cisco (fifth position) and Fujitsu (sixth place); they only differ by 5.26% points and traded places this quarter. In a similar vein Coriant and Ericsson swapped positions 7 and 8. NEC made the top 10 this quarter by bumping Tellabs out of the ranking.  

By region North America was the best performing, providing 5.2% quarter-over-quarter gains and 23.3% year-to-year. This growth was largely driven by AT&T, Verizon and Sprint. Although the CapEx spending of these Tiers 1s is winding down, it has been a significant driver throughout this year. APAC, the largest region from an optical revenue standpoint, reported a decrease of 15.4% quarter-over-quarter but managed a positive 4.5% year-over year. EMEA is still showing lethargic performance and was down 3% quarter-over-quarter and 7.0% year-over-year. LATAM posted the largest declines on a percentage basis: -26.4 quarter-over-quarter and -9.8 year-over-year.   

  • The MSPP market segment continues to decline revenue and for Q3 dropped 15.3% quarter-over-quarter and 14.5% year-over-year. The general transition away from legacy technologies is driving the decrease in this market segment. As enterprises move to the IP/Ethernet environment, product types are shifting from MSPPs to Metro WDM platforms.
  • Marlin Equity Partners continues its acquisition and privatization of companies within the optical vendor ecosystem. With its recent Tellabs offer now approved by shareholders, Marlin Equity Partners has become a major player in the optical market. In the LAM region Tellabs and Coriant held the fifth and sixth positions. 
  • Demand for 100 Gig interfaces is tapering. Although many vendors made their 3Q revenue target, the product mix is still largely being driven by 100G deployments by the major Tier 1 service providers. The overall port count for 100G deployment was down 12.5% for some vendors.
  • The Metro WDM market was strong, particularly in North America, and will soon surpass sales of the MSPP market. This transition is driven from the migration away from the legacy technologies such as ATM and TDM to an all IP/Ethernet environment. We expect this trend to continue as well as spread to other regions with long existing legacy infrastructures.

The optical networking equipment market continues to be driven by its traditional application, wireless backhaul and data centers applications. Although there has been some consolidation, the space has numerous players and competition remains fierce as vendors compete for Greenfield opportunities, target the installed base of their competitors’ aging solutions and look for any chance to unseat an incumbent. This trend is expected to continue throughout the remainder of 2013 as vendors attempt to pull in all possible revenue to have a strong finish this year.

For more information about ACG's packet optical transport services, contact 

         Jeff Ogle   

Friday, December 13, 2013

The Weather outside is Frightful, Time for ACG’s Annual Predictions for Video

It has been a tough year for many sectors of the video business. The STB business took a big hit and is now generally recognized that it is a commodity business. Home gateways grew significantly. The transition to CCAP is leaving many QAM vendors out in the cold and fights over retrans fees are not helping.

Pay TV is no longer a must have service, (about one-quarter of Charter’s customers do not want TV service) and cord cutting/shaving is becoming more common. Competition from outside the traditional competitor circle is getting stronger. Netflix continues its robust growth and now has 40 million subscribers. Google is continuing its fiber rollout. In an apparent response to Google, AT&T recently announced GigaPower, a fiber-based service with 300 Mbps and a free upgrade to gigabit service available next year.

The industry structure is shifting and talks about consolidation are rampant. Time Warner and Comcast both hired M&A staff. On the equipment side, Arris is still assimilating Motorola. Cisco is working on shifting its business away from commodity hardware to software with its NDS assets. With technology, viewing habits and competition rapidly changing, ACG sees consolidation as necessary and inevitable.

Tablets continue to grow and video viewing on tablets/mobile devices are the fastest growing segment. Forty-eight million tablets were shipped in Q3 13, 37% Y-Y growth rate. Video is about 44% of all mobile data usage and is expected to account for over 60% by 2018. 

MSOs are recognizing the need to change viewing experience with better user interfaces and more OTT like viewing options. Charter and Liberty both tested cloud-based UI/guides that are more competitive with the OTT players. They are also getting serious about business services and other services such as home monitoring. 

  • 2014 will be the year of 
    • CCAP 
    • Home gateways 
    • Online video advertising systems 
    • Cloud-based UI deployments 
  • STB prices will continue to fall; there will be increasing competition from no-frills vendors.
  • Traditional pay TV subscribers will continue to fall in developed countries; OTT services will grow.
  • More MSOs will launch multiscreen and OTT like services, though if history is a guide, few will take much share from Netflix and other OTT services.
  • Current home monitoring/security offerings from the MSOs will be modestly successful. Offerings must overcome negative brand perception that MSOs created over with high prices and poor service.
  • Pay TV subscribers in developing nations will continue to grow, though long term we see that penetration rates will disappoint as customers just get data service and watch via streaming.
  • Google will continue to deploy fiber in existing markets and may announce one more market in 2014, but no massive nationwide effort. 
  • Google’s Loon project with weather balloons in the stratosphere is fraught with technical and business problems; there is a slight chance of it being deployed commercially. 

 For more information about ACG's video services, contact

David Dines

Tuesday, December 10, 2013

Business Case for Cisco Intelligent WAN

ACG Research analyzed four approaches to replacing all or some MPLS VPN WAN services with business broadband Internet services without compromising network availability. It found service cost savings of 34 percent to 81 percent, project payback of five to 11 months, and return on investment of 199 percent to 1,220 percent for three years of monthly cash flows. Network downtime can be reduced by 79 percent by adding a second router at each branch. This does not affect monthly savings but it doubles project payback; none-the-less ROI is 279 percent when dual broadband services are used. IWAN also greatly increases bandwidth utilization by making both bandwidth paths active simultaneously. In addition, IWAN offers features to support secure direct Internet access, where guest access or Software-as-a-Service can be automatically offloaded to the Internet. This eliminates the costly and performance diminishing practice of backhauling Internet traffic to the data center. Also, throughput and application performance are enhanced through application-specific optimization capabilities.

For more information about ACG's business case analysis services, contact

Monday, December 9, 2013

Q3 2013 Mobile Market Update

The mobile infrastructure market continues to be a bright spot for the telecom industry. According to the industry statistics (GSA), 109 LTE networks have launched commercially in the past 12 months for a total of 222 commercial networks in 83 countries. The GSA expects 260 commercial networks by the end of 2013. Additionally, 474 operators in 138 countries are investing in LTE, of which 421 have made commitments to deploy.

Additionally, mobile broadband is living up to growth expectations: subscriptions are now over two billion, and the number is expected to grow to 9.3 billion by 2019. Of these, there are currently 100M LTE subscribers, and this expected to grow to two billion in five years. This approximate 4X growth in subscribers will drive a 10X growth in network traffic.

Mobile infrastructure spending remained strong in Q3 2013, up 3% annually to $1.2B. This growth is because of the continued strength in LTE globally, although North America is starting to peak, but other geographies are starting their ramp. The Chinese wireless carriers are just beginning their deployments, and we should see extensive growth in the coming quarters. EMEA is awakening from its slumber is starting to show signs of life.

Mobile IP Backbone grew 4.3% Y-Y. Mobile IP Backhaul continued its robust growth at 21.7% Y-Y as additional backhaul capacity is needed to deal with the increase in data handled at existing base stations as well as for new small cell sites. The Mobile Packet Core segment was down double digits Y-Y, primarily because of delays in North America.

Small cells have been one of the major hubs of innovation in the past few years and did not disappoint this quarter: it grew 42% Y-Y, with growth across all segments. Femtocells increased 57% Y-Y; picocells increase 34% Y-Y; and micro/metrocells increased 31% Y-Y. SP WiFi remained strong at 40% Y-Y increase and IP backhaul grew 22% Y-Y.

Small cell adoption has not been a smooth curve as some carriers misjudged consumers’ price sensitivity early in the adoption cycle and the demand did not meet initial expectations for femtocells. ACG sees the most interest in unlicensed spectrum/WiFi offload because of the lower costs and increased flexibility. Other issues that will impact adoption rate are LTE transitions/hetnet operations, hotpsot 2.0, new backhaul technologies such as millimeter wave and free space optics (FSO), and power.

The capacity enabled by LTE is rapidly changing the face of information technology and enabling the always-on/connected society. The next wave will enable high-quality video entertainment, video communications, gaming, location services and commerce, not just voice calls and texting. The race to  provide these services and be more than dumb pipes is paramount to MNOs. This pressure is propelling technology vendors to develop the solutions to enable and control this complex environment.

For more information about ACG's mobility services, contact

David Dines

Friday, December 6, 2013

Happy Holidays from the Crew of ACG!

Thank you for helping make 2013 another successful year for us. We look forward to 2014 and providing you and your teams with the quality services that you have come to expect from ACG. 

We wish you and yours a wonderful holiday season filled with laughter and love. Have a happy, healthy and successful 2014. 

Thursday, November 7, 2013

Cisco’s Application-Centric Infrastructure: Tighter Integration

ACI is an important step forward in unifying physical and virtual resources and improving application experiences

Among the most important requirements in delivering superior application experiences as the industry transitions to an increasingly virtualized environment is accomplishing tighter integration between applications themselves and the underlying physical and virtual resources working together to support them. The ability of companies to meet users’ expectations and the needs of increasingly diverse and demanding applications depends on achieving this goal.  

Cisco has taken a strong step forward toward achieving the goal with the introduction of its Application Centric Infrastructure (ACI) framework, the related Nexus 9000 family of switches, and perhaps most important, its Application Policy Infrastructure Controller (APIC).

The Nexus 9000 family of data center switches is designed to achieve efficiency, agility, and scale to support both virtualized and legacy applications. It is tuned to enforcing diverse application policies dynamically and charts out a practical path for supporting both types of applications. As such, it is an attractive “underlay” networking platform for the emerging environment.

In parallel, to address the needs of integrating policies across the broader range of data center resources that need orchestration, Cisco has moved toward elastic and extensible policy management platforms for cloud and data center infrastructures with its APIC policy management system. APIC combines a compelling mix of prepackaged functionality with the modularity and openness needed to participate in a variety of data center environments. It provides 1) a solution that blends policies that applications require in whole data center implementations; 2) support for combining physical computing infrastructures (such as UCS) into the same application policy framework integration of physical and virtual overlay networks (in the Nexus product series, for example); 3) via ecosystem partners’ integration of platforms with APICs functionality, the policies can be applied to physical and virtualized storage management systems (NetApp and EMC), hypervisors/virtual machines (VMware, Microsoft, Citrix); L4-7 network service engines (Symantec, F5, Citrix), additional service orchestration platforms (OpenStack, IBM, Microsoft, VMware), and application platforms (such as SAP).

APIC is also open via APIs for extension in northbound and southbound directions, acknowledging the need for the openness so crucial to support heterogeneous data center environments. Cisco has also highlighted APIC as the initial entry in its family of software control platforms needed across data center, WAN, and access network areas in the Cisco ONE (Open Network Environment) framework, further underscoring its relevance in helping achieve holistic policy management for applications in an extended network infrastructure.

With all these positives, will APIC be the one or the only policy and service management software system customers need to achieve superior application services moving forward? Probably not. Although APIC is indeed a strong step forward and supports an extensive range of service management features, it’s realistic to envision a mix of service management tools covering the full range of components. However, by presenting a unified base for linking the network environment with multiple other components likely to be mixed together uniquely in each customer’s environment, the APIC platform presents a well-designed, modular option that solves the physical and virtual network coordination problem and is also available to help solve parts of the application services management problem in the data center.

There will certainly be additional application management tools and systems for managing virtual computing, storage and services that come from other sources and may work together with Cisco’s ACI to achieve an improved application delivery design. In this way Cisco is demonstrating that overlay and underlay resources can be orchestrated automatically to support diverse application requirements and that a modular policy management fabric is within reach for many customers’ environments.

For more information about ACG Research's SDN and cloud services, contact sales at

Monday, October 14, 2013

Strong Optical Networking Spending Promises Steady Growth

The Total Worldwide Optical Networking market is projected to increase from $14 B to $17.25 B by 2018 (CAGR 4.4%). From a regional perspective the immediate growth is coming from network expansions of the incumbent carriers in North America and APAC and driven largely by the up-take in wireless 4G LTE based services. This build-out should take a couple years to complete and will also expand to the EMEA market where it will fuel revenue growth in the outlying three to five years. The projected five-year growth on a regional basis will be EMEA (CAGR 5.0%), Americas (4.7% CAGR) and APAC (3.7% CAGR). Based upon revenue generation the ranked order is Americas, APAC and EMEA.

The packet optical transport segment (POTS) will grow the fastest over five years (7.2% CAGR) and reach a $2 B run rate in 2018. The POTS segment emerged around 2008 as vendors started fielding the purpose-built IP to optical platforms that carriers and enterprises will need as they transition to an IP environment. Although this segment has not grown as fast as some originally predicted, it has offered new opportunities for vendors to expand their optical portfolio with minimal investment and thus has attracted new entrants into this optical market segment. This segment has the potential to exceed the forecast based upon the carriers’, content service providers’ and enterprises’ transition to an all IP environment.      

The legacy product segments of Long Haul DWDM (4.7% CAGR), Metro DWDM (4.7% CAGR) and MSPP (4.0% CAGR) will continue to grow; they account for approximately 85% of the total optical network spend during the next five years. This is due largely to the relationships or dependencies between the product segments. The Metro DWDM and MSPP are the edge devices and customer interface to the optical network. The Metro is usually deployed to support Carrier Ethernet-based business services. MSPP supports legacy voice data and video service offerings. The deployment of these edge devices drives the need for the Long Haul DWDM platforms to interconnect them, a trend that will not abate within this forecast window. Most Long Haul DWDM vendors are now shipping 100G interfaces and have announced or demonstrated their roadmap to higher rates. These have been well received and are being deployed at a high rate, demonstrating the advantages of this higher speed interface to support  subscribers’ connections.  
The only product segments forecast to deliver negative growth over five years are the optical cross connect (OXC) segment (-6.0% CAGR) and the SONET/SDH (-9.1% CAGR) segment. These product segments are the oldest within the optical networking market and are in the declining phase of their product life cycles. Much of the OXC functionality has been absorbed into the Long Haul DWDM and MSPP platforms, eliminating the need for a separate box to accomplish this function. The majority of carriers have also stopped spending on legacy SONET/SDH gear as they work to transition their networks to the all IP packet-based environment. Equipment vendors have also added SONET/SDH gateway functionality to their MSPP platforms to allow carriers to support these legacy systems both internally and for their subscribers. These two segments combined account for only 4% of ON spend and will drop to approximately 2% by 2018.

The optical networking equipment market is forecast to deliver 10.1% revenue growth in 2013 and experience slow but steady growth over this forecast period. This is in contrast to the boom or bust cycles for which optical has been historically known. The applications for optical technology have expanded in wireline and wireless networks, data centers and cloud computing and have created constant and ongoing support demand in support for network services.

The next five years will bring about stratification of these network services as carriers go to tiered services to close and cover the gap between costs and average cost per user (ARPU), the common metric used to derive the revenue generation of a service. ACG feels a new metric will emerge that defines the profit per user or APPU based upon an individual’s consumption of network resources and services. This new metric is a key requirement to determining actual costs and ultimately the profit a user generates. This capability will require the need for analytics applied to the software-defined network and virtualization capabilities of the entire element service delivery chain and will be a serious differentiator for those vendors that can deliver.  

For more information about ACG's optical services, contact

         Jeff Ogle   

Wednesday, October 9, 2013

Carriers’ CapEx Focuses on Edge Segment

The Total Worldwide Service Provider Carrier Router-Switch market is projected to increase from $11.9 B to $15.4 B by 2018 (CAGR 5.3%). From a regional perspective, the Americas and APAC will lead the growth as carriers respond to increases in data traffic, Big Data, virtualization, software-defined networking and the unrelenting demand for innovative and intelligent applications and services. The projected five-year growth will be strongest (in order of growth) in North America (CAGR +5.2%), APAC (CAGR +5.1%), LAM (GAGR 5.0%) and EMEA (CAGR +3.1%).

Carriers are focusing their CapEx on the edge segment. Why? The edge has significant impact on customers’ experiences and subscriber revenue. The edge segment, which is projected to reach $12.1 B in 2018, dominates the router market and is 3X the size of the core router market, which will increase $3.2 B in 2018. Driving edge growth is 1) the increase of bandwidth capacity of edge routers, 2) integration of network service functions, such as video services, NAT, security and threat management, 3) movement toward SDN, which approaches the network as an amalgamate and configurable resource and 4) traffic being pushed to the edge. Additionally, the cost of increasing bandwidth capacity in the core and carriers running their core networks hotter, and thus utilizing more resources, has pushed traffic to the edge.

Mobile backhaul is also driving this edge growth; more people are connecting with multiple devices, which is propelling operators to upgrade their backhaul networks with routers to support mobile services based on LTE and HSPA+ technologies. Mobile operator CTOs have been and will continue to focus on network cost economics, 3G-WiFi integration, and carrier aggregation.

The core router market, which is anticipated to grow to $3.2 B/5.4% by 2018, is also undergoing a transition. Carriers are utilizing a combination of MPLS and optical switching to handle traffic loads that are crossing the core and which do not require detailed analysis. The advantage of adding optical switching to a packet switch for carriers is twofold: this combination is more scalable, and time and costs associated with converting traffic between electronic and optical platforms are both reduced.

CapEx for the second half of this year is looking positive and expected to increase 7% year over year. Key drivers are LTE investment in mobility and Carrier Ethernet and 100G in the wireline side.

In the next five years service providers will continue to focus on monetizing emerging opportunities, which will require networks that enable them to accelerate service innovation, scale services, and expand the customers’ experiences, all within a viable economic framework.

Tuesday, September 24, 2013

Cisco’s Network Convergence System: Building the Foundation for the Internet of Everything

Cisco Network Convergence System is a family of integrated packet routing and transport systems designed to help service providers capture their share of the Internet of Everything Value at Stake. NCS is built on major innovations in silicon, optics and software and provides the building blocks of a multilayer converged network that intelligently manages and scales functions across its architecture. 

ACG Research analyzed the business case for NCS and found it achieves massive scale via multichassis system architecture, the density and performance of its new chip set, and the extension of the control plane to virtual machines internally and externally. Fully virtualized software improves service velocity and asset utilization by creating a cloud model inside the platforms. Virtualization also supports orders of magnitude improvement in system availability and security through the isolation and independence of software operations. Optical innovations lower multichassis interconnect costs and optimize wavelength density and cost. Click here to download Michael Kennedy's whitepaper.

Monday, September 16, 2013

Fixed/Mobile Convergence Draws Near

Long anticipated, it now appears that the boundaries between fixed and mobile network infrastructure are fading. Demand for steadily increasing bandwidth coupled with service providers' urgent need to control costs is forcing convergence of network infrastructure, while widespread and enthusiastic adoption of wireless devices in all market segments (wireline, mobile, enterprise and consumer) is further blurring the service boundaries. Read more at FierceTelecom.

Monday, September 9, 2013

Are You a Low Risk or High Risk Vendor?

ACG Research’s 2Q Vendor Financial report indicates that Adtran, Cisco and Juniper have the lowest risk of 11 vendors analyzed.

Using publicly validated financial data as input, ACG Research calculated 11 sustainability and operation ratios and Altman Z-Score to determine 11 vendors’ financial risk. Based on the score, vendors were segmented as low risk, medium risk or high risk. Vendors falling into the low risk segment are Adtran, Cisco and Juniper. 

What makes a company low risk? These companies have high operating margins, solid revenue, and high equity to debt ratio. They also have stable revenue sources and operating margins because of sales, solid gross margin, and expense discipline. These companies continue to increase momentum with new product offerings, acquisitions as well as refining their strategy of innovating in high-performance networking.

High risk vendors are characterized by low receivable efficiency, low operating margin and financing assets with more debt than equity. Their ratios indicate that their business practices, for example, in extending credits and collecting debts, are less efficient than their competitors. They also have low inventory turnover, indicating inefficient inventory management. Investments in research and development also tend to be low. 

Why is assessing risk important to a provider? Technology, although important, should not be the only criteria by which to judge a vendor. Sustainability of a vendor is equally as important for making a business decision. Knowing a vendor’s sustainability gives providers one more piece of information to assess the risk of selecting the right vendor to meet their current and most importantly their future business requirements. It also allows providers to make decisions based on the stability of the vendor regardless of technology innovations. 

For more information about ACG’s Telecom Vendor Index service, contact

Wednesday, September 4, 2013

What's the Network Market Look Like for Optical Equipment?

Because of the inherent advantages of optical technology, it has become the standard foundation for practically all network types. This, in turn, makes the optical equipment market a very competitive arena, one that has grown to almost 20 vendors. The vendor list includes both the well-known incumbent players that have been around for decades as well as newer entrants that are offering a different approach or value proposition to provide optical connectivity and control. Read more at TechTarget.

For more information about ACG's optical services, contact

         Jeff Ogle   

Tuesday, September 3, 2013

SDN Needs Versatile Northbound APIs for Cloud Integration

WANs using SDN are getting tighter integration with cloud providers' XaaS platforms by putting APIs into their SDNs to interact with cloud management systems and automatically adapt network policies to cloud services' needs.  With SDN operators could make their WANs (VPNs, for example) work as smoothly with cloud XaaS as internal data center networks are starting to do already (with OpenStack Neutron APIs and integration via on-switch gateways with VMware NSX). It encouraging developers in each domain (WAN SDN and cloud DC) to be close collaborators, delivering superior results. Read more.

For more information about ACG Research's cloud service, contact

Monday, August 26, 2013

Optical Networking Market Rebounds in Q2 and Shows Its Competitive Nature

In Q2 2013 the Worldwide Total Optical Networking market had a significant rebound, 34.0% quarter-over-quarter, yielding a year-over-year 10.2% increase with revenues of $3.66 billion. All segments reported positive quarterly growth, pointing to strong product demand to support end users. Only MSPP and SONET/SDH reported negative year-over-year growth. The Long Haul DWDM segment contributed the largest revenue, and the POTS segment posted the highest growth on a percentage basis.

Again this quarter vendors’ performance varied widely, causing another reshuffle of positions 2–9 of the top 10 players in the ON market. ZTE overtook Alcatel-Lucent, which usurped Ciena, bumping it from 2nd place in 1Q to 4th this quarter. Such quarterly swings in position are indicative of the cyclic nature of the optical business as one new network deal and deployment can quickly boost revenue.  

2Q, 2013 Worldwide Total Optical Networking Market
Revenue ($M)
$ 849.1
$ 673.0
$ 375.1
$ 351.7
$ 240.6
$ 232.3
NSN (Coriant)
$ 138.0
$ 122.6
$ 120.2
$ 112.7

Alcatel-Lucent and Ciena are within 6% of one another, both vying for 3rd place. A similar situation exists for Cisco (5th position) and Fujitsu (6th place); they only differ by 4% points. In positions 7–10 the difference between Coriant in 7th and Tellabs in 10th is $26.1 million on a quarterly basis; consequently, this spread presents opportunity for vendors to advance their overall rating and market percentage.

  • The MSPP market segment has been consistently dropping and although grew 40.6% quarter-over-quarter was down 13.2% year-over-year. The overall transition away from some of the legacy technologies such as TDM and ATM is impacting this market segment. Enterprises are driving a shift of product type from MSPPs to Metro WDM platforms as they move to the IP/Ethernet environment.
  • Supporting multiple 10G and 40G subscriber connections in wireline networks and mobile broadband backhaul 100G has become the de-facto optical standard for long haul transport.  Several optical vendors such as Alcatel-Lucent, Ciena and Infinera have already field trialed, demonstrated and in some cases delivered the ability to combine additional wave lengths to form super channels that will enable transport rates to 400G, half terabit and ultimately full terabit line rates. This is a good way for vendors to demonstrate their optical prowess as well as product future proofing.
  • SDN is gaining traction and the battle lines are being drawn. Various vendor alliances are being formed to develop the entire ecosystem, such as Blue Orbit. PlugFests have been established to help in the validation and interoperability, and vendors, such as Ciena, have announced test bed networks to also validate implementations. All optical vendors will need to have their SDN story in place along with the product roadmap to be considered for new networking opportunities.
  • The Metro WDM market was strong, particularly in North America, and will soon surpass sales of the MSPP market. This transition is driven from the migration away from legacy technologies, such as ATM and TDM, to an all IP/Ethernet environment. We expect this trend to continue as well as spread to other regions with long existing legacy infrastructures.  
The optical networking equipment market is being driven by applications in wireless data centers and its traditional role of long haul transport. The market is showing signs of solid growth this year and is poised to increase to the low double-digit range. The number of players in this space continues to actually increase, and ACG Research now tracks over 20 vendors in this space, though not all play in all market segments. This keeps competition fierce as vendors compete for Green field opportunities and any chance to unseat an incumbent supplier. We expect this trend to continue throughout 2013 and into next year.

For more information about ACG's optical services, contact

         Jeff Ogle