There has been more than a small disturbance in the information and communications technology (ICT) community, with the announcement that Oracle has agreed to acquire session boarder controller (SBC) market leader, Acme Packet. My colleague Rachel Ramsey has an excellent piece with the details on the roughly $2.1-billion deal, expected to close in the first half of 2013, and is subject to the customary stockholder approval, certain regulatory approvals and usual closing conditions.
The deal comes at a critical time in the historic transformation of global networks to being data center-centric and all-IP. As noted at TMC’s just concluded ITEXPO event in Miami, I happen to believe that not only are we now in high gear in “The Age of Acceleration” —where the only constants are change and the fact that the speed of change is increasing—but that we are at an industry tipping point where the fortunes of various players long-term will be dictated in large measure by what happens in the next 12-18 months.
This is in fact a thought echoed by Acme Packet CEO, Andy Ory, who in a letter to customers and partners noted, “We are excited to join forces with Oracle because we believe that together we can rapidly accelerate the transformation to all-IP communications networks across the globe.”
The missing ecosystem link is found
Let’s start with a little background. Scott McNealy, former Sun Microsystems (now part of Oracle) CEO, loved his old Sun tagline, “The Computer is the Network.” In an interesting twist, it turns out based on the emergence of cloud computing, that he could have also said, “The Network is the Computer.”
That really is what this deal is all about.
Reality is that to be a “one-stop shop,” which seems to be the goal of Oracle’s sharp elbowed CEO Larry Ellison, was missing the networking piece of the transformation puzzle. Acme Packet fills in the gap.
Oracle has a comprehensive portfolio of applications, social and platform services, infrastructure services, and storage. What has relied on the kindness of others for has been SBCs, a little piece of hardware that performs mediation between legacy networks and SIP-based ones which are dominating the session control layer. This may be a small part of moving customers from legacy architectures to next generations ones, but it is critical for customers in both the service provider and enterprise spaces to literally get from here to there. They do perform the function of accelerating the move to an all-IP based infrastructure that makes the network the computer and the computer the network.
And while Acme Packet has recently encountered a stiff headwind because of the intensifying competition in the SBC market, recently losing its top spot to Cisco in the enterprise space, Infonetics Research says it still dominates the overall SBC market with a roughly 40-percent share.
Hence, Oracle is picking up a leader of the pack with more than 1,900 enterprise and service provider customers.
As Diane Myers, Principal Analyst VoIP, UC and IMS at Infonetics explained, “This interesting. Given the way the world is going, and going quickly, being basically a single product company like Acme has been is a challenge, particularly as SBC competition has increased.”
She continued, “There has been speculation about Acme and how it might expand into other offers to mitigate the impacts of increased SBC competition, but given resource constraints to be an acquirer this makes a lot of sense. It certainly is a nice acquisition for Oracle to enhance its role in a different part of the service provider business from where they have had historic strength.”
Myers also noted that for Oracle this does bring them more into competition with the likes of Ericsson and Huawei. Acme Packet has a foothold in the critical Diameter signaling business which gives Oracle visibility into another small but incredibly important part of the service provider business and a place at the table as networks migrate to LTE in the wireless area.
Oracle may still be missing some important parts of the radio access, OSS/BSS and professional services in its portfolio to fully compete as a one-stop shop in the service provider business, but it has stated the year by making some important noise. What the acquisition also gives Oracle are some solid OEM and strategic alliance partners that market its SBCs and more than 330 reseller partners.
While this could ruffle the egos and feathers of existing networking partners, these things have a way of sorting themselves out based on customer demands.
A few more perspectives
While I believe the deal represents a harbinger of industry restructuring on a grand scale, where the “big guys” are looking to be even more dominant in large enterprise accounts and with major service providers, in a world where preferred vendor lists are getting smaller, I’d like to share the observations of a few other industry observers.
For a relatively small acquisition in a small part of the infrastructure business, it drew some big thoughts that are great food for thought.
Michael Elling of Information Velocity Partners, LLC, noted three facets of the deal:
In other words, look for the competition between Oracle, Huawei and Ericsson and a few others to really heat up and soon.
Dana Cooperson, principal analyst held a similar view saying, “The acquisition should strengthen Oracle’s hand both with enterprises and carriers by giving it a more central role in controlling and improving how devices and subscribers interact and communicate.” Cooperson went on to say that Oracle’s move illustrates important on-going trends in global communications. These include:
IT and Telecom are rapidly blending: “Companies that specialize in either telecom or IT will need a strategy of how they will benefit from this blending of what were two largely separate domains. Any vendor that wants to be a full-service partner to the telcos and other large communications and content providers will need such a blended strategy to be credible. Specialists will need to align with full-service partners.”
Software increasingly driving network capabilities:“Although hardware is still important in many applications to provide needed performance, software is more and more critical for both differentiating and monetizing network capabilities. Performance without monetization is only half the equation.”
Communications needs are anytime, anywhere: “People want to be connected, at work or at play, through a variety of devices and access means. Controlling these sessions securely and at the needed quality is increasingly critical.”
Cooperson added, “Oracle Communications has a value proposition that encompasses telcos, enterprises, and other ICT (information and communications technology) infrastructure vendors. In fact, Oracle both sells to and competes with telecom infrastructure vendors. But unlike many of these companies, Oracle has a comparatively large bucket of cash to use for acquisitions— as a communications infrastructure vendor bested only by Cisco. Oracle and Cisco can both afford to be aggressive with M&A whereas many of their peers cannot. Expect the buying spree to continue.”
Gartner Group’s Akshay Sharma, hit the same themes; “The SBC on hypervisors running on standard servers with Soft-DSPs, could be the angle Oracle with Sun is taking….Diameter Routing for controlling sessions for policy management, and real-time charging is another angle…These are elements Acme Packet has been working on…”
And last but not least, the perspective of David Walters, VP Marketing at Sansay, an SBC competitor to Acme, is worthy of note. "Oracle's acquisition of Acme Packet is powerful evidence of session control's importance for network operators as they move to all-IP,” Walters stated. “Whether it 'accelerates' that migration as Oracle touts will depend on Oracle's software defined networking (SDN) strategy. Sansay agrees that session control will emerge as a key element of SDN and feels that Oracle's impact will hinge on how effectively they address deployment flexibility, management automation, and the use of open standards."
If nothing else, this deal has gotten the industry’s juices flowing.
Convergence making a comeback
For those of us who have been in the industry a few years, we can remember back to the term “convergence” being used as much if not more than we now hear the word “cloud.”
The context previously was about how the move from analog to digital was forcing communications to converge onto a flattened network, i.e., it was the start of the conversation about how the move to all-IP was going to ultimately make things like voice and video be services provided over high-=speed data networks. Convergence is about to make a huge comeback. Ovum has it right and I like their addition of using it with the associated moniker “blended.”
We are moving toward an ICT environment enterprise and service providers will leverage what I call “Infostructure”—what Ovum would call blended capabilities that include storage, networking, apps and devices in an era dominated by permissions, context mediation and the enforcement of policies and rules. This will be a utilitarian environment.
What I mean is that it will be a next-generation utility for enterprises and service providers alike, where blending is going to obscure those domain boundaries. It’ll also be extremely useful /utile in serving the needs of an increasingly unpredictable and accelerating world.
Oracle has placed an interesting bet on how to be the preferred provider in this world. It sets the tone for a lot more industry restructuring that is likely to come sooner rather than later, and where seemingly little things can be a big deal in determining future success.
This last week I was at the Intel Skylake for business launch in San Francisco, and I moderated a panel on security which pretty much convinced me to …
At CES last week, Corning led with a glass-forward vision that was picked up by companies like Panasonic and Samsung showcasing a number of active dis…
I'm at IBM Connect this week, and as with all IBM events since the IBM/Apple partnership, this is as much a showcase for IBM software as it is a showc…
With the big game coming up on Sunday, let's not forget what the Super Bowl is really about: commercials. Sure, some brutes in jerseys are going to co…
For two firms that have had somewhat of a contentious relationship, seeing Verizon in late-stage talks to purchase XO Communications is certainly an i…