Cable Tech

Zhone's Raptor Grabs at DSLAM Market

Access equipment vendor Zhone Technologies Inc. announced its new Raptor DSL Access Multiplexer (DSLAM) product family today, claiming that the new gear will soar above the competition with its unbeatable density and price-per-port (see Zhone Intros DSLAM Family).

Zhone, which has bought eight companies to date, has previously been able to offer DSL provisioning with other products. Its flagship product, the Broadband Access Node, combines the functions of a DSLAM, a switch/router, and a broadband subscriber management system in a single box. But with its own central office DSLAM, Zhone hopes to help carriers deliver more lines of DSL than anyone else, at a very low price. The technology for the Raptor products was developed by Zhone in-house, the company says. Of course, it's worth noting that Zhone became a student of DSLAMs following its 2001 acquisition of two Nortel Networks Corp. (NYSE/Toronto: NT) product lines. To wit, Zhone bought Nortel's digital loop carrier (DLC) product, AccessNode, which uses high-speed lines to extend the reach of central office switches to remote neighborhoods. It also snapped up Nortel's Universal Edge 9000, a product that sits between the carrier's central office and the customer location and can operate either as a DSLAM or as a DLC.

The three boxes in the new Raptor series -- the 100, 300, and 700 -- put the company in competition with the DSL provisioning leaders, including Advanced Fibre Communications Inc. (AFC) (Nasdaq: AFCI), Adtran Inc. (Nasdaq: ADTN), Alcatel SA (NYSE: ALA; Paris: CGEP:PA), and Lucent Technologies Inc. (NYSE: LU).

“This definitely addresses a gap in [Zhone's] portfolio,” says Current Analysis analyst Ron Westfall. “Overall, this is a praiseworthy, significant announcement.”

Zhone is making several claims about the new product line, the first being that none of its competitors can touch it on price. The company says carriers can scale from the Raptor 100, a one-rack-unit box with its 24 fixed ports, to the Raptor 700, a seven-RU box with its 640 ports, with a list price-per-port as low as $148. That compares, Zhone claims, to a Lucent Stringer FS/FS+ price per port of $440.

Lucent wouldn't engage Zhone in a price-per-port comparison, but did hint that being a telecom heavyweight, as opposed to a new DSLAM market entrant, has its advantages. "You're comparing list prices to real prices," says a Lucent spokesman.

“[Zhone's] price points are certainly aggressive,” Westfall says, pointing out that, while the company’s pricing is on a par with pricing in Asia/Pacific, it certainly undercuts anything in the European or U.S. markets. “This should allow them to position against a whole host of DSLAM products out there.”

With some software upgrades, Zhone says its new gear can handle voice and data, turning it into more of a next-generation digital loop carrier. This is significant, since most products on the market require an additional card to be added manually when upgrading to voice, according to Zhone vice president of marketing David Markowitz.

One thing Zhone hasn't made much noise about is its new gear's video transmission capabilities. “Clearly there are some other rivals out there that are further along on the video aspects,” Westfall says, pointing out that both Alcatel and Lucent already have paying carrier customers for their video products.

Markowitz claims that Raptor boxes are optimized for video and says the company will be doing a lot of talking about video going forward.

Zhone isn’t discussing which or how many customers it has landed so far for its new Raptor series, but boasts that, across all its product lines, it sells to 250 service providers serving 8 million subscribers worldwide.

— Eugénie Larson, Reporter, Light Reading

sevenbrooks 12/5/2012 | 12:25:08 AM
re: Zhone's Raptor Grabs at DSLAM Market
Anybody who thinks $150/port for a DSLAM is aggressive is on drugs.

litewatch 12/5/2012 | 12:25:02 AM
re: Zhone's Raptor Grabs at DSLAM Market I think that many vendors discount substantially from list, so a real price of $75/port appears very good.

Richard Hatch 12/5/2012 | 12:25:00 AM
re: Zhone's Raptor Grabs at DSLAM Market ...Already! The question is how low can you go? Did anybody else see the VZ CTO profile in the WSJ last week where he boasts of squeezing vendors to the max? Sales guys are offloading DSLAMs for <$5k now just to try to make quota.

It seems strange to hang your hat on price-per-port in this market, with scant sales & >10 DSLAM vendors struggling to stay afloat. But then again, carriers aren't innovating much either so new features are ho-hum too. Not a good story...especially if you're hoping carriers deploy video-over-DSL anytime soon!! (Remember voice-over-DSL?)
sevenbrooks 12/5/2012 | 12:24:58 AM
re: Zhone's Raptor Grabs at DSLAM Market
In East Asia, prices below $50/port are common. Prices at major US carriers are a bit higher but not vastly different. $75 bucks a port is a yawn.

Sonny Boy 12/5/2012 | 12:24:47 AM
re: Zhone's Raptor Grabs at DSLAM Market Does anyone have the WSJ article on Verizon CTO that was mentioned in this thread? It would be an interesting read!
_____ 12/5/2012 | 12:24:41 AM
re: Zhone's Raptor Grabs at DSLAM Market Can't wait until the guys in India have figured out a way to outsource the CIO function at US based companies :) :) :)

This guy will be sweeping streets in Tehran singing the tunes of the good ole days when he was CIO at Verizon.
Richard Hatch 12/5/2012 | 12:24:41 AM
re: Zhone's Raptor Grabs at DSLAM Market For Clues to Why the Tech Sector
Is Still Down, See Mr. Kheradpir

Information Chief at Verizon
Puts the Squeeze on Suppliers

NEW YORK -- Shaygan Kheradpir didn't like what he was hearing. "You guys are lowballing this," he said.

Mr. Kheradpir, the chief information officer of telephone giant Verizon Communications Inc., was reviewing this year's technology budget with his top lieutenants in late January. He didn't think their savings projections were ambitious enough.

They told him that $50 million would be saved by firing consultants. Mr. Kheradpir dismissed that as something already "in the bag" from negotiations last year. "What are you going to do for the rest of the year?"

They told him $20 million would be lopped off large-computer purchases. Not enough. "We saved $100 million" last year, Mr. Kheradpir snapped.

Larry Plunkett, one of his top aides, protested that Verizon "did such a phenomenal job of vendor-squeezing in 2002 that there's not much more to squeeze."

Squeeze harder, Mr. Kheradpir admonished: "See how much you can push things."

Mr. Kheradpir's attitude is bad news for International Business Machines Corp., Hewlett-Packard Inc., Sun Microsystems Corp. and other big technology sellers. Unfortunately for them, it is a widespread attitude not expected to change soon.

Chief information officers for the biggest U.S. companies expect their technology spending this year to decline an average of 1%, according to a Goldman Sachs survey done in December. That's after a 6% drop last year. Ford Motor Co. just slashed its information-technology budget by $300 million, or 20% for this year, mostly by firing contract employees. Merrill Lynch & Co. expects last year's $2.5 billion technology spending to be down 5% this year, marking the third consecutive year of declines.

The economy is growing again, albeit modestly. Many economists continue to regard computers and software as productivity enhancers. So why are sales still sagging in the once-mighty tech sector?

For one thing, corporate computers are becoming more like commodities. With wider adoption of software standards, the machines are more interchangeable, making it easier for Mr. Kheradpir to play one manufacturer off the other. Foreign technology has improved, so that Verizon can hire Indian companies, for one-third the cost, to handle programming once done by American firms. Better software can reduce the need for costlier hardware. Mr. Kheradpir has curtailed his buying of data-storage devices because new software allows him to use all the capacity of machines he already has. And eBay has made equipment prices more transparent.

Then there is the rise of people such as Mr. Kheradpir himself -- tech-savvy CIOs who are increasingly used by their companies not just to make the computers work, but to save money and improve profits. CIOs are getting broader responsibility and authority, and commanding bigger salaries -- averaging $750,000 at large companies, according to executive recruiters Christian & Timbers. Many report either directly to the chief executive officer or to the chief operating officer, as Mr. Kheradpir does.

He has cut Verizon's information-technology staff 20% since 2000, and the amount of money he spends with outside vendors has dropped more than 30% since then. It will drop again this year, he vows. Verizon's clampdown on computer spending is also telling because it isn't some dot-com weakling looking to cut corners; it had a budget last year estimated at $2 billion for personnel and computers, software and services. While the company needs to trim costs to reduce a heavy debt load, it is still one of the nation's healthiest large telecommunications companies.

A 42-year-old native of Iran, Mr. Kheradpir came to the U.S. to earn bachelor's, master's and doctoral degrees in electrical engineering at Cornell University, and got his first job as a researcher at GTE Corp. He eventually became CIO there, earning respect for delivering new products on schedule. After Verizon took over GTE in 2000, he was promoted to the CIO position the following year. Since then, Verizon's overall information-technology budget has dropped from the telecom-industry average of 6% of revenue to just above 4%.

Verizon used to negotiate corporate discounts from each big computer vendor and then let Verizon's programmers order the computers they wanted. But last year, Mr. Kheradpir told programmers he would choose what computers they would work on and he held off ordering new machines until the middle of the year. Then he told Sun, Hewlett-Packard and IBM that their share of Verizon's spending would depend on how low their prices were. All three immediately lowered their prices 25%. Then Sun and H-P decided to slash maintenance charges.

Sun went further, offering to provide software for Verizon's planned development of another major new service. Ultimately, Sun increased its share of the shrunken budget the most; H-P also gained. IBM lost ground, as Verizon cut $100 million out of its server budget, trimming it to $125 million. IBM declined to comment.

Dreaming of One Supplier

Still, Mr. Kheradpir wants more. Lately he has been wondering aloud to staffers how much more he could save if Verizon gave all its server business to one supplier. At most, Mr. Plunkett has told him, "we could get maybe $20 million more." Not enough, Mr. Kheradpir has decided for now, to justify the added vulnerability that would come from complete dependence on one vendor.

To make sure Verizon gets the best price for routers and storage boxes, Mr. Kheradpir says he encourages his staff to go first to eBay, the Internet auction site. Defunct dot-coms often sell through eBay hardware they bought but never used -- goods that are frequently still in the box. The pricing information this provides buyers is unprecedented. "It's as if you now have a stock market for servers," says Mr. Kheradpir.

Verizon's procedures keep him from buying on eBay -- he's trying to change that -- but he says he checks prices for EMC Corp. storage devices on eBay every month and sends the Web link with the price to his storage buyer, with instructions to beat it.

Mr. Kheradpir has started what he calls his "Offware" program to remove duplicate software. Because Verizon comprises three predecessor companies, each of which had picked its own software, it often has multiyear licenses to several products that do the same thing. As licenses expire, Mr. Kheradpir encourages other vendors to present a plan for "offing" the rival that includes providing discounts on their own software.

Last year, offware casualties included a database made by Sybase Inc. and a software package made by Serena Software Inc. that keeps track of changes made in programs all across a computer network. "That's $17 million I won't pay," says Mr. Kheradpir. He says that IBM and Microsoft Corp. each picked up some of the database business because they provided programming help that halved the cost of replacing Sybase.

He says his programmers found a tool from another vendor that accomplished what Serena did. Mark Woodward, chief executive of Serena, says his company "is realizing annual renewal rates of 95%" for strategic software packages. A spokesman for Sybase says, "We understand their need to reduce their number of vendors," and added that the company is pitching other products to Verizon.

Mr. Kheradpir is looking forward to 2005 when a big license with Computer Associates International Inc. expires and he can play it off against IBM's Tivoli products. The competing products perform similar functions, monitoring computer systems for overloads and tracking processing speed. Computer Associates CEO Sanjay Kumar visited Mr. Kheradpir in December, and promised to cut prices to win all of Verizon's business. "I don't care which one goes off, because I'm not paying double," Mr. Kheradpir says. "We'll talk to them and say, 'Hey, you can get the other guy out.' "

Mr. Kumar says that most customers are looking to incrementally trim budgets, but "some CIOs are very aggressive, like Shaygan." He adds, "I'm aggressively pursuing replacing IBM at Verizon." IBM declined to comment.

An Indian Advantage

Although Verizon employs several thousand programmers to develop applications, it has long relied on free-lancers, or contract employees, for such tasks as running new software to make sure it works right with existing programs. Last year, Verizon got rid of hundreds of U.S. contract employees and replaced them with developers who work for computer-services firms abroad, primarily in India. Five years ago, the Indian firms, such as Wipro Corp. and Infosys Technologies Ltd., had barely cracked the U.S. market. But Mr. Kheradpir says they have improved and can bid for jobs and hire programmers capable of matching or exceeding American consultants.

This year the number of offshore consultants is expected to rise sharply. Last year, Verizon saved $14 million from "global sourcing," Mr. Kheradpir says. "This year we'll get $50 million." The savings from using Indian contractors is $50,000 per employee over U.S. counterparts. Mr. Kheradpir says the move also improves project speed because "they test code and fix bugs while we sleep," giving Verizon's programmers cleaned-up code to work on when they arrive in the morning.

Verizon has found new ways to make maximum use of the computer equipment it owns, curbing the need to buy excess capacity for anticipated growth. Hardware vendors are so eager for business these days that they frequently agree to install more computer processors than a customer buys or leases. They charge only for the number used, and if the customer needs more, the vendor turns them on.

During a recent visit to one of Verizon's four big data-processing centers in Tampa, Fla., to review cost-cutting efforts, Mr. Kheradpir strode through a computer room full of hundreds of beige or blue refrigerator-size servers, routers and storage systems. The facility is helping Verizon address one of telephone users' biggest frustrations: Phone companies can't give a specific time for service appointments. With new software designing the best route and global-positioning-systems on trucks, Verizon is trying to narrow the promised time of service to a two-hour window, instead of four or five.

Verizon needed new computer servers for the task. Verizon programmers planned to buy a 12-processor IBM array. But Mr. Kheradpir's penny-pinching deputies thought an eight-processor system would be sufficient. Shouting over the din of air-conditioning fans, one manager reported: "We said, 'You can provision with 12-way, but we're only going to pay for eight-way unless we need it.' " IBM installed the 12-way but currently Verizon is only using -- and paying for -- an eight-processor system, Mr. Kheradpir said. An IBM spokesman says it frequently offers such deals in a program called "capacity on demand."

Software developments and standardization in data storage have also helped Verizon save. A few years back, its primary way of storing data was to attach a single storage device to each computer server, and to make sure it bought twice the capacity it needed to accommodate future needs. Now, software enables storage devices to be linked together in a network, so servers can take advantage of unused capacity anywhere in the system.

Another breakthrough came last year, Mr. Kheradpir says, with new software that made it clear exactly what percentage of disk capacity was occupied. Until then, "it was difficult to know how much storage was actually used."

Verizon says it has freed up about 100 terabytes of storage -- capacity that would cost about $3.5 million on the market today -- without buying any new equipment. In Tampa, the storage manager reports that his systems are 60% full, and he won't buy any more until 80% is reached. He says he has negotiated a deal in which storage provider EMC will install added capacity, but, like IBM with its processors, won't charge for it until Verizon asks for it. Meanwhile, EMC is cutting prices every quarter, meaning that Verizon's costs will be lower when the storage devices are eventually powered up.

Verizon is still buying hardware, including new personal computers with speedy Pentium 4 microchips from Intel Corp. for its call centers. In these centers, desktop units must handle a demanding array of tasks, including different programs with as many as a dozen different scripts for dealing with customers. "A lot of the new applications we're building scream" -- run fast -- "on the new desktops," Mr. Kheradpir explains. "The capital expenditure is worth it."

Verizon used to replace PCs every three years, but that period lengthened to almost four last year. Now, he says, he thinks PC purchases will pick up again. More than half the new ones will be laptops equipped with antennas for wireless networking.

But other trends promise to continue to push down costs, he says. He is considering "blade servers" that replace expensive machines based on the corporate Unix operating system with hundreds of cheap computer cards. And Linux, a free operating system propagated over the Internet, is becoming powerful enough for Verizon to consider it for major systems, making servers even more of a commodity.

As he quizzes staffers in the Tampa data center, Mr. Kheradpir thinks of something he'd like to add to his digital dashboard -- a 52-inch plasma video screen in his office. It displays key metrics of his business, such as the number of people who sign up for service on the Internet or handle all payments over the Web. With an e-mail thumbed into his BlackBerry, he tells his workers, "I want you guys to develop a program so bells go off ... whenever you're not utilizing your computers at a 60% level."

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