Alcatel-Lucent reported its quarter, and the results were disappointing to say the least. The company suffered from margin pressure, caused no doubt by the competition from arch-rival Huawei. The devil here is in the details, which in some ways are much better for Alcatel-Lucent, and in some ways worse.
When you’re a very broad-based supplier in an industry in transition, you tend to lose in one place while gaining in another. If you look at Alcatel-Lucent’s router numbers, you see healthy performance and margins comparable to competitors. It’s just that one product sector can’t overcome the fact that the gains in that sector are the result of secular shifts that create losses elsewhere. So the good news for Alcatel-Lucent is that in the IP area, they’re still in the game.
The bad news is that they’re not capitalizing on it very well. The key division for Alcatel-Lucent today is wireless, where again the problem was the Peter-versus-Paul dilemma. Being big in 2G and 3G means that unless they’re REALLY big in 4G they face a net loss. And today wireless is the only place that matters in the network.
So what should they have done, or what should they do? More good news here, potentially. They need to embrace the IP model of networking full-on, and the first step in that is now and has always been the “IP-fying of IMS”. Nobody has taken a better first step toward that than Alcatel-Lucent, but the step they’ve taken still (obviously) isn’t enough. They need to be totally aggressive here, embracing the IP-only model of the future and working to be the leader in all the critical concepts. Their biggest issue is SDN, which could be an enormous asset to them if it’s supported correctly—unifying their service, wireless, and IP strategies. It could be an enormous liability if they don’t get it done, and that’s where they are now. The fate of Alcatel-Lucent may literally hang on its SDN activity, not because SDN is such a great financial foundation but because it’s the link between cloud and network, and if you’re a vendor you NEED that link under your control.
Ordinarily, network monitoring isn’t exactly the foundation of our practice. In fact, I’ve been told by the media that I’m one of the few analysts who follow the space at all. Ordinarily, it generates nothing much in the way of news. This time it may have outdone the ordinary, because even monitoring has to contend with the radical changes in our industry.
NetScout is one of the few “real” monitoring firms left, a company who offers actual probes to read traffic and send it off for analysis. Over the years, NetScout has been evolving beyond the geeky peek-at-bits image, or trying to. They’ve made a number of acquisitions, the most recent of which is the OnPATH stuff that’s opening the higher-speed interface market to NetScout. It’s a hard slog, but they may be getting some help from the outside.
Network operators are really not interested in having a DPI strategy for every season, but that’s what the market would like. Their challenge is to separate the mechanics of packet inspection from the application of what you find there. More and more, operators see the latter as being an application for the cloud. Verizon’s Stu Elby gave a speech last week about new models for service infrastructure and centralizing DPI management was one of them. It’s also a model of interest for Network Functions Virtualization (the two are likely related since Verizon is a founding member of that group).
In some ways, monitoring seems a step toward the happy goal of cloud DPI, because most monitoring is already centralized and over time it’s been focusing on how to avoid creating more traffic from the probes than the network is carrying from the user. That’s Elby’s beef, and the beef of many operators. But not all DPI is about looking and analyzing, some also wants to influence forwarding behavior or other network policies, and it’s not yet clear how easily the folks at NetScout can tie into that. I asked them if they were aware of NFV, for example, but I didn’t receive a response. That’s not to say they’re not working feverishly to support it; they may simply not want a public comment at this point. If they are, they could be one of the few companies facing the cloud-network future. If they aren’t, they could be another potential victim of it. Like Alcatel-Lucent.
