ACG Research

ACG Research
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Thursday, May 29, 2014

1Q Vendor Financial Index Announcement

ACG Research has released its 1Q 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, 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. Adtran’s growth continues with its international business increasing 56 percent year over year. The company posted strong performance in EMEA and Latin America, attributed to increased Broadband Access product sales). Brocade, which is focusing on efficiency, had the highest operating margin in the industry, 21.5 percent, increasing 43.8 percent quarter over quarter. Cisco’s US commercial and enterprise orders increased by 10 percent year over year. The company also posted a high operating margin, increasing 47.3 percent quarter over quarter. Juniper continues to pursue its restructuring plan, cost cutting initiatives and diversification of revenue with the goal of increasing efficiency in delivery of services and customer support.

Cyan, Ciena and ZTE are high risk, which is characterized by low inventory turnover ratio, revenue decreases and low value of equity to debt ratio. Cyan’s bottom line continues to be affected by cautious ordering patterns by its customers. The company, however, continues to enhance its Blue Planet SDN and NFV software platform, which is attracting positive attention from the industry. Although Ciena’s revenue continues to come from sales to a small number of service providers, the company’s partnership with Ericsson (for SDN products) should drive international revenues. ZTE’s revenue dropped 9.5 percent quarter over quarter; the company is focusing on sales of 4G infrastructure in China and international growth to drive revenue. 

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Tuesday, May 27, 2014

Gains in Evolved Packet Core Segment in 1Q 2014 WW Mobile IP Infrastructure Market

Although the 1Q 2014 Worldwide Mobile IP Infrastructure market decreased to $1.1 billion, the Evolved Packet Core (MME, PGW, SGW, and PCRF) grew 45% q-q and 4.9% y-y. Mobile service providers continue their investments in Mobile IP Backhaul and Packet Core networks, including significant capex spend shift to LTE networks. 

Cisco posted significant gains in Packet Core (MPC + EPC), increasing 306.3 percent q-q and 32.4 percent y-y. Cisco, which holds 43.2 percent of the total mobility market, has been focusing on its Packet Core offerings with a high price/performance portfolio strategy and winning in key LTE markets. Cisco’s core strengths in Packet Core and its extensive LTE core network experience are a result of its large/incumbent position in AT&T and Verizon Wireless where it has acquired complex deployment experience in 3G migration, LTE capacity planning, subscriber policy management, and multimedia/video revenue creation models.

Ericsson, which holds second place in the total mobility market, continues to lose market share in all segments, decreasing 28.3 percent q-q and down 30.2 percent y-y. The company reported 147 EPC contracts in 70 countries and 104 commercial live EPC networks in 1Q.

Alcatel-Lucent posted decreases of 10.7 percent q-q but increases of 4.5 percent y-y.  ALU announced 42 LTE EPC wins and 70+ total wireless packet core wins and (2G/3G, & 4G/LTE) to date, which helped put the company in a solid third place market share position. The North America regions accounts for 95 percent of ALU’s revenue in packet core.

2014 will see increases in mobile spending, globally, despite ARPU declining across many regions. EPC will continue to be a highly dynamic market for the next several years as vendors and carriers work through network virtualization. Mobile service providers are focused on optimization of RAN and Mobile Backhaul, as well as on their network capex and opex. Companies are delivering new innovations in Mobile Backhaul that are enabling mobile service providers to scale investments by reducing hardware costs by considerable amounts. Flexibility in Mobile Backhaul is a key requirement to winning the race for optimization. Many Tier 1 vendors have released or announced partnerships to provide a range of deployment options to mobile service providers, enabling planning and operations efficiencies. ACG expects innovations, investments and consolidations within the Mobile Backhaul segment in 2014.

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

Sunday, May 18, 2014

Business Case for Cisco SDN for the WAN

Traffic requirements are growing rapidly because of the widespread acceptance of online video services, cloud computing, and mobile broadband. WAN costs also are rising with traffic growth in part because of suboptimal network utilization efficiency. At the same time service creation processes are lengthy and service providers’ responses to competitive threats such as over-the-top video and cloud-based services have been sluggish, resulting in slow revenue growth. A root cause of rising WAN costs and slow revenue growth is poor WAN management information flows and many manual work steps.

Software defined networking in the WAN offers the opportunity to drive down costs through increased operational efficiency, increased service creation velocity, and differentiated and personalized network services. Cisco WAN Automation Engine implements SDN in the WAN for service providers’ networks. It is a platform that provides real-time visibility, analysis and control across multivendor network infrastructure and services. Real-time software abstraction of the network allows applications to gain visibility and control of the network through web programming techniques rather than through device-specific embedded programming techniques. This strengthens service providers’ network control and lessens their dependence on systems vendors.

ACG Research analyzes four use case examples to demonstrate the financial benefits of SDN in the WAN as implemented by WAE to service providers. Two dynamic bandwidth management examples identify opportunities for service providers to sell occasional, high-bandwidth services to enterprises and quantify financial metrics, including net present value, gross profits, and return on investment. Two traffic engineering examples describe opportunities to apply automated traffic load management to increase service velocity, reduce operating expenses, and improve network utilization. 

Click here to download the TCO.

For more information about Michael Kennedy, click here. To read other business cases, click here.

Monday, May 5, 2014

Becoming an Agile Operator in a Globally Connected World

Growth in application uptake and related traffic volumes are outpacing the ability of legacy platforms to keep pace. Providers are aware that they not only need new solutions but also need new models ​for how computing and networking should be done to meet demand and growth. The answer​ is in use of virtualized platforms and open modular software, which are providing order of magnitude improvements in scale, agility and TCO versus legacy designs. Cloud-based applications and IT investments are delivering payback periods of less than one to between two and three years depending on the service. Virtualized network functions are demonstrating ​sustainable ​ reductions in TCO of 40–65 percent, doubling the speed of new service deployments.

Operators can secure efficiencies and paybacks ​in these ranges ​ by starting on targeted programs of adopting the virtualized platform ​model. With the prospect of benefits from virtualization being as broad and substantial as the early evidence shows they can be, the primary imperative for an operator’s team is to choose the areas in which early implementations can be trialed, aligning those targets with a coherent vision of how service offerings might evolve moving forward, and building on the progress achieved. The track record of cloud and virtual platform implementations to date has shown that remarkable acceleration of innovations and new service developments can be achieved in fractions of the time previously required to deliver functionality. The relative efficiencies in deploying and scaling the solutions that gain traction allow for an order-of-magnitude improvement on total costs of operation.

Click here to read the research brief.

For more information about ACG's SDN consulting and syndicated services, contact sales@acgresearch.

Paul Parker-Johnson