We're all friends here, so we can be honest--right? Okay. In the broader tech world, telecom isn't always seen as the sexiest or coolest segment of the market.
Shocking, I know. But face it, as much as LTE might be the latest mobile broadband marketing message, the vendors producing LTE infrastructure take a backseat to the likes of Apple when you think of who is driving the market forward. It's the experience that's captured people's attention, not the network. Likewise, if operators were known for their wild innovation we wouldn't have seen service provider innovation centers being built over the past few years--not so coincidentally timed with impending LTE builds--and Telefonica wouldn't be heralded as such an innovator for its decision to support Telefonica Digital. Top this all off with the fact that many telecom network vendors and operators have been struggling to turn a profit and you get the picture. Returning to the Apple example, anytime a rumor pops up that the company is thinking of building its own telecom network, the answer's always been a simple one in the form of a question. "Why would it go and dilute its value and coolness factor?"
Somewhere along the line, however, something changed.
Think the acquisition of Bytemobile by Citrix. Think the acquisition of Traffix by F5. Think the recent move by Oracle to acquire ACME Packet. Sure the normal industry shuffling--operators buying other operators, vendors shedding peripheral business units--has continued apace. But that's not new. IT players getting into telecom, at a time when the words "dumb pipe" have become a de facto description of a carrier network, that's interesting.
How, then, do you explain the IT world taking a shine to telecom over the last year?
The short answer is simply that telecom networks are not "dumb" but they are becoming more like IT networks. The longer answer is that telecom-IT convergence is taking place along a number of axes playing to operator and vendor agendas.
Networks - Today vs. Tomorrow. The concept of platform reuse is well-understood in carrier infrastructure. We've had ATCA platforms in the network for years alongside service routers and multi-standard base stations. Yet, if the move to ATCA represented a marriage of IT-grade server platforms with carrier-grade reliability, moving more telecom functionality into the datacenter is the next logical step. On the one hand, this is a simple extension of the cloudification of services and infrastructure that's been embraced by the enterprise. On the other hand, it's more than theory. It's the model that's being driven by startups like Skyfire and Affirmed alongside folks like Cisco who have explicitly tied recent acquisitions (Broadhop, Intucell) to cloud-based delivery. Of course, moving from proprietary platforms to off the shelf servers for service delivery assumes a very different margin paradigm for vendors and a very real example of the Innovators Dilemma in action. At the same time, it represents an intersection of the telecom and IT worlds that allows for new vendors to get into the telecom game.
Services - Today vs. Tomorrow. But why, you might ask, would new vendors want to get into the staid, old telecom game? If it's hard enough for many of the current telecom vendors and operators to remain competitive, why would anyone else look to get into the space? Because services are changing. There's no shortage of pain points operators face circa 2013: the search for spectrum, getting device makers to support their strategic initiatives, standard competitive dynamics, new technology rollouts (WiFi, small cells, LTE). In the face of an increasing OTT threat, however, better mobile broadband monetization often tops all of those. Selling LTE as "faster" may help to woo customers from your competitors, but it does nothing to squeeze the complete value from the technology nor to fend off OTT competition. Whether we're talking policy, BSS/OSS evolutions or customer analytics, vendors have the solutions to the monetization puzzle. More often than not, they align well with the capabilities of IT players more than telecom players. That means opportunities for new entrants into the telecom marker, if they can credibly penetrate it.
Channels and Adjacencies. When you're only tool is a Hammer, you probably see yourself as 2 Legit 2 Quit. In any case, when your frame of reference is telecom, it's often difficult to look beyond your current customer base. Yes, we've seen telecom vendors looking at vertical markets for growth, but that's very different from the way in which IT players have traditionally viewed telecom as just another vertical market. Of course, as service provider needs increasingly bump up against IT expertise and telecom networks increasingly look like IT networks, telecom is more than just another vertical; it's a vertical that holds newfound promise for IT players. Of course, building credibility and sales channels in the space isn't easy. To that end, expect to see plenty of more tie-ups and acquisitions as telecom becomes one of the "cool kids."
Peter Jarich is the VP of Consumer and Infrastructure at Current Analysis. Follow him on Twitter: @pnjarich.