Huawei is the company that a lot of people love to hate. They’re a China equipment giant who’s always been suspected of having close ties to the government there. In the past they’ve been sued for various intellectual property infringements (and settled). The country itself has been linked to attacks on government websites, and so it’s no wonder that Congress has investigated them and decided that they (and ZTE, their smaller counterpart) are risks to national security. Whether this is a real risk or a political play is impossible to say from outside the intelligence community.
Apart from the security risk, there’s the commercial risk that is surely real. Networking is commoditizing and nothing is going to stop that. Huawei and ZTE might push margins and prices down faster and force changes in network design to lower cost, but all that would happen in due course no matter who was in the market. You can’t have a retail broadband environment where capacity growth isn’t matched by revenue growth without changing how you build networks. This is the challenge for the vendors, and I contend that none of them are immune.
Alcatel-Lucent has a broad portfolio but one that it’s never integrated into a full strategy. It’s entrenched in some of its flagship concepts, and while it’s been perhaps the most innovative player in the API-and-developer space, it has never positioned its stuff well there. The very breadth of the company makes it hard for them to win anywhere without losing somewhere else, and though SDN principles would serve them perhaps better than anyone else, they have absolutely no SDN position.
Cisco is vacillating between wanting to open new markets to increase TAM and wanting to defend its incumbencies where it already has established a brand. With the advent of cloud and SDN, the company has taken the route of supporting the higher-level service-connection part through APIs but has hung back on adopting anything substantively different in controlling and scaling the network. The final upward-facing connection to the cloud is still a work in progress, something they likely expect vCider to help with. They want to transform without risk, and no such transformation is ever possible.
Ericsson is the largest player in the field, and in many ways the best-positioned to take on the new challenges because they don’t have a big incumbency in the switch/router products that are under the most pressure. But they still have to defend the features in their turf, and that means positioning as much as products. The company is conservative, conservatism implies inertia, and inertia is fatal in a market whose value propositions are collapsing.
If most of the players have an articulation problem, Juniper has it in spades. While the company has always had a good reputation for solid technology, they’ve become a follower in terms of supporting operator monetization. The company’s focus on TCO simply invites everyone to look to the East where the real price leader has always been. Any business school text will tell you that TCO measurement is fuzzy at best, and in any case never measures the ability of competing approaches to address opportunity and raise the top line. In the current age, where monetization is such a focus, how could Juniper miss that?
NSN, despite its precarious relationship with the two companies in the joint venture that created it, may have one of the better positions. At least they’re focused where the margins are still good. Their problem again is articulation. Nobody believes that mobile broadband will go anywhere other than down the tube, profit and margin-wise. The honeymoon isn’t over, but the desk is preparing the bill and NSN needs to pay it while they can. There’s plenty of room for service-layer differentiation today, and maybe for a year or so. Beyond that, learn Mandarin.
We are probably going to see something we’ve not seen in years—M&A. It’s not so much that the major firms will be snapped up (they are too big or as in Juniper’s case have too high a P/E multiple) as that they will likely be snapping up startups in 2013 and 2014 as it becomes clear that their own internal activity has missed the cloud/SDN craze. Optical/SDN plays, data center fabrics, and cloud software are all going to be HOT. It might be smart to start that bid-and-buy process this year, folks. Pickings are going to get slim very quickly