If you want to see how an ecosystem evolves, study the animals. That’s why Ciena’s recent acquisition of WaveSmith Networks and Tellabs’ recent acquisition of Vivace could be bellwether events. Watching dinosaurs adapt to change is a good way to watch evolution in practice.
Confused by all this technology evolution? Take a lesson from Darwin. If you want to see how an ecosystem evolves, study the animals. That’s why Ciena’s recent acquisition of WaveSmith Networks and Tellabs’ recent acquisition of Vivace could be bellwether events. Watching dinosaurs adapt to change is a good way to watch evolution in practice.
Tellabs is a venerable survivor of the days of digital cross-connects and leased lines. Ciena is a survivor of the optical hype collapse, a company that learned how to produce a bunch of cheap bits but couldn’t find a way to turn them into profits for its carrier buyers. So how is it that both companies turned to a similar strategy – evolve to a new market mission by absorbing a start-up?
One clue is that both WaveSmith and Vivace make ATM-centric IP service switch boxes. Everyone knows that TDM is passé, a view the FCC’s February ruling reinforced by giving the regional Bell operating companies unbundling immunity for packet infrastructure. Similarly, everyone knows that service switch products that offer users IP and frame relay/ATM service interfaces, and support Multi-protocol Label Switching, have figured prominently in both RBOC and interexchange carrier plans. So we can say that the two dinosaurs see the same market climate in the future, and not surprisingly see the same path to success. What’s less clear is how Ciena and Tellabs expect service switches to help them evolve out of their current market positions.
For an optical player such as Ciena, a service switch product could provide a traffic on-ramp for the rest of its product family. It’s pretty clear that selling users OC-48 private lines is a nonstarter, so a SONET/wavelength division multiplexing optical network player needs to have some sort of service-creating equipment in front of its optical layer to provide users what they want to buy – services such as frame relay and IP. Ciena apparently saw this requirement emerging a few years ago and made investments in Equipe and WaveSmith to prepare a position for itself when the network market resumed growing.
Ciena has a nice network diagram on its Web site, which shows how WaveSmith and Equipe (in which Ciena still has an equity stake) play in creating multiservice edge, metropolitan and core networks. WaveSmith gives Ciena an electrical edge to its optical strategy, but it still has an electrical core option with Equipe.
Tellabs, long-time champion of all-optical networking, clearly now also sees the need for a service switch on-ramp. The real question is whether an optical core can provide those Layer 2 and 3 services with no internal electrical devices – Tellabs’ deal with Vivace gives it a version of WaveSmith, but not Equipe.
It’s likely that Tellabs’ acquisition of Vivace is a response to the Ciena/WaveSmith deal rather than direct strategic thinking. But this doesn’t mean that Tellabs won’t have to do some thinking, and quickly. The company now is forced to articulate a vision of the all-optical network that’s based entirely on service-edge electrical devices. Tellabs has to develop the Vivace product into a core switch as well as an edge switch, or find an “Equipe-like” packet core device that will let Tellabs draw the same diagrams of customer networks as Ciena now can draw.
But pictures won’t be enough. The Jupiter/Lucent alliance brings depth to the electro-optical networking arena, and substance in products and positioning will be needed to counter it. Ciena’s announcement last month of its LightWorks Services initiative is a step toward both, but not a delivery of either. Tellabs has nothing at all, yet.
Absorbing companies isn’t the same thing as absorbing ideas. Companies rarely make major strategic changes successfully by importing technology elements without importing strategic thoughts along with the products. Gluing feathers on a dinosaur doesn’t create a bird. We’ll see if gluing service switches on an optical player creates a market winner – or survivor, at least.
