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NetCentrex Acquires IMS Smarts

Light Reading
News Analysis
Light Reading
7/26/2005

VOIP system vendor NetCentrex SA is acquiring fellow French firm, session border controller vendor NeoTIP SA, for an undisclosed sum in a bid to accelerate its IMS strategy, Light Reading has learned.

NeoTip is the third session border controller (SBC) vendor to be bought by a larger vendor in the past five months, following the acquisitions of Kagoor Networks and Jasomi Networks (see Juniper to Acquire Kagoor and Ditech's Itsy Bitsy Jasomi Deal).

So why does NetCentrex need NeoTip?

NetCentrex is pouring financial and human resources into its IMS strategy, and is developing some of the required IMS-specific elements in-house (see NetCentrex Tackles IMS (and Huawei) and IMS Guide). But founder and CTO Olivier Hersent says one of those elements, the Proxy Call Session Control Function (P-CSCF), would have taken a long time and a lot of man hours to develop. So, it made more sense to acquire NeoTip to gain instant access to its IMS-compatible technology and gain instant entry into the growing SBC market.

In an IMS architecture, the P-CSCF works in tandem with the Serving CSCF (S-CSCF) and Interrogating CSCF (I-CSCF) to provide routing, access, and policy management capabilities. The P-CSCF is the first point of contact within an IMS architecture for a new session request: It either serves that request to the I-CSCF, which manages the connections to users within the network, or forwards them to another P-CSCF. The S-CSCF identifies users' privileges and connects sessions to the appropriate application servers.

Hersent says an SBC can act as a P-CSCF in an IMS architecture, and that "in every IMS RFP there will be a demand for a session border controller, so this will boost demand for session controllers even more."

He adds that, while not every SBC conforms to the exact P-CSCF requirements set out in the IMS standards, NeoTip had already developed its IMS-compatible components and has been involved in some IMS trials.

Hersent says there are other reasons why NeoTip makes a good fit. He says the two companies are already working together in "two high-volume business opportunities involving tens of thousands of ports for residential VOIP users." Indeed, the two come from the same background: Both were spun out of France Telecom SA's (NYSE: FTE) R&D labs (NetCentrex in 1998, NeoTip in 2003), and are both well entrenched suppliers to the national operator, which is currently upping its VOIP momentum (see Eurobites: VOIP's Hot).

"Every acquisition is risky, but this reduces the risks," Hersent notes.

He says NetCentrex explored alternatives, such as acquiring or partnering with other SBC vendors, but NeoTip delivered immediate technology, business, and cultural benefits. He declines to identify any of those alternative prospects.

"For NetCentrex this is part of a major push towards IMS, and that's the only sensible way forward for softswitch vendors," says Heavy Reading analyst at large Graham Beniston, though he notes that not all session border controllers would provide a suitable technical base from which to develop IMS elements.

He does say, though, that NeoTip has decent technology, noting that the company scored well in Heavy Reading's recent analysis of the SBC sector, VOIP Session Border Controllers: A Heavy Reading Competitive Analysis, particularly in terms of supporting multiple protocols, codecs, and proposed softswitching architectures. Its NeoXBC LE was rated the best enterprise SBC, while its LR and LB models ranked highly in the carrier access and distributed media proxy categories. NeoTip did fall down on scaleability and interfaces supported, according to Beniston's report.

Beniston's Heavy Reading colleague, Graham Finnie, who has just completed an in-depth study of IMS, agrees that this is an important move for NetCentrex (see IMS Takes Over the World).

"The P-CSCF is a central element in any IMS strategy," says Finnie, "and with NetCentrex going hell-for-leather to build an IMS position, buying NeoTip looks like a good way to help it get there."

Not everyone believes IMS is a critical concept that will shape the future of the telecom sector, though, as the current results in our latest poll show.

NeoTip also gives NetCentrex an existing carrier customer base for its NeoXBC session controller. In addition to various France Telecom operations, including its Wanadoo SA broadband business, other NeoXBC users include Brasil Telecom SA and Entel SA (Telecom Chile) -- both won in partnership with Alcatel (NYSE: ALA; Paris: CGEP:PA).

Making the acquisition now gives NetCentrex new revenue opportunities in the market for SBC capabilities at the edge of the network, which Hersent believes is ramping up fast as service providers roll out IP telephony over broadband services, particularly to business customers. "The market for carrier-to-carrier peering was very ad hoc, but the opportunities in the IP trunking market, connecting enterprise networks to carrier IP networks, is exploding now," he says. "Every connection to a PBX is going to need a session border controller. Our customers want this sort of product urgently -- I think we'll be able to sell significant port volumes."

He adds that there are also growing opportunities in the carrier-to-carrier session controller space as network operators demand more sophisticated capabilities such as VLAN support, which NeoTip has been developing. Certainly the SBC market is expected to grow. Infonetics Research Inc. estimates the market will be worth $434 million in 2007, compared with less than $100 million in 2004 (see Report: Session Controllers in Demand).

Hersent also believes NeoTip will provide NetCentrex with source code that will help with development of its I-CSCF. The vendor is also currently developing its own S-CSCF, but Hersent says this is a complex technology to develop and that it will be 2006 before that element is ready to test.

He adds that, while NetCentrex's architecture is not currently IMS-compliant, it has some similarities to IMS, such as having a centralized directory for customer profiles. And the CTO stresses that NetCentrex supports both the H.323 and SIP protocols for VOIP, though the majority of the company's deployments to date, such as its extensive deployment at Italy's FastWeb SpA, are H.323-based "because of customer demand. We support both, and can provide a migration path for carriers from H.323-based networks to IMS."

It seems NetCentrex wasn't the only company that spotted NeoTip's potential. According to Michel L'Hostis, NeoTip's founder and CEO, the company had been approached by a number of potential acquirers, though he wouldn't identify any of those companies, or comment on whether Alcatel was among them.

L'Hostis was also silent on the commercial terms of the acquisition, confirming only that his company has 25 on staff and about 10 carrier customers.

— Ray Le Maistre, International News Editor, Light Reading


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voyce_overipee
voyce_overipee
12/5/2012 | 3:07:15 AM
re: NetCentrex Acquires IMS Smarts
Is there a business case for a stand-alone SBC company any more?

Probably not more than one or two companies, similar to firewall companies but a smaller market. And they'd haave to branch out to have growth, since the market is miniscule compared to data for firewalls.

The question is branch out to what? They won't want to compete with thier own partners for other voip roles, and going to data as a firewall would be a really tough competitive market, and they'd be way behind too.

I guess they could branch vertically, like Acme/Netrake/Newport moving to enterprise, but its lower margins and higher cost of sale. Or Jasomi/Nextone/Kagoor moving to carrier, but its kinda late for that.
LightWarrior
LightWarrior
12/5/2012 | 3:07:15 AM
re: NetCentrex Acquires IMS Smarts
Seems like Netcentrex got a gem under Alcatel's nose. Acme Packet must be smiling. Who's next? SBC's are being bought up by the hardware/switch vendors (Juniper) and the softswitch guys (Netcentrex). Is there a business case for a stand-alone SBC company any more?
allidia
allidia
12/5/2012 | 3:07:14 AM
re: NetCentrex Acquires IMS Smarts
I believe SONS was looking at one of these guys about 9 months ago but decided to build inhouse instead. Too much tweaking needed.
LightWarrior
LightWarrior
12/5/2012 | 3:07:14 AM
re: NetCentrex Acquires IMS Smarts
It's been rumoured that Cisco is shopping for an SBC. After Netcentrex acquiring NeoTIP, and Kagoor/Jasomi already gone, who is the top target of those left?

Also, is this going to be a new trend with IMS adoption driving acquisitions?
LightWarrior
LightWarrior
12/5/2012 | 3:07:11 AM
re: NetCentrex Acquires IMS Smarts
I am not surprised Sonus decided to pass on buying and SBC. A lot of the gateway-imbedded softswitch companies are going to find it very difficult to extract their call control intelligence and services from their transport layers. This disaggreation is required by IMS and will give most of the major gateway companies major heartburn when SPs start to force the issue in RFPs (already starting to happen). The more distributed softswitch companies like Netcentrex and Broadsoft will be in the best shape. I have seen some of the major vendors starting to move to ATCA platforms though, so that should give them a good start.
ClaireW
ClaireW
12/5/2012 | 3:07:06 AM
re: NetCentrex Acquires IMS Smarts
From what I can tell, this acquisition is certainly going to help Netcentrex leap frog their competition and position themselves as the leader in the VoIP market. I have been watching them for some time now and I am very impressed with the strategic steps their management team have taken. It will be interesting to see what's next for them.
nasus_potpal
nasus_potpal
12/5/2012 | 3:07:05 AM
re: NetCentrex Acquires IMS Smarts
These Netcentrex guys are smart to beef up their P-CSCF and A-BGF for IP security. The VoIPSA guys are going to be all over this one.
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