telecom equipment

Velocix purchase positions Alcatel-Lucent in CDN market

The growing interest of telcos in content delivery networks (CDNs) is the driver behind the acquisition of CDN specialist Velocix by Alcatel-Lucent. We’ve noted both here and in our Netwatcher newsletter that operators like CDNs because it gives them a paying role in over-the-top content distribution, as well as a means of providing their own video-on-demand content services.

Obviously what’s interesting to carriers is interesting to carrier-focused equipment vendors. Velocix has been popular with carriers; the company has deep packet inspection (DPI) and content node assets that Alcatel-Lucent can use in gaining traction in the emerging CDN deals, which in turn may be critical to the emerging content plans of the carriers.

From a strategic perspective, Alcatel-Lucent is also interested in projects like CDNs because they represent both equipment and service revenue opportunities, and they’re likely early examples of the growing trend toward operators letting integration/management contracts for new service-driven infrastructure projects.

Alcatel-Lucent focuses in on management contracts

Alcatel-Lucent announced yet another managed service deal, this one with Bharti Airtel. We’re starting to believe the company is making a very specific and broad shift into the service space, focusing on its operations/management integration skills (which we cited in our SWOT analysis). This could be either to gain quick traction in the service management area, which is critical, or to build margins that are under pressure from equipment commoditization—also critical, but without the details of the deals we can’t be sure margins are adequate. In any event, the experience in service operations will be valuable for the company.