A White Paper from the Experts In Business-Critical Continuity™.
Leveraging the Communications Server Ecosystem How network equipment providers can effectively take advantage of investments made by the ATCA and MicroTCA communications server ecosystem
Hermann Berg, Business Solutions Architect Larry B. Terry, Strategic Business Development
Table of Content 3 Executive Summary 4 Introduction 4 What is the communications server ecosystem? 5 What benefit will I obtain from this ecosystem? 5 What is the magnitude of R&D capability in the market? 8 How can I leverage these investments by the ecosystem? 10 When is the best time to consider changing? 10 What happens if I don’t engage with the ecosystem?
2 Leveraging the Communications Server Ecosystem EmersonNetworkPower.com/EmbeddedComputing
Executive Summary Network equipment providers (NEPs) can reduce costs and improve their business agility by capitalizing on the maturing ecosystem for research and development (R&D) and maintenance of key products. The embedded computing ecosystem uses lessons learned from more than 20 years of both embedded and enterprise computing and participation in telecom industry standards. It has evolved into a virtual extension of the telecommunications R&D community that can deliver and maintain building blocks or complete platforms for telecommunications products under commercially attractive conditions.
3 Leveraging the Communications Server Ecosystem EmersonNetworkPower.com/EmbeddedComputing
Communications Servers Communications servers are open, standards-based computing systems that operate as a carrier-grade common platform for a wide range of communications applications and allow for value-add at many levels of the system architecture. Based on industry-managed standards such as AdvancedTCA®, MicroTCA™ and Service Availability Forum™ specifications, communications servers are the foundational platform upon which equipment providers build infrastructure elements for deployments such as IMS, IPTV and wireless broadband. By driving down infrastructure costs, improving time-to-market, and shifting user resources toward the development of new applications and services, communications servers will help accelerate the costeffective deployment of converged services.
Introduction Traditionally, network equipment providers (NEPs) have provided completely integrated, purposebuilt network elements as essential building blocks of growing telecommunications networks. They have rarely used their suppliers for any of the major areas of hardware design, software development, reliability engineering, platform validation or related services. However, the rapidly evolving and fiercely competitive landscape of the global NEPs’ customers – the network service providers (NSPs) – looks nothing like it did a decade ago. A number of market dynamics have been introduced over recent years that are driving down average revenue per user (ARPU): world-wide telecommunications deregulation; disruptive technologies (e.g., Voice over IP); increased demand for data applications; and diminishing loyalties from the end-user customer base. The very foundations of the industry are being shaken. As a result, many established NEPs are struggling with the challenge of how to survive, let alone thrive, in this turbulent environment. The embedded communications computing industry refines a concept from enterprise computing that may go a long way in addressing these challenges: Using the standards-based communications server ecosystem to leverage external, independent investments in R&D and delivery capability. This notion raises a series of questions which are explored in depth by this paper: •
What is the communications server ecosystem?
•
What benefit will I obtain from this ecosystem?
•
What is the magnitude of the R&D capability in the market?
•
How can I leverage these investments by the ecosystem?
•
When is the best time to consider changing?
•
What happens if I don’t engage with the ecosystem?
What is the communications server ecosystem? In 1993, James F. Moore wrote the following definition of a business ecosystem: “An economic
community supported by a foundation of interacting organizations and individuals--the organisms of the business world. This economic community produces goods and services of value to customers, who are themselves members of the ecosystem. The member organizations also include suppliers, lead producers, competitors, and other stakeholders. Over time, they co-evolve their capabilities and roles, and tend to align themselves with the directions set by one or more central companies. Those companies holding leadership roles may change over time, but the function of ecosystem leader is valued by the community because it enables members to move toward shared visions to align their investments and to find mutually supportive roles.” (James F. Moore; Harvard Business Review 1993, Predators and Prey: A New Ecology of Competition) Following this alignment, the communications server ecosystem largely consists of the following ‘food chain’: •
Network service providers
•
Network equipment providers
•
Communications server providers
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Board-level hardware components providers (including component providers)
•
Application software providers
•
Operating system providers
•
Other complementary hardware/software/services providers
The early stages of an emerging ecosystem based on open or de facto standards often experience inherent imbalances, whereby one ore more key players compensate heavily for other, underdeveloped members or those not fully engaged with the ecosystem. For the past two years, communications server providers have held the principal role of ecosystem leaders, while many NEPs have maintained the traditional role of picking component elements, then integrating and 4 Leveraging the Communications Server Ecosystem EmersonNetworkPower.com/EmbeddedComputing
Understanding the mutual dependency of the NEPs and the ecosystem … can avoid overlaps within the ecosystem resulting in better utilization of time, money and expertise. Key Organizations • PICMG: www.picmg.org (400+ members) • SA Forum: www.saforum.org (30+ members) • CP-TA: www.cp-ta.org (30+ members) • SCOPE: www.scope-alliance.org (20+ members) • Linux Foundation: www.linuxfoundation.org (Carrier Grade Linux Workgroup)
Key Standards • AdvancedTCA (PICMG) • AdvancedMC (PICMG) • MicroTCA (PICMG) • Carrier Grade Linux (Linux Foundation) • High Available Middleware: AIS + HPI (SA Forum) • Reference Architectures & Interoperability (CP-TA)
validating the resulting platform themselves as a means of adding value or providing differentiation for a perceived competitive edge. Understanding the mutual dependency of the NEPs and the ecosystem, or how to use the ecosystem to its fullest extent, can avoid overlaps within the ecosystem resulting in better utilization of time, money and expertise. Currently, NEPs (and to a smaller degree NSPs) are increasingly accepting their role in ecosystem leadership, partnering with key application-ready platform providers and other key members of the ecosystem to take full advantage of the collective investment in communications server R&D, services and delivery capability … once the exclusive domain of the equipment provider.
What benefit will I obtain from this ecosystem? Key elements required for a business ecosystem to flourish include open standards, certifiable interoperability, and strong organizations to own, manage and evolve these standards as the ecosystem continues to develop and grow into a healthy business sector. Communications server standards and associated organizations are referenced on the left. The projected sales growth of products based on the ATCA and MicroTCA open standards indicates these standards are already widely accepted as a solid foundation for the communications server ecosystem, having moved well beyond the inflection point for success into the early majority phase in less than two years (Figure 1).
What is the magnitude of R&D capability in the market? In 2006, it is generally agreed that the total ATCA market was valued at just under $250M USD. Emerson estimates, through it’s close relationships with industry analysts and ecosystem partners, as well as publicly available data, show that the total ecosystem investments for 2006 roughly equaled the revenue estimates. The
Figure 1: Communications Server Platform Adoption Cycle (Adapted from “Diffusion of Innovations” theory by Everett Rogers, Diffusion of Innovations, 1962)
chart in Figure 2 compares this ecosystem investment with the typical major NEP investment for the same period. While some tier one NEPs invested more in 2006 than the average indicated in Figure 2, the contrast between what the ecosystem invested in aggregate vastly exceeds what any single major NEP may have had the opportunity to invest, even if it was possible to consider. The chart in Figure 3 is even more striking, in that estimates show that almost 45% of the total $650M USD investment planned for 2007 by the ATCA industry is still being spent by NEPs on a market that is estimated at roughly $850M for the same period. While there are purpose-driven applications with no commercial alternatives available for some of this development activity, much of the 45% shown in Figure 4 represents overlapped R&D investments by multiple NEPs in core platform elements (switches, chassis, management, etc.) and general-purpose processing blades.
5 Leveraging the Communications Server Ecosystem EmersonNetworkPower.com/EmbeddedComputing
Ecosystem vs. Typical Major NEP ATCA R&D spend 2006 (in million) $ 250 Typical Major NEP
$ 200 $ 150
Application-ready ATCA Platform Provider Board-level Hardw are Components Providers Operating System Provider
$ 95
$ 100 Application Softw are Provider Other
$ 88
$ 50 $ 24
$ 20
$-
Source: Motorola 2007 estimates based on publicly available information from key members of PICMG, CP-TA, Scope, SAForum and Mountain View Alliance Figure 2: Strength of the AdvancedTCA Ecosystem
Total annual R&D spend in the ATCA ecosystem
Operating System Provider 6%
Other 6%
Application Software Provider 0%
Board-level Hardware Components Providers 21%
NEPs 45%
Application-ready ATCA Platform Provider 22% Source: Motorola 2007 estimates based on publicly available information from key members of PICMG, CP-TA, Scope, SAForum and Mountain View Alliance
Figure 3: Distribution of R&D Dollars 2007
6 Leveraging the Communications Server Ecosystem EmersonNetworkPower.com/EmbeddedComputing
This overlap in R&D expenditure results in a dilution of leveraged investment by the ecosystem and presents undesired limitations of the benefits of accelerated profitability over time from the use of standard-based, commercial off-the-shelf (COTS) technology. Re-directing and optimizing investments in non-overlapping R&D could significantly improve the adoption rate illustrated in Figure 4, resulting in a more capable ecosystem. While this situation seems alarming at first blush, there are three principal reasons why this imbalance has occurred to date. First, the bulk of the NEP investment stems from early adopters in ATCA technology, when a nascent ecosystem lacked sufficient product and technology containing the right features, cost points and/or schedules. Second, and most important, was that the relative number of NEPs that were adopting ATCA for leading-edge programs in the 2005-2007 timeframe was small, relative to the number of NEPs using proprietary platform solutions.
Ecosystem annual R&D estimates (Platform, Board, OS, Middleware Providers) $ 3.000 $ 2.500
$ 2.000 $ 1.500 $ 1.000
$ 500 $0 2006
2007
2008
2009
2010
2011
Source: Motorola 2007 estimates assuming that ecosystem R&D increases at least as fast as ATCA revenue projections for ATCA from Yankee 2007
Figure 4: Ecosystem R&D Spend Projection
Moreover, ATCA platform solutions announced and rolled out over the last two years tended to be singular network elements, such as RNCs or gateways. Lastly was the associated “cultural evolution” of the NEPs heading into the early years of ATCA; while equipment providers demonstrated the desire to think strategically about the value of employing standards, COTS and “outsourcing” of the non-differentiating elements of a solution, some of these same vendors were simply unable (or unwilling) to complete the transformation quickly, continuing instead to operate under the “old model” in terms of investing internally on technologies the ecosystem could easily, or had already, developed. It is generally believed by industry analysts and ecosystem leaders that 2008 will mark the beginning of the commercial volume ramp for ATCA products. A majority of NEPs made up from the significant tier one and tier two players (major NEPs) will be adopting ATCA as a common platform standard for new applications. The buying volume is expected to pass the billion-dollar threshold that year. As the total ATCA market grows, the ecosystem can afford to take on additional R&D responsibilities. This large and growing R&D investment should be focused on areas that help the NEPs reduce their own development time and effort, while at the same time reducing the R&D fragmentation and duplication within the ecosystem (in particular, within the NEPs). This will ultimately reduce the infrastructure cost to NSPs, leaving them with more money to spend on value-added features. 7 Leveraging the Communications Server Ecosystem EmersonNetworkPower.com/EmbeddedComputing
OpenSAF™ www.opensaf.org OpenSAF is a new initiative undertaken by Ericsson, HP, Motorola and Nokia Siemens Networks to create a new open source project to develop a complete high availability operating environment based on the Service Availability Forum (SA Forum) standards. The goals of the OpenSAF project are to: Create an open source implementation of a high availability operating environment which includes the SA Forum Application Interface Specification (AIS) • Develop necessary additional complementary services necessary to deploy and manage the software • Accelerate the development of SA Forum specifications by proposing enhancements implemented in the OpenSAF project • Establish a broadly adopted high availability operating environment that can be leveraged by computing technology companies, NEPs, other industries requiring high availability, and ISVs. • Utilize an open source licensing model not tied to any commercial implementation
How can I leverage these investments by the ecosystem? It is a frequent observation by some experienced NEPs that ATCA shelves, blades and other components are not truly “plug and play”. Open standards necessarily leave a number of areas of flexibility and optimization that resulting bodies such as the Communications Platforms Trade Association (CP-TA focuses on interoperability within the ecosystem) and SCOPE (focus on reference architectures used by NEPs) aim to address. At the same time, major NEPs and a number of communications server providers/system integrators (such as the Embedded Computing business of Emerson Network Power) who are focused on accelerating the adoption of standards and improving the level of platform integration have established some de facto standards and ‘mini-ecosystems’ around their system products. Working closely with key strategic suppliers from within the greater ecosystem – such as blade and AMC component providers, operating system providers and, now, standardized middleware – these collaborative efforts are effectively simplifying the out-of-box experience for NEPs. In the next year or two this imbalance will likely shift, with a few communications server providers extending their own mini-ecosystems to cover the majority of the overall communications server ecosystem (e.g., more special-purpose blades, a wider choice of operating systems, applicationspecific data plane, I/O and interfaces), thus strengthening their growing role as ecosystem leaders. Major NEPs will increasingly realize that their core competency does not include all of the hardware platform integration, validation, reliability engineering or certifications. Those NEPs will, in turn, invest in (and maintain control of) the value chain by strategically selecting certain product lines or platforms for their own purpose-built blade-level development, management and sourcing – likely based on the platform of their preferred communications server provider. The rest of the product lines will then be given to one or two preferred communications server providers or system integrators (ecosystem co-leaders) to implement a “common platform” strategy. One of the most exciting elements of the ecosystem for products being based on the ATCA and MicroTCA open standards (collectively coined ‘xTCA’) is the concept of a standards-based opensource high availability middleware: OpenSAF. OpenSAF will greatly improve interoperability within the ecosystem, namely the interoperability between all applications and all hardware platforms that have been adapted to this middleware. OpenSAF enables an NEP to have multiple competing system hardware platforms (communications and enterprise servers) used simultaneously for any one of their core applications and solutions, as OpenSAF will abstract the application interface from any hardware changes. The NEP can hence avoid lock-in to any one hardware platform, be it external or internal. Hardware platform decisions for any given customer engagement can then be freely determined based on a customer’s performance and price requirements. While thorough analysis of the details for respective development programs should precede any investment or sourcing decisions, some general points can be made about the benefits of working with the ecosystem. Sourcing vs. in-house development and production can create value along the following dimensions: •
cost savings – particularly when system-level integration is required, as then the high R&D dollars can be shared across multiple customers
•
time-to-market – where pre-integrated components are already available at project start, the time-to-market effect on product lifetime revenue cannot be overestimated
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redeployment benefits – where internal resources freed up through use of the ecosystem are refocused on core business activities, a higher ROI can be expected
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risk reduction – readily available products mitigate the risk of development schedule slips or complete failures
•
benefits from supplier ecosystem – the variety and lifetime of components available from the ecosystem via a key system integrator will increasingly exceed that of any NEP, thereby enabling a platform to be more widely deployed and maintained for a longer period of time 8 Leveraging the Communications Server Ecosystem EmersonNetworkPower.com/EmbeddedComputing
“SCOPE and CP-TA are both committed to accelerating the deployment of carrier-grade base platforms based on open specifications. We are encouraged to see CP-TA aligning their interoperability documents with our published AdvancedTCA profile and we believe this will lead to faster adoption of commercial off-the-shelf building blocks within the industry.� ~ Magnus Karlson, SCOPE Chairman, Ericsson From a financial perspective, there are two more important factors to consider: cash flow and assets. The cash flow from sourcing projects becomes positive very quickly when compared with the significant initial cash outflow for R&D on in-house projects (see Figure 5). Hence, the break even of a development project can be achieved significantly earlier in the cycle (see Figure 6). Along the same lines, the assets of development equipment -- test equipment, tool chains, etc. -become obsolete quickly and the inventory associated with in-house production can be minimized. The level of financial risk escalates correspondent with the degree of project complexity, with platform projects being substantially more significant than blade or board projects.
Cash Flow Comparison $14.000.000 $12.000.000 $10.000.000 $8.000.000 $6.000.000 In-house
$4.000.000
Sourcing
$2.000.000 $1
2
3
4
5
6
7
8
9
10
11
12
13
$(2.000.000) $(4.000.000) $(6.000.000) years
Figure 5: Cash Flow Comparison In-house vs. Sourcing (Source: Motorola Total Cost of Ownership Model Calculation for System-level Projects)
Cumulative Cash Flow Comparison $70.000.000 $60.000.000 $50.000.000 $40.000.000 $30.000.000
In-house
$20.000.000
Sourcing
$10.000.000 $1
2
3
4
5
6
7
8
9
10
11
12
13
$(10.000.000) $(20.000.000) years
Figure 6: Cumulative Cash Flow Comparison In-house vs. Sourcing (Source: Motorola Total Cost of Ownership Model Calculation for System-level Projects)
9 Leveraging the Communications Server Ecosystem EmersonNetworkPower.com/EmbeddedComputing
When is the best time to consider changing? Successful adoption of ATCA can be seen as an indication of broader acceptance of both the COTS concept and the advantages of open industry standards. There can be little doubt that ATCA is here to stay, with over 50% of the NEPs publicly declaring adoption of the standard. Notable companies who have made major announcements include Nokia Siemens Networks, Alcatel-Lucent, Nortel, NEC, OKI and Motorola’s Networks business. Emerson’s Embedded Computing business is reaping the benefits of deploying early engineering resources in ATCA, and has many early adopter customers who are well into volume deployment phase in 2007. The competitive landscape for NEPs is fierce and capital expenditure share is getting tougher to keep; new markets are harder to penetrate, business cases tougher to define and new projects riskier to undertake. NSPs are demanding standards, interoperability and choice. All in the name of demonstrated lowered capital and operational expenditure. NEPs must show a clear advantage in critical success factors in order to gain leadership, acceptance and market share. Such success factors include time-to-market, R&D effectiveness, reusability, scalability and, ultimately, solution value. Tier one and, to be sure, tier two NEPs are increasingly turning to ATCA and MicroTCA based solutions to underpin these success factors. Thus, for most of the mainstream solutions being developed, the time is now to take advantage of the ecosystem.
What happens if I don’t engage with the ecosystem? Like it or not, the computing platform element of the network equipment market is gradually being commoditized. Proprietary solutions are being rejected by service providers and won’t yield the margin required to sustain them in this increasingly cost sensitive environment. In fact, NSPs are asking NEPs to provide – and increasingly manage – the building block network elements of their next-generation networks based largely on open standards and commercial off-the-shelf hardware and software.
Figure 7: MicroTCA Market Adoption vs. AdvancedTCA
10 Leveraging the Communications Server Ecosystem EmersonNetworkPower.com/EmbeddedComputing
“Strategy is becoming, to an increasing extent, the art of managing assets that one does not own.” Marco Iansiti, Roy Levien 2004, in The Keystone Advantage:What the New Dynamics of Business Ecosystems Mean for Strategy, Innovation and Sustainability Some NEPs are progressively evolving their product development culture now. Others have not yet signaled their intentions or have chosen to hold steadfast for now. Many of these same NEPs are reporting declining margins and market share as a result, with more efficient low-cost competitors and a few adaptive global tier one companies gaining share advantage. As adopting the communications server sourcing model dramatically lowers barriers to entry, new competitors are entering the network equipment market by extending their solutions to include, if not feature, a standards-based COTS platform. It is essential for any incumbent NEP to: •
Review core competencies and determine non-core solution development activities
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Evaluate where internal non-core R&D and delivery efforts duplicate efforts already completed or currently underway within the ecosystem
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Evaluate where sourcing, rather than in-house creation, can further improve flexibility, speed, profitability and cash flow
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Evaluate where OpenSAF or potential future SA Forum-compliant middleware alternatives can be used to decrease dependency on specific hardware platforms and form factors, permitting future-proofing through flexibility
The next step NEPs should consider include engagement with key ecosystem members, to clearly define each other’s core competencies, review total cost of ownership goals and time-to-market objectives of current and future projects, and to look for risk and cost sharing opportunities “...to move toward shared visions to align […] investments and to find mutually supportive roles.” (James F. Moore) The ecosystem represents a substantial amount of virtual R&D capital that is at the disposal of the NEPs simply for the asking.
11 Leveraging the Communications Server Ecosystem EmersonNetworkPower.com/EmbeddedComputing
About Emerson Network Power Emerson Network Power, a business of Emerson (NYSE:EMR), is the global leader in enabling Business-Critical Continuity™. The company is the trusted source for adaptive and ultra-reliable solutions that enable and protect its customers’ business-critical technology infrastructures. Through its Embedded Computing business, Emerson Network Power enables original equipment manufacturers (OEMs) and systems integrators to develop better products quickly, cost-effectively and with less risk. Our business was strengthened by the acquisition of Motorola's Embedded Communications Computing group, which has driven open standards and pioneered technologies based on them for more than 25 years. This positions Emerson Network Power as the recognized leading provider of products and services based on open standards such as ATCA®, MicroTCA™, AdvancedMC™, CompactPCI®, Processor PMC, VMEbus and OpenSAF™. Our broad product portfolio, ranging from communications servers, application-ready platforms, blades and modules to enabling software and professional services, enables OEMs to focus on staying ahead of the competition. Manufacturers of equipment for telecommunications, defense, aerospace, medical and industrial automation markets can trust Emerson’s proven track record of business stability and technology innovation. Working with Emerson helps them shift more of their development efforts to the deployment of new, value-add features and services that create competitive advantage and build market share. Emerson’s commitment to open, standards-based solutions and our deep understanding of the embedded computing needs of OEMs provide the foundation for the market to look to us for leadership and innovation.
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