equipment vendors

Cisco’s ISR G2 and Borderless Networking: Service layer implications?

Cisco has announced a new generation of its popular ISR platform (G2, fittingly), and also announced an initiative/architecture called Borderless Networking. The ISR upgrades are performance enhancements to the earlier models based on what Cisco calls the “Service-Ready Engine” that can support Linux applications directly, not through the older AXP insert card.

Borderless Networking is harder to pin down, however. It appears to be what a Cisco PR video calls a “recommitment” of Cisco to some core technologies rather than a new announcement. But it is possible that Cisco will offer something new and substantive there. From the positioning, it appears to be a service-layer strategy focused on creating an “IT control plane” from Cisco’s data center and virtualization technology. Whether it’s real or slideware is the question.

Cisco often makes announcements like this to anticipate announcements by competitors, and a number of them may be planning something in the service layer area within the next month. As we’ve noted, this is a critical area, and if Cisco can create a credible “IT control plane” based on data center virtualization, it could have an impact in the space. Recent trends within Cisco management and organization, however, seem to suggest a de-emphasis on software products and on network abstraction and management, key ingredients in a service-layer strategy.

NSN’s very bad quarter: Good technology, bad messaging

Nokia Siemens Networks’ (NSN) quarterly results were just plain bad, with the company admitting a much larger market share loss than they’d forecast—so much so it swamped a market that turned out to be better than NSN had expected.

We think the problem here is a combination of conservatism and the lack of a single area of specialized focus on which NSN could underpin marketing efforts. NSN has excellent technology but extremely limited marketing skills, and the company is especially troubled by a lack of ability to engage high-level issues in a telco market that is increasingly focused on transformation of business model.

The NSN analyst event late this month may show how, and if, NSN plans to change all of that. The numbers make it very clear that it needs to. NSN can’t sustain sales and margins against Huawei without a strategy, and it can’t boost its U.S. market position without one either. The expectations of vendor M&A in the telco equipment space has driven prices on companies up, making it less likely NSN could bring off an acquisition that would position it here in the U.S.

Lack of monetization strategy hangs over telcos/vendors

Huawei’s quarter put it on track as a big gainer in the ranks of major equipment vendors, with fourth place in the bag and second place within its grasp if it can meet its targets. As we said in our Huawei analysis (part of our three-part telecom vendor SWOT series in Netwatcher), Huawei is the winner in the market by default.

Price commoditization of legacy services and lack of credible monetization strategies overall force telecoms to reduce their costs, which moves them to lower-priced suppliers. We believe Cisco’s emphasis on service/outsource models, consumer electronics, blade servers and new market sectors are all reflections of the fact that even Cisco no longer believes telcos will continue to spend on premium vendors.

Certainly the time available to create alternative monetization models for telcos is coming to a close; a big negative step will be taken in May if no credible strategies are available by the spring planning reprise, and the nail in the coffin could come in October with the fall planning cycles.

EU telecom spending: Cost-cutting & pricing tiers on the table

The ITU has released information on the EU telecom markets that shows many of the largest countries are lagging smaller ones in their telecom infrastructure, and other reports show that there was more cost-cutting (meaning pushing back of projects) in March. Our information shows that EU telecoms are planning an off-cycle planning exercise in the May timeframe to decide which of the 2009 projects to continue to push back and which to now approve for spending.

This will be a critical step in the telecom recovery, and at the same time is likely to set the strategic framework for the 2009/2010 spending cycles. We believe that the program will not reflect additional monetization strategies at the service layer since operators tell us that vendors have still not provided convincing support for new strategies, and thus will be more likely to cut costs.

A third of all Tier 1 operators are now actively planning for pricing tiers and caps, and all who have mobile assets, are planning further shifts to mobile. Metro infrastructure is more likely to be funded than “core” networks.

DPI: Use it, but don’t use it

Deep Packet Inspection (DPI) continues to be a contentious topic, and service providers are so leery of regulatory intervention that they avoid words with any of those letters in them.

They’ve told us to ask vendors not to use the term—they prefer “application-specific routing” or something similar. There are in fact a lot of valid applications of DPI, such as the XO model where it is used to monitor application performance.

But DPI is like firearms or interrogation or a lot of other stuff that has valid uses and egregious misuses, and it is typecast by the latter. We’ve not seen much interest in rehabbing the concept by renaming it, but operators have made their positions very clear, and we think there’s some indication that vendors are catching on. If that’s the case, then “xxx” might be a really hot concept in 2009.

Network market leaders analysis to come

In the Market Area Focus section of our February 2009 issue of Netwatcher we’ll be starting a three-article series on the major service provider network equipment vendors with coverage of Alcatel-Lucent, Cisco, and Juniper The next segment will cover Ericsson, NSN, and Huawei, and the third will cover Ciena and Tellabs