Oracle Corp.'s plan to acquire session border controller (SBC) specialist Acme Packet Inc. looks like a way for the software giant to get some ready-made smarts in the key telco sectors of 4G packet core networking and network functions virtualization (NFV), according to industry analysts. (See Oracle to Acquire Acme for $1.7B.)
But the move, which is yet another example of encroachment by a major IT company into traditional telecom turf, will also shake up the competitive environment and put some industry relationships under strain, says the experts.
Packet core competencies
As mobile operators migrate toward the all-IP networking environments of 4G/LTE, so the capabilities they need in the intelligent core of their networks (where voice and data traffic is identified, analyzed and managed) are changing. Acme Packet has some of the key technologies mobile operators will need in their all-IP architectures, especially as traditional circuit-switched voice traffic disappears and mobile "calls" become real-time packet interactions.
"Acme Packet is well positioned in real-time IP-based communication services," says Heavy Reading senior analyst Gabriel Brown. "On the mobile side, it has a big opportunity in IMS-based Voice over LTE [VoLTE or 4G Voice], and that is only one of several potentially large markets for real-time services."
Brown notes that Oracle believes Acme Packet's potential spreads far beyond the telecom sector. The acquisition announcement "talks about healthcare, security, and commerce, so clearly Oracle sees Acme's technology as being applicable to a broad range of applications and markets. [Acme] also has a decent play in so-called Operator OTT [over-the-top service management], should that emerge as a significant source of revenue," he adds. "Oracle has, for some time, wanted a bigger presence in the 4G core, so the deal fits on that score. Buying a segment market leader has much to recommend it."
Let's get virtual
Acme Packet is also one of the IP networking specialists that has been exploring ways in which its products can be offered as software and integrated into networks that, in common parlance, are "software-defined" or "virtualized."
"Acme Packet is further along in virtualizing its 4G core products than many other vendors," notes Heavy Reading's Brown. "It'll be interesting to see how Oracle drives this idea of software-centric networking and hardware independence, as is being pursued across the industry in the Network Functions Virtualization [NFV] work." (See Carriers Peer Into Virtual World.)
Brown's Heavy Reading colleague, Ari Banerjee, agrees that the deal gives Oracle opportunities in the NFV space. "This will enhance Oracle's SDP [service delivery platform] strategy and allow it to jump into SDN" as it will be able to house "Acme Packet technology on Sun platforms in a virtualized hypervisor environment."
Positive for Acme, a natural step for Oracle
Infonetics Research Inc. principal analyst Diane Myers believes this is a good time for Acme Packet to find a new home. "The competition for session border controllers within the service provider and enterprise space has been heating up and being a standalone product specialist becomes more challenging," she states.
And it makes sense for Oracle, though it alters the industry dynamics somewhat, notes Myers. Buying a network vendor "is a natural extension of [Oracle's] work on the service delivery layer. It will, however, put it in closer competition with many of its network partners. It was expected that Oracle would make a push into network equipment at some point in 2013."
That potential for competitive tension is exacerbated by the growing interest among major communication service providers in virtualization, but it's also a good way for Oracle to kick back at the networking giants such as Cisco Systems Inc. and Ericsson AB that are invading the IT space and making big noises in the NFV and SDN arenas, believes Heavy Reading's Caroline Chappell.
"This is the start of the fight-back of the IT vendors against Cisco et al moving into the Service Provider Information Technology (SPIT) space with cloud management and OSS acquisitions and talking about becoming software and services companies." (See Cisco Extends Its SDN & Cloud Plans and Ericsson to Buy Telcordia.)
Chappell adds: "The network equipment providers were scenting the advantage [in virtualized networks] as NFV requires deep knowledge of the network, but Oracle is beginning to even up the playing field by buying a heavyweight networking company and it's also one that strengthens its SIP server, charging and policy control business," she notes.
Having a foot in both the networks and SPIT camps is a must for major vendors now, notes Ovum Ltd. principal analyst Dana Cooperson in emailed comments issued to trade journalists. "Telecom and IT are coming together in ways that are shifting the vendor competitive framework significantly. ... 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."
And Cooperson expects further strategic acquisitions. "Oracle has a comparatively large bucket of cash to use for acquisitions," with only Cisco among the infrastructure vendors boasting greater M&A muscle, she notes. "Oracle and Cisco can both afford to be aggressive with M&A whereas many of their peers cannot. Expect the buying spree to continue."
-- Ray Le Maistre, International Managing Editor, Light Reading