The Reality Quadralateral of Bridgewater, Level 3, Ciena, and RIM

We have an interesting potpourri of tech events today, and in combination they might be telling us something about the business future of tech in general and the networking space in particular.  Let’s look at Amdocs’ acquisition of Bridgewater, Level 3’s expanded content services, Ciena’s financial trends, and RIM’s disaster.

Wasn’t it only this week that Ericsson decided to buy Telcordia?  Now we have the other giant in the OSS/BSS space buying policy-management player Bridgewater.  On the surface, just like with Telcordia, this seems one of those enormous yawns.  After all, Bridgewater makes policy stuff for mobile/IMS applications and we all know what Amdocs does.  But what makes this not only interesting but potentially earth-shaking is that OSS/BSS activities are SERVICE MANAGEMENT and Bridgewater makes components for SERVICE LOGIC.  I’ve been saying for some time that in the new network we need to combine these functions in some way, and I noted with the Ericsson/Telcordia deal that Ericsson just might have its eye on the converged service management space.  Operators are telling me that they need a single conception of the service layer that integrates logic and operations functions seamlessly.  They wanted the network vendors to provide it through a service-layer architecture.  The OSS/BSS guys may now have their eye on the prize.  Amdocs may also have its eye on becoming the next guy to be picked up by a big network vendor, too.

Then we have Level 3.  The company has been gradually morphing itself from being an Internet backbone play to being a CDN play.  Backbone revenue per bit is almost at the vanishing point, and that was the driver for the CDN role.  Now the CDN role at Level 3 is changing into a broader role of content monetization support.  With the network operators all targeting content monetization, you might think Level 3 is getting ready to be their partner.  That would be a bad move for the operators in our view.  Content monetization is a low-margin business and you can’t afford to be sharing the wealth there.  It’s also true that content monetization and overall service personalization are converging, which means that operators would need to share more and more of their other service data with a monetization partner to stay up with the market.  No, what’s likely to be happening here is simply a Level 3 reaction to an onrush of operator interest in “full monetization” which would threaten Level 3’s CDN business if they didn’t augment their own features to match those of the operators.  Thus, we’re seeing a competitive move to validate our thesis that content monetization is not only coming, it’s rushing.

So where does this leave us with Ciena?  Well, here’s a company that any way you look at it is just a bit-pusher.  The lower layers of the network can’t be convincingly linked to personalization—they can’t afford to be made aware of users and activities or they won’t scale and contain transport costs.  That means that they’re on the road to even deeper commoditization, and that’s problematic.  It’s particularly so for Ciena because they told the Street they planned to increase margins significantly over Street estimates.  OK, they didn’t offer an aggressive or firm timeline, but they’re making a promise that they cannot possibly keep unless they plan to buy or build their way out of the optical layer.  So where would they go?  They couldn’t expect to climb up to Ethernet and IP because first of all there’s a million big incumbents and second that space has its own margin/features problem.

At least they’ll have company from RIM.  Here’s the classic example of how a company can stick its head in the sand and accomplish nothing other than perhaps getting infested with ants or something.  RIM had an absolute lock on business mobility because they had a lock on the handset/appliance space for businesses with Blackberry.  They dawdled and fiddled and let their edge slip, then they watched Apple taking market share, Android coming on even stronger in unit volume terms, and Microsoft and HP trying to ignite their own business appliance programs.  And RIM countered with a shortsighted, ineffective, uninteresting tablet and gave it an insipid launch.  So what do they do to recover?  Nothing.  It’s too late.



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