service delivery platform

Cisco expands UCS to carrier market

Cisco, to no one’s surprise, has expanded its Unified Computing System (UCS) positioning to the service provider market, taking advantage of the interest of operators in cloud computing for both a retail service base and as a foundation for creating distributed next-gen service features. Cisco’s positioning is likely to be a response to interest from IBM, Microsoft and HP in the space, but most of all a reaction to what Oracle is likely to do with a Sun acquisition.

The service delivery platform (SDP) market has been hamstrung to date by a lack of a mission beyond voice and a lack of a general feature-friendly architecture at the platform level. Cloud computing can provide the latter, and with a flexible platform, the need to find specific non-voice drivers for deployment is reduced because the architecture can do nearly anything, respond to any trend.

Skype IPO could be worst-case for telcos

eBay will be spinning Skype off in an IPO in 2010 instead of selling it to its founders. As we had suggested, the founders could not meet the price eBay hoped for, due we’re told to the reluctance of private equity firms to back the transaction.

An IPO for Skype could create a kind of worst-case scenario for telcos and for IMS supporters by almost guaranteeing a flurry of OTT voice services that would force down pricing and margins, at a minimum. We’re of the view that the current central-administration PSTN-like model (including IMS) will be more difficult to sustain with OTT competition unless IMS can be expanded to provide better support for so-called Web 2.0 applications and unless it is opened to more developer innovation.

A number of vendors have committed to this, notably Alcatel-Lucent, but so far no one has completely delivered. Alcatel-Lucent’s Web Services Gateway is a step in the right direction but not a complete solution. Voice competition by Skype and others could also impact ROI of the telcos further, particularly in the mobile space where call costs are still relatively high, especially for roaming and international calls.

Cisco’s generalized data center solution — risky business

Cisco made its long-awaited “California” announcement, but the event didn’t fully address the critical questions of just how the new products will be positioned. At one level, Cisco announced itself as a general-purpose blade-center-based IT competitor to IBM, HP and other computer vendors. At another level, Cisco appeared to be putting forward positioning that makes a distinction between a new Unified Computing System and a classic data center.

UCS is heavily linked to network virtualization, strongly linked to storage networking and somewhat linked to cloud computing. Most will recognize much of the UCS positioning from prior Cisco presentations on network support for virtualization, and Cisco trotted out a bunch of partners from Accenture to EMC to try to defuse concern that it might be trying to be a one-stop data center solution provider.

Our view of California from the first has been that anything that presented a generalized data center solution would be incredibly ambitious and risky for Cisco, and we believe that Cisco’s efforts to avoid the risks have not been sufficient, at least in terms of positioning. Counter-pressure from a tightening of the IBM/Juniper relationship seems inevitable if Cisco really goes after the data center market. Juniper’s Project Stratus fabric approach to switching appears more directly responsive to the data center opportunity and less likely to create IT vendor angst.

But will Cisco really do what the product material suggests? The early sales targets and beta tests, according to our sources, are primarily like service delivery platform (SDP) applications, content servers and other special missions.

Over-the-top players: A race to the bottom

One of the forgotten truths of the current economic crisis is that while telcos worldwide will certainly be deferring some projects and obsessing even more about monetization, their competitors are likely to be even more concerned.

The guys at the greatest risk, in fact, are the darlings of the last couple of years—the over-the-top players. Many of these are still struggling to define any revenue model at all, and with advertising slipping and VCs demanding break-even performance, a lot of startups will die, and public companies will slump, shrink, be acquired, or disappear. In a race to the bottom, the guy with the lowest internal rate of return always wins because he can keep investing past his competitors’ pain point.

The issue is whether the telcos can take advantage of their opportunity. The recent interest in service mashups by Cisco and Alcatel-Lucent has the potential to allow the network operator to take control of the partnership with the OTT guys while the latter are down and out. Will they seize on that opportunity? That, according to our research, depends on how well the vendors (particularly the two we named) do to create the right ecosystem.

Cisco and blade server plans

Cisco has not been shy in pushing the envelope of what a networking company does, and one extension that’s been rumored for quite a while has now appeared in public—though still as a rumor. Cisco is said to be working on a blade server product family, something that would extend the company’s reach into the service layer of the network. The move would, in our view, help Cisco with service providers whose focus increasingly is on servers and service delivery platforms (SDPs) and higher-layer features.

 It would also help in the enterprise to support hosted applications that are tightly coupled with the network, including unified communications (UC). One impact of this step would be to formalize Cisco’s entry into the IT space, something that’s been inevitable anyway as Cisco works to rise up the value chain.

 In all, we believe this rumor is absolutely true and a good thing for Cisco. It will put considerable pressure on Cisco’s competitors, especially Alcatel-Lucent and Juniper, to flesh out their own strategies. Alcatel-Lucent has already announced a strategic shift to the “online ecosystem” that links developers and telcos, but Juniper has not articulated a strategy here yet, though the company has spoken at conferences on the topic of open networks.

Alcatel-Lucent position could be game-changer

Alcatel-Lucent has posted a press release with more color on its new strategy, one that makes it clear just how dramatic its new position is. The company is now committed to a program of facilitation for the composition of services by partners as a primary strategic thrust, a position that is totally unique in the equipment vendor space and exactly what operators have been telling us they want to see.

Quoting from their release, “This strategy requires providing an open environment, which does not exist today, where all these trusted capabilities can be available between the network and “over-the-top” applications typical of Web 2.0. It is a challenge that Alcatel-Lucent is uniquely positioned to address, with its long-standing relationship with network-based service providers and thousands of enterprises worldwide, its capabilities in delivering fixed and mobile broadband, flat-IP networks and its end-to end integration capabilities around the globe.”

Vendor PR is never a sure sign of things to come (like any form of PR), but this has the potential to be a game-changer of a strategy in a market where monetization has become a singular obsession among buyers.

Alcatel-Lucent strategy: Focus on third-party access

Alcatel-Lucent has announced job cuts and predicts a decline in global telecom spending of between 8 and 12%, which is much larger than any dip we can see based on any credible set of economic trends.

The forecast appears to be based on the presumption that the recession will continue not only through 2009 but through 2010 as well, since only that outcome would create such a broad suppression of spending.

The good news is that Alcatel-Lucent has targeted the strategic issue we believe has the greatest credibility: the linking of network assets to over-the-top players in what is popularly called “third-party access.” If they play strongly here, they stand to gain considerably, and even more so should the market conditions get as bad as they expect.

Cisco’s new broad, vague Web 2.0 program

Cisco announced a broad if somewhat vague program to bind the Elements of Web 2.0 applications into a cohesive whole. The details on this vision were extremely difficult to extract, and we could find no Cisco material online to offer more insight. But it appears to us that Cisco is proposing a broad concept of service-from-mashups where APIs used by various social networks, sites, and even operators could be combined in some centralized way to create new services.

What is even less clear is exactly what role Cisco proposes to play in this. Will it offer a product set, host a service, or both? All this said, we admit that it just might be that Cisco is looking at the area of reformulating service creation—a major focus of our own interest—and also the area of using social networking and similar Web evolutions as the basis for collaboration and communication, another thing we believe to be essential in shaping the next generation of services.

In short, Cisco may be on to something and we’ll try to figure out what exactly it is.

Microsoft telco framework quietly dropped

Microsoft has quietly dropped its Connected Services Framework, an ambitious program that targeted telcos with a package of components that was, at some points in Microsoft’s positioning, a service and sometimes a product.

The move has been interpreted as a response to the complex telco environment, but we think the real reason is more complicated. First, vendors are finding telcos are not happy about closed platforms for services and thus are more likely to demand standards conformance. That opens the ecosystem, making it less profitable for the vendor. Finally, monetization of new services is still problematic, and as a result, the investment needed to create them has to be carefully justified.

All of this speaks against CSF. We note, however, that Microsoft has specific point products that we believe it intends to deploy to telcos. In fact, Microsoft has been successful with carriers worldwide in getting some of these into networks—as much as anyone has, in fact. It’s shedding the CSF packaging and positioning, in our view, but not the market.

Microsoft focuses on software in network planning

Microsoft has released a new TV platform for advertising, Mediaroom, but the product won’t actually be available until June of 2009 according to sources. The release marks a major initiative by Microsoft to become the platform provider for a wide variety of service components in both emerging services like video and older services like voice. Microsoft is seeing the overall industry trend toward a software focus in network planning, a shift that arises from the commoditization of access and transport that the Internet has created. We believe that there will be a war between IT players like HP, IBM, and Microsoft and network players like Cisco for dominance in the network platform software space.