We’re seeing more evidence of major changes in the networking industry, this time from the vendor side of the picture. Obviously one impact of a sudden shift in network operator business models would be a collateral shift in spending that would impact vendors depending on their product portfolios. I think some of those impacts can be seen.
NSN, who’s been a kind of on-again-off-again stepchild of Nokia and Siemens (and is now “on”) is rumored to be up for consideration for a complete Siemens takeover. NSN has also articulated “pillars” on which it will frame its future business model. Sadly most of these are rather vapid (increase capacity, improve QoS) and those that have potential (cloud-enable operators) are vague.
The challenge for NSN is that their recent decision to focus on mobile may be putting them in the position of having to small shoes for their feet. To be sure, mobile is a big deal for operators because margins are higher there, but ARPU for mobile users is already flattened and in some cases heading to declines. WiFi offload is actually revaluing metro, and so is CDN. That means that a pure-RAN-and-IMS push may not be enough skin in the game. And IMS, remember, is perhaps the number one target of operators for NFV. You can’t have an open-source radio, but you could take everything else in IMS, including the evolved packet core (EPC) and turn it into cheap hosted functions. That would have a decidedly chilling impact on three of the big mobile suppliers (Alcatel-Lucent, Ericsson, and NSN) but most of all on NSN simply because they don’t have anything else to play with.
The SDN and NFV future also present risks to the vendors, obviously, though they’re much harder to assess. Operators have expressed the conviction that future networks will be rich in both, but the fact is that operators really don’t have any solid strategies for making that happen. In our spring survey results, now largely in for the network operators, we found that the indicated that they did not believe that they would have made “significant strides” in deployment of either SDN (in the network) or NFV by the end of 2014.
Alcatel-Lucent may be the centerpoint of the whole evolution-of-the-network thing. They have a broad network asset base, a strong incumbency, good professional services, and probably more assets in the SDN space than competitors. They’re working hard to build a cloud position, which could give them an SDN position. Their stock has been rising on the expectations of the Street that they’re less disordered than some of their competition. Philosophically their biggest rival is Cisco, who has sacrificed broad carrier-product engagement for value-driven carrier-cloud IT engagement. The question is whether Cisco can drive a cloud strategy for operators in an industry that is still unable to articulate one as a consensus framework or standard. Many say that Cisco is one reason that’s happened; they’ve been dragging their feet on issues like SDN and NFV. If that’s the case, then the Cisco/Alcatel-Lucent dynamic is the focus of a major Cisco gamble. Our models say that carrier spending on network infrastructure will climb nicely through 2015 and then tip downward, never again to rise out to the 2018 limit of our prediction. If that’s true, Alcatel-Lucent could benefit enormously in the near term and if Cisco can’t drive an IT shift to offset their lack of many of the basic elements of infrastructure (RAN comes to mind) then they risk watching a major rival reinvent itself with the cash earned from this spending surge.
Another vendor is betting on change, Cyan. The company has launched what’s essentially an SDN-coop with a bunch of other largely smaller players. The titular focus of all of this is an SDN-metro deployment that would combine optical and electrical and link better to the cloud and to central network operations-based apps. I like the idea a lot, but I’m not convinced that there’s enough substance here. The trouble with SDN these days is that all you need to do is spell out the acronym and the media thinks you have a story. No details on how things actually work are required. The press likely wouldn’t carry them anyway, but I’ve noticed that they don’t even go on the website. If you have an ambition to SDN-ize metro you have to open the kimono to the degree needed to explain exactly how you expect to do it, which I can’t get from what Cyan has said.
We see a lot of SDN and NFV coming down the line based on briefings we’ve received and what we’ve gotten from operators who have also been briefed. Most of it seems to be relying more on professional services and customization than on standard products and open architectures. Since only major vendors can offer the professional-services path, it may be that this proves the major drivers of our big network revolutions are the least revolutionary of the players. That may compromise the goals of both technologies. Operators have fallen into this trap of trusting innovation to those with the most to lose by innovating. I hope they don’t do it again.