Optimizing the Network Edge with Juniper Networks MX Series 3D Universal Edge Router

Service providers are increasingly looking to optimize their network design and reduce operational complexity in order to minimize totalcost of ownership, contain operational risk, and reduce environmental impact. Traditionally, service providers use a variety of appliances to deliver and monitor services and ensure security; however, this approach becomes more inefficient, complex, expensive, and risky as network scale and service offerings increase. 

ACG Research compares network upgrades for two hypothetical operators. Operator 1 implements a traditional appliance-based edge network, and Operator 2 implements a converged edge network utilizing the Juniper Networks MX960 hosting both routing and services. Among other findings, the research establishes that the converged MX960 solution demonstrates up to 49 percent lower TCO and 64 percent lower environmental emissions than the traditional appliance-based service delivery method. 

Click here to download the TCO.

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

Michael Kennedy

mkennedy@acgresearch.net
www.acgresearch

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. 

For more information about ACG Research's Vendor Financial Index service or other syndicated and consulting services, contact sales@acgresearch.net.

Ray Mota

rmota@acgresearch.net

www.acgresearch.net

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 sales@acgresesearch.net.

Ray Mota

rmota@acgresearch.net

www.acgresearch.net

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.

Michael Kennedy

mkennedy@acgresearch.net
www.acgresearch

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

pparkerjohnson@acgresearch.net

www.acgresearch.net

High IQ Networks: An ACG HotSeat Video with Juniper Networks

Ray Mota, ACG Research, and Rami Rahim, EVP/GM of the Juniper Networks Development and Innovation team, 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 featured with use cases, as well as Juniper’s position and market differentiation on open standards.  Click here to listen.

For more information about ACG's HotSeat Videos, contact sales@acgresearch.net.

Ray Mota

rmota@acgresearch.net

www.acgresearch.net

Home Broadband, Video Usage Patterns Will Force Changes in Access, Aggregation Networks

Residential networking services and the devices we use to access them are constantly changing, usually in unanticipated ways. Video streaming, social networking, smart phones and tablets are creating new demand, displacing traditional media and threatening the foundations of the multichannel video subscription (cable, DBS and telco) industry. The new services and devices also are causing a shift in video usage from multichannel service to broadband Internet service. The shift already has made video the dominant Internet traffic source and is driving network operators to rethink their network architectures. Read more at FierceTelecom.

For more information about Michael Kennedy, click here.

Michael Kennedy

mkennedy@acgresearch.net
www.acgresearch

Business Case for BTI Intelligent Cloud Connect for Content, Co-lo and Network Providers

BTI Intelligent Cloud Connect provides converged optical and LSR based architecture that responds to the challenges of today’s metro data center networks.

Cloud computing, video streaming, and social media are contributing to a dramatic rise in metro and regional inter data center traffic that includes data center to data center, data center to access networks and local traffic, and data center to peering and partner traffic.

Inter data center network architectures are being reconfigured to respond to the increased traffic volumes and changing traffic patterns. The architectural challenges include cost effectively accommodating rapidly expanding traffic volumes, providing network flexibility, and supporting service innovation.

BTI Intelligent Cloud Connect (ICC) is a converged optical, LSR and application-aware architecture that responds to these challenges. The converged platform provides 10 Gbps and 100 Gbps DWDM wavelengths, MPLS Label Switch Router (LSR), and a Network Function Virtualization-based (NFV) applications module. The LSR approach is optimized for cloud connectivity applications.

ACG Research conducted a case study of a typical metro data center network to compare the five-year total cost of ownership of the BTI Intelligent Cloud Connect architecture with two alternative solutions: 1) LSR Composite: separate LSR, transparent optical transport, and network analytics platforms; 2) L3 Composite: separate L3 router, transparent optical transport, and network analytics platforms.

The case study shows that BTI’s TCO for five years is 58 percent lower than the LSR Composite alternative and 71 percent lower than the L3 Composite alternative. BTI’s CapEx is 59 percent lower than the LSR Composite alternative and 72 percent lower than the Layer 3 router alternative. BTI’s OpEx is 56 percent lower and 69 percent lower for the LSR Composite and L3 Composite alternatives, respectively. Click here to download the TCO.

For more information about ACG’sbusiness case analysis consulting service, contact sales@acgresearch.net.

Michael Kennedy

mkennedy@acgresearch.net
www.acgresearch

Telecom Performance in 2014 Indicates Growth

The Worldwide Router and Switch markets are expected to grow moderately and steadily from 2014–2018 with growth being driven by the increase in fixed broadband traffic and mobile broadband traffic on 3G and LTE networks. 

The total Worldwide Service Provider Carrier Router-Switch market is projected to increase from $11.4 B to $13.8. B by 2018 (CAGR 5.1 percent). From a regional perspective, APAC will lead the growth as carriers respond to increases in data traffic, big data, virtualization, software-defined networking and machine to machine as well as the unrelenting demand for innovative and intelligent applications and services. The projected five-year growth will be strongest in APAC (CAGR +6.3 percent), North America (CAGR +5.1 percent), and EMEA (CAGR +4.5 percent).

Wall Street firms report that the 2013 year-to-date telecom performance was 6.2 percent; IT was 10 percent. These numbers are indicators of future economic growth within these sectors. Worldwide, there is a correlation between different types of technology and the impact on GDP or economic growth. For example, for every 5 percent broadband penetration related to consumer business or mobility there is a 1.6 percent increase in GDP. In the communications, technology or IT in the enterprise spaces, we see a similar type of correlation; for every 5 percent increase in the use of IT within the enterprise space there is approximately 0.5 percent increase in productivity. This insight is important for companies as they need to change their mindset on how they create solutions for a customer.

Trends

• The outlook for routers: the edge segment, which is projected to reach $12.2 B in 2018, is 3X the size of the core router market, which will increase $3.3 B in 2018.

• Live SDN deployments in WAN IP and transport solutions will gain significant traction, and the edge, metro and core domains will each become larger as a percentage of total SP SDN sales than the data centers are by 2018 (including both hardware and software SDN products). This is driven by the diversity of platforms participating in SDN solutions in those domains (IP/MPLS, Ethernet/MPLS, Optical and Packet Optical Transport Systems, for example), the broad extent of their deployment in SP infrastructures globally, and the range of optimizations in each domain being ushered in as part of the SDN transformation.

• Total potential for SDN enabled equipment in the core will reach $7.5 billion in 2018, but not all of those platforms will be used for live SDN deployments.

The demand for new applications, increases in Internet data and video traffic will continue to drive markets during the forecast years. These drivers will require flexible and scalable networks. This year, the network that connects the data centers will be the industry’s focus. Inter-data center networks need to change to support new services and network requirements for bandwidth scalability, low latency, security, virtualization and automation. 

For more information about ACGResearch’s router and switch service, contact sales@acgresearch.net.

Ray Mota

rmota@acgresearch.net

www.acgresearch.net

4Q 2013 Optical Networking Market Update

Once again the optical infrastructure market grew; 4Q quarter budget flush delivered 19.5% quarter-over-quarter gain and increased the Worldwide Total Optical Networking market revenue to $4.01 billion, the highest run rate level since 4Q 2008. 

The fourth quarter year-over-year growth for the optical infrastructure market was 16%, growing 9% for the year. Of the six product segments tracked within the optical market five of the six reported positive quarterly gains. The Long Haul DWDM segment returned to the number one position based on revenue with 45.6% quarter-over-quarter growth. The Metro WDM segment was the second highest segment, delivering 15.9% quarter-over-quarter growth.

Only the POTS segment experienced negative quarterly growth, -4.1% but was up in 42.1% year-over-year. It also remains the fastest growing segment on a yearly basis. All the other product segments of MSPP, Optical Cross Connect and SONET/SDH saw demand increase and reported positive quarter-over-quarter growth.

In 4Q not all vendors benefited equally from the increased spending with some significantly missing their revenue targets. The vendors’ performance varied widely with several reporting banner quarters with the highest revenue levels seen for years or new highs. For the top 10 positions for the total worldwide optical networking market this caused a reshuffle of positions 2–8 within the Optical Networking market for 4Q.

4Q, 2013 Worldwide Total Optical Networking Market
Company	Rank	4Q Revenue ($M)
Huawei	1	$ 1381.9
Alcatel-Lucent	2	$ 432.8
Ciena	3	$ 403.5
ZTE	4	$ 364.5
Ericsson	5	$ 225.9
Cisco	6	$ 210.0
Coriant	7	$ 152.0
Fujitsu	8	$ 146.0
NEC	9	$ 121.5
Infinera	10	$ 115.1

Huawei maintained its lock on the first position and reported its highest optical revenue quarter ever. The advancers included: Alcatel-Lucent, Ciena, Ericsson, and Coriant, which all advanced one position. The decliners included ZTE and Fujitsu; both lost multiple ranks within the market for 4Q. Cisco managed to maintain its position although its quarterly performance was also below target.

APAC, the largest region from an optical revenue standpoint, reported 25.6% quarter-over-quarter growth and positive 27.0% year-over year gain. This was largely driven by Huawei and the company’s wins with both China Mobile and China Telecom. The economy in EMEA is beginning to show signs of picking up and vendors reported 48% quarter-over-quarter growth and 11.9% year-over-year. LATAM was the largest increase on a percentage basis, delivering +58.9% quarter-over-quarter but only +3.3% year-over-year increases. On a regional basis North America was the worst performing region, -15.0% quarter-over-quarter but still managing a gain of 10.0% year-to-year. This was largely driven by AT&T, Verizon and Sprint, North American Tier 1 providers, curtailing their CapEx spending toward the end of 2013. 

4Q Trends

• The MSPP market segment continues to experience declining revenue and for 4Q was able to post a small positive gain of 3.9% quarter-over-quarter but dropped 15.4% year-over-year. On a yearly basis in 2013 the MSPP segment dropped 17% and is 52% down from its all-time high achieved in 2007. The general transition away from legacy technologies is driving the decline in this market segment. As enterprises move to the IP/Ethernet environment it is driving a shift of product type from MSPPs to POTS platforms.

• Though the POTS segment saw a decline in demand during 4Q and decreased 4.1% quarter-over-quarter it was still up 24.1% year-over-year. This segment grew 25.9% on a yearly basis, making it one of the fastest growing segments in the optical equipment market. These platforms are widely deployed in data center solutions and are generally all SDN ready. There are a large number of both incumbents and newcomers to this market segment, making the competition extremely fierce and partnering and technology decisions more complex.

• Marlin Equity Partners completed its acquisition and privatization of Tellabs and has set its strategic direction. A portion will fold into Coriant and the other will be spun out as a separate entity called Tellabs. With Coriant in seventh position and Tellabs in eleventh, the combined revenue will bring them on par with Fujitsu and Cisco. Marlin Equity Partners has become a major stakeholder in the optical market, and it must now focus on execution.

• Demand for 100 Gig interfaces remains strong and ACG estimates more than 10,000 100G ports were shipped in 4Q. The overall port count for 100G deployment was up by approximately 26% in 4Q and accounts for as much as 30% of some vendors’ revenue. We anticipate a flattening of growth but project that demand will remain strong during the first half of 2014.

• The Metro WDM market segment was strong, particularly in North America, and has surpassed sales of the MSPP market segment. The Metro WDM growth is driven by increased user traffic as well as a traffic pattern shifts where more of the traffic originates and terminates within the Metro itself. This trend, which predicts as much as 75% of the traffic, will stay within the Metro and will drive equipment sales.

The optical networking equipment market continues to be driven by its traditional application of wireline services (dry and wet), wireless back haul, data centers applications and emerging M2M applications. Demand for services that will rely and effectively run over optical infrastructure will remain strong. With the global economy showing strength and government outages behind us consumers should help drive demand. In the optical market, however, 1Q of every year tends to be down as vendors generally attempt to pull in all possible revenue to finish their year strong.

For more information about ACG'spacket optical transport services, contact sales@acgresearch.net. 

         Jeff Ogle
jogle@acgresearch.net   
    www.acgresearch