The privately held Israeli vendor, which boasts annual revenues of around US$700 million, is already an established player in the backhaul equipment sector, having pitched its XDM and BroadGate transport product lines to operators for years, with significant success (around 100 backhaul deployments, mostly in emerging markets such as India). (See ECI Pumps Up TDM, ECI Unveils Tiny MSPP, and ECI Adds MPLS.)
Now it sees an opportunity to pick up even more business as carriers migrate from TDM to packet backhaul deployments. (See Ethernet Quickly Eclipsing T1s for Backhaul, MegaFon Raises Russian Backhaul Stakes .) To that end, ECI has been adding packet capabilities to its traditional SDH platforms to offer hybrid solutions, and pushing its Carrier Ethernet gear as a pure packet backhaul play.
But ECI isn't alone. A host of other vendors with TDM experience and packet network capabilities are all doing the same thing, including, but not limited to, the following:
- ADVA Optical Networking
- Alcatel-Lucent (NYSE: ALU)
- BTI Systems Inc.
- Celtro Inc.
- Ciena Corp. (NYSE: CIEN)
- Ericsson AB (Nasdaq: ERIC)
- Huawei Technologies Co. Ltd.
- NEC Corp. (Tokyo: 6701)
- Nokia Networks
- Orckit Communications Ltd. (Nasdaq: ORCT)
- RAD Data Communications Ltd.
- Tejas Networks India Ltd.
- Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA)
- Transmode Systems AB
Add to that the microwave backhaul specialists such as Aviat Networks Inc. (Nasdaq: AVNW), Cambridge Broadband Networks Ltd. , Ceragon Networks Ltd. (Nasdaq: CRNT), DragonWave Inc. (AIM/Toronto: DWI; Nasdaq: DRWI), Nera Networks AS , and others, that are addressing the same sector, and you have a very crowded market, albeit a large and growing one -- worth more than $7 billion to vendors in 2009, according to Infonetics Research Inc.
The desire for differentiation
So, in an effort to stand out from the crowd, ECI has enhanced the capabilities of its product lines (enabling native TDM and native packet on the same platforms); added new products to its pure packet Carrier Ethernet Switch Router (CESR) range; and decided to branch out into the radio world by adding its own microwave product line, the BG-Wave family (standalone units and plugin modules), to its portfolio.
And in the context of the market, ECI is keeping up with its microwave rivals. "Until now we've seen a lot of microwave vendors building smarter and smarter Layer 2 and Layer 3 transport network smarts into their microwave products. ECI is coming at this from the opposite direction," notes Heavy Reading senior analyst and backhaul specialist Patrick Donegan.
Not that ECI hasn't been offering a microwave element to its backhaul customers: Currently, it has a partnership with microwave specialist Ceragon. (See ECI & Ceragon Partner.)
So does going it alone in microwave backhaul make sense? Given ECI's large installed base, the revenue upside potential of the new microwave product line is clear and compelling, according to Donegan.
What is not so clear is the impact on ECI's bottom line. "Relying on OEM agreements or joint product development with a specialist microwave vendor such as Ceragon or Aviat would have been a lower-risk approach," says the analyst. "Building its own product portfolio certainly promises greater rewards in terms of synergy with its current portfolio, but it also carries greater risk in terms of exposing its bottom line to a fiercely competitive microwave market driven by RF-savvy vendors that are brimming with wireless heritage and competence."
Not surprisingly, ECI sees things differently. The vendor's senior product marketing manager, Gil Ephstein, says the Ceragon relationship, or indeed any OEM deal, couldn't give ECI all it needed for its complete pitch.
And in terms of the market, ECI believes that adding radio capabilities to a long and deep transport heritage is an easier path to take than adding transport to a microwave platform. "The microwave guys are trying to add networking and more to their products. But for us it's easier to add microwave to our transport experience. The investment for us is not so big, but the advantage is enormous," says Ephstein.
"We hired a bunch of experienced radio specialists to do the development. We have leveraged a lot of experience and have full control over the development. That wouldn't have been possible with an OEM."
Covering the backhaul bases
ECI's goal is to be able to offer carriers a complete package that includes any type of backhaul (TDM, hybrid TDM/packet, or pure packet) across any type of network (copper, fiber, microwave) with a single network management system and professional services support.
By investing in the development of its own microwave product -- a process that took about two years -- ECI has control of the underlying technology, can integrate it with its other platforms, and can ensure the product is fully managed by its LightSoft OSS system.
Ephstein says that by having the full range of backhaul technology and network architecture options, it can work with carriers to determine what is best for the operator's business case and not have to promote a particular technology in favor of another. "We are transport agnostic," boasts Ephstein.
"Our focus is on the best investment protection for the carriers," says the ECI man, who adds that the company has been just as busy developing the supporting professional services (consulting, network planning, business model development, and return-on-investment strategies) that go hand-in-hand with the equipment, where a big focus has been on reducing the physical size and power consumption of the products. (ECI's professional services division has about 400 on staff, the company says.)
Helping the operators plan for the future is a big play for ECI, which is primarily targeting the developing markets. "Most of our customers are building 3G networks but want to be Long Term Evolution (LTE)-ready. However, they don't really know what this means" in terms of what they can do now that will not break the bank but will make network evolution easier in the future, notes Ephstein.
ECI's new microwave products -- a pure packet product and a hybrid product that handles TDM and Ethernet natively on the same platform -- will be commercially available by the end of the year, when ECI will be pushing its own products ahead of those from partner Ceragon.
— Ray Le Maistre, International Managing Editor, Light Reading