CEO Chat With Tom Stanton, AdtranCEO Chat With Tom Stanton, Adtran
Steve Saunders met up with Adtran's Tom Stanton and chewed the fat about monetizing NFV, reorganizing the company, doing the right thing and much, much more.
September 9, 2015
A hallmark of any good leader is that they are able to impress their own core values on the companies they run.
That's clearly the case with Tom Stanton (the CEO of Adtran, not the baseball player).
The phrase that best describes Tom is "business pragmatist," and that clearly ties in with Adtran's reputation as a stalwart of the comms industry: trusted, reliable, safe. But as I found out on a recent visit to Adtran Inc. (Nasdaq: ADTN) HQ, that doesn't mean that both Adtran and Tom aren't also investing in (and excited about) next-gen technologies like NFV.
Interestingly, the executive that Tom Stanton most reminds me of, in terms of their business-centric, common-sensical outlook on the communications industry, is Eric Xu, deputy chairman and Rotating CEO at Huawei Technologies Co. Ltd. (Check back with Light Reading next week for our interview with Eric.)
Figure 1: Leaning into virtualization: Tom Stanton, Adtran's chairman and CEO.
Both Tom and Eric are focused on the broadband opportunity, and the fact that this is where the money is now, today, while also recognizing the benefits that will accrue from virtualization in the future. Both are focusing hard on creating strategies that let their customers monetize the world that we live in today, while also charting a path to the future.
As it dawns on the communications industry that the marketers have gotten ahead of the market in terms of over-hyping the benefits, and availability, of virtualization, I think Tom's outlook is not just refreshing, but also exactly what most CSPs are looking for.
Page 2: Monetizing NFV
Page 3: Diagnosing the telco data center
Page 4: Reorganizing Adtran
Page 5: Doing the right thing
Page 6: Broadband pragmatism
— Stephen Saunders, Founder & CEO, Light Reading
Next page: Monetizing NFV Monetizing NFV Steve Saunders: Tom, there's an awful lot of change going on in the industry now, from hardware to software, to virtualization. Network architects are being told they need to reinvent their networks, and their careers, around these things. The problem, from my perspective, is that the money isn't in virtualization right now. The money is still in capacity and reliability, and SLAs. How long will it be before your customers start to actually make money from things like network NFV? Tom Stanton: Good question. It depends on the customer; the more niche you can be, the more the service provider can capitalize on the newest thing. So we have customers today that are making money off of it. If you look at our Blue Socket product, we had customers that were immediately able to make money because of its scalable virtualization. They had dedicated, proprietary, very expensive pieces of hardware with fixed capacity. We took all of the functionality -- the authentication, the switching, all of it -- and put it on a server, virtualized it, and just completely cut the price point out of that market. We should have actually marketed that as its differentiator. So at a micro level, there are customers that are doing that today. The key is: When does a larger carrier presence do it? It's going to be some time. Think of ESBC (Enterprise Session Border Controller; https://www.adtran.com/web/page/portal/Adtran/group/4360) functionality today. That's a place where it makes a lot of sense to virtualize. Relatively simple, finite functionality. People will do that today, but it's not to make money; it's to save cost. SS: Right. TS: The key to making money on virtualization is to actually create something new, with a price point that opens up a whole new market, and that is a long ways away. I don't see it. I don't know if you see it? SS: I think that we're entering the classic trough of disillusionment and that we have all of the symptoms of an over-hyped technology which won't work as advertised when it moves out onto the network, because there are too many standards and nothing's going to work together. We need to work through those things, and, you know, we're the communications industry, so they always get resolved; but that doesn't mean that there isn't going to be some disillusionment with service providers saying "Hey, where's all the innovation you promised me?" I also think that the trough of disillusionment represents an opportunity for companies like Adtran to position yourself as the pragmatists and say, "We understand where your business is coming from as well as where it's going, and we're not going to forget you." TS: [Nodding] Look, I've seen this trough a few times and for some reason, no matter how much you say, look, it's going to take a lot longer than you would like, and maybe it will end up looking a little different, people don't get it. The problem is... SS: ...is that you're one person, but you've got an entire industry tooting its little trumpet for virtualization. TS: Right. You have a customer base that doesn't want to be left behind. They want to spur the innovation on to see how quickly it can get done and to move the goalposts forward. And I know for a fact that if you are too negative, you'll be labeled as the guy who says "it's not going to work." And that's not good, it's detrimental to your company. So I'm all for jumping into the water, and learning how to monetize the technology as you go. SS: So you can't wait? TS: No, you can't. You can moderate what you're doing; focus what you're doing to have the highest impact; focus what you're doing to have the best reusability, and still be part of the conversation. Next page: Diagnosing the data center Diagnosing the telco data center
SS: I'll give you an example of a place where I think the industry needs help: virtualizing the central office. That's really hard, and there isn't a lot of information out there about how to do that in a design-proofed way. Is that the kind of thing that Adtran's going to help customers with?
TS: That's a case in point where you have to be part of the community and be active in those discussions.
There are so many companies right now that have specific niche capabilities like session border control or firewalls, and they're all virtualizing those products. But if you virtualize individual functions you may lower the price point on one piece of CPE gear by 20%, but you haven't really moved the ball forward. What people need to do is step back and say "What is it that we're actually trying to accomplish here?" And to do that you really have to have an understanding of everything in the central office.
In order to really let software-driven networks and virtualization have an impact, you have to have the mindset of closing the central office. Keeping it a third of the way open doesn't really save anything. It probably costs you more. So that means you have to get into the mundane things that people don't want to deal with, right? 9-1-1 service is just the tip of the iceberg of things you're going to have to convert.
Right now, you have too many people focused on the headline features, but not enough people focused on the details of what it's really going to take.
So what we're doing at the moment is looking at the functionality in the central office, and trying to understand which services you can virtualize, and where you need to have hardware acceleration. Then we're taking that hardware acceleration and building it into the solution that will be offered with our standard data center offering.
SS: That's a big deal.
TS: It is. It's going to take a while.
SS: Right now, it's an R&D program rather than a sales program?
TS: Without a doubt, it's an R&D program. But we can really support customers by understanding what features of virtualization need acceleration and which don't. It's what we bring to the table, right?
SS: Sure. It's the difference between you and some of the startups which you were talking about, that are selling point products.
Next page: Reorganizing Adtran
SS: You reorganized the company fairly recently, right? Tom: Yes, the first thing we did was combine the [enterprise and telecom] engineering groups. That's probably the most dramatic thing that we did. It meant we could enable end-to-end management capabilities, which is a big differentiator if you can really do it. It also means that we can make sure that all of the pieces of the network that we build will play in a synergistic way. And by doing this we also created efficiencies. You know, like how many versions of IPV-6 do I really need to build?
The biggest thing that we're trying to do right now is get ahead of the software game.
SS: How's that going?
TS: Really better than I'd hoped. We're still early.
SS: When did you first identify the need to transform from a hardware company to a software company?
TS: It's been six years now.
TS: Yeah. We didn't know that SDN was going to be so big. But without a doubt, you could see that the differentiators that people were interested in were in software. We moved to a full agile development process four years ago. I tell you, for a hardware-centric company like we were, that's not an easy thing to do.
SS: Must have raised some eyebrows amongst the teams.
TS: It did. You know the surprising thing, though, is that the ones that were here the longest, that had how we did things before ingrained in them, they were the ones that actually embraced it the quickest.
It was never a question of whether or not we were going to be a software or a hardware company. The problem was there's an inherent overhead when you go through an agile process. You show progress every two weeks. Everybody has to get together.
But the reason people embraced it is we had been through some very big developments with very big carriers that just wore us out; where the amount of R&D we were having to do to fix things that were caught too late in the cycle, or the amount of delay because this particular element didn't catch up to speed with the rest of the elements that were needed, and nobody knew it, it just flat out wore people out.
So people said: "Look, what we're doing today doesn't scale anymore for the amount of software that we need to do in the future," and they embraced it, and that's been a very good thing for us.
Next page: Doing the right thing
Doing the right thing
SS: Why are you so focused on the smaller, rural carriers and their efforts to build gigabit networks? Is it just a financial opportunity, or is there sort of an element of wanting to do the right thing for America?
TS: Part of our mantra is to close the gap between people that have broadband those who don't have broadband. That gap is about more than just whether or not they get online shopping. So, if you can help mitigate that gap and run a profitable business at the same time, who wouldn't do that?
There's the other piece, also, which has to do with the momentum that we're trying to build in gigabit services. There was a time, five or six years ago, when one of the questions you would have asked me is, "What's going to happen when 4G rolls out and we don't need fixed anymore?" Nobody asks that question anymore.
Now that bar has raised itself to at least 100 megabits, if not a gig. Without a doubt, rural communities are the ones that are hurting the most and are the ones that are most passionate about getting [high speed capacity] and are the ones that move quick. But if you can set that standard for 30% of the country, the other 70% is going to fall over.
SS: It's really something when you enable a rural community to leapfrog a metropolitan area. All of a sudden, the city dwellers are like, "What just happened here?" That's really what I think the future of communications is about, is about bringing the 100 gigs, or whatever it is, to the 99%, right?
That's not just a business mission, is it?
TS: In my mind, without a doubt, it's doing the right thing.
Next page: Broadband pragmatism
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