AT&T and Juniper: Consistent Signals of an Uncertain Future

Juniper reported their numbers yesterday, and so did one of Juniper’s key clients, AT&T.  Just a day before, AT&T had announced that Juniper (and Amdocs) were added to AT&T’s “User-Defined Network Cloud”.  Now, some contrasts between the two companies’ reports create a worthy topic for analysis.

When you read through Street analysis on AT&T, it’s clear that the only thing that’s making much of an impression is wireless growth.  This isn’t surprising given that wireless is the key driver for profit for all the operators, and in fact the bright spot for capex that would be most likely to drive vendor success.  Every analyst who covers AT&T talks about the company’s prospects in continuing to add customers, the notion of reduced churn, and whether AT&T can upsell existing post-pay smartphone customers to tablets.  There isn’t a single word about “infrastructure” or the cloud program Juniper was selected for.

The benchmark comment on Juniper from ISI makes an interesting parallel read.  They say that they’ve “…long viewed Juniper as the ‘network innovator’…” but that like many such companies, Juniper had “reached too far seeking growth in adjacent markets and lost sight of OpEx discipline.”  The company was now coming back to its roots by imposing a stark cost-cutting program and shedding some of those adjacent lines of business.

Juniper’s primary area of growth was switching, which can reasonably be linked to the cloud (and thus to Juniper’s AT&T Domain 2.0 status).  But the number of cloud mentions in AT&T’s call was limited—three.  Juniper mentioned it over 30 times.  What this reflects is the fact that while cloud investment might mean a lot to the vendors, it’s still pretty much background noise to the network operators, who are faced with the same dilemma their suppliers are—making the Street happy about the current quarter.

I’ve known, and worked with, Juniper since literally the week their first CEO started his job.  The company has always had strong technology, and their vision of what was next—which included the first articulation of the cloud opportunity by any vendor—has also been unparalleled.  The problem they’ve faced has been one of marketing/positioning.  Only one Juniper CMO has ever shown the necessary fire to drive the company’s vision forward.  That one left years ago.

The notion that Juniper “reached too far” in seeking growth is valid only when viewed through the lens of this marketing deficit.  Juniper’s MobileNext family could have been a strong contender in the space that the Street is now watching most closely—wireless.  They had a content strategy that could have been one of the top approaches to that other important space.  But these strategies lived only in the technical sense.  Juniper could never explain them to outsiders, never link them to the specific customer business goals that would have validated them with buyers and earned revenue.

There’s no option other than “reaching” in the network equipment role.  Anyone who’s not spinning their own private delusions surely knows that without a Congressional mindset that effectively bars Huawei from selling into the US carrier space, Juniper would not have seen anything good in terms of top-line growth.  Routing and switching are commodities, and you win in either space mostly by being an ecosystemic player.  AT&T’s notion of creating roles and zones of procurement have helped save Juniper from the real risk, which was not reaching enough.  And that is the risk that Juniper now faces.

Juniper cannot win in “the cloud”.  You build clouds with servers and software, and Juniper has none of the former and has never “reached” appropriately in the latter space.  If any network vendor will own the cloud, that vendor is Cisco because of UCS.  The Street’s determination to force strategic contraction on Juniper is simply pushing it into a niche that can never again be defended against commoditization.

The Domain 2.0 win Juniper has achieved is interesting considering who else was named—Amdocs.  If you talk to service providers today (or in fact at any point in the last eight years) you’d hear that they need vendor support for their transformation process.  One area of critical concern is the junction between services and the network, the place where service agility and operations efficiencies are created.  Juniper’s only hope, then and now, is to utterly own that space.  It’s represented by a combination of SDN and NFV, and that combination is another of the things Juniper’s positioning has booted.

Contrail, in its technology, is a responsible solution in the SDN space, but you don’t need an SDN controller win to pull Contrail through, and demanding one as a condition of success will have the inevitable and unfavorable result of promoting the “nothing” path of the “all-or-nothing” choice.  Juniper needed only to look above the northbound APIs to find differentiation.  That’s also where NFV lives.  But to do any of this means both a strong marketing position and an understanding of the software side of networking.  Juniper’s old CEO from Microsoft (Johnson) didn’t understand network software.  The Street has made it clear that they want the new CEO only to understand how to shed businesses and people to cut costs.

Part of Domain 2.0 is aimed at creating operations layers that will pull service value up out of the network and into hosted software.  What AT&T would like more than anything else is for that software to be totally open-source.  A year ago, I think that operators would still have accepted the idea that their vendors can lead.  Now, the problem is that the Street is imposing requirements on those operators as much as on the vendors, and these requirements dictate revolutions in operations.  Amdocs is the real potential winner in Domain 2.0, but there would still be room for Juniper (and others) to build something that acts as the shim between the highly monolithic and historically unresponsive OSS/BSS space and both the agile customer opportunity and the evolving network infrastructure.  But time is running out, unless Amdocs boots their own chance of creating that layer.  And they well may do that.  For Juniper, now, only mistakes by others can save them from themselves and their parasitic financial friends.

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