Open Source Upheaval Could Finish Off 'Traditional' Vendors
BERLIN -- Broadband World Forum 2017 -- The industry's steady march toward the adoption of open source technologies could force its equipment suppliers to reinvent themselves entirely as margins are squeezed and products lose their value, according to one of the companies in the eye of the storm.
Tushar Saxena, a senior director at Radisys Corp. (Nasdaq: RSYS), reckons vendors could end up as "an extended engineering arm of service providers" if operators turn increasingly to open source technologies, which stop suppliers from making money from the intellectual property behind software.
"I think if you fast forward three or four years it may be a misnomer to call us vendors of equipment," said Saxena during a panel session on open source technology at this week's Broadband World Forum in Berlin. "We will be integrators and can partner with service providers and help them put open source together… We may still supply equipment but margins will probably be extremely low."
Radisys Corp. (Nasdaq: RSYS) designs products used in wireless networks, switches and video distribution systems, as well as IP-based networking gear, but has already made a big push into systems integration and the professional services market.
It is one of a number of industry players whose future role is at stake as some of the world's largest telcos take advantage of open source technologies, which rely on code that is shared by software developers. (See Open Sores: Are Telcos on a Collision Course With Vendors? and TIP Players Voice Open Source Misgivings.)
Service providers including US-based AT&T Inc. (NYSE: T), France's Orange (NYSE: FTE) and Germany's Deutsche Telekom AG (NYSE: DT) have seen open source as a way of spurring innovation in the market and minimizing their dependency on particular suppliers.
Slashing equipment costs is a key motivation for Deutsche Telekom. "We could be there in two or three years with deployments based on disaggregated network components including bare metal hardware and open source software," said Manuel Paul, a senior expert on international standardization with the German telco. "That is what we are working toward."
Such developments have already put pressure on traditional vendors to overhaul their business models and generate revenues from activities other than the licensing of intellectual property. That could include the provision of support services, as Saxena points out.
Yet there is still a question mark over just how much disruption open source will cause in the telecom industry, and whether it will pay off for the service providers that back it.
Even Deutsche Telekom acknowledges there are challenges. "It is a bit early to deliver proof points or say it is the answer," admitted Paul. "The market and the industry is just at a stage where there is still a lot of learning going on… We need to get a handle on it when it comes to the financial story."
While Paul evidently regards open source as an unstoppable force in the industry, Saxena thinks the economics surrounding it still represent a "hurdle" for some telcos. "To actually get open source deployed you have to convince operations people and that requires a hard look at the economics, including how it is maintained, what operations force you require to manage it," he said. "The onus is on vendors to prove that it is not just a good idea because of [reducing vendor] lock-in but also a better business case, and that you will save money by going down this path."
Anuradha Udunuwara, a senior engineer with Sri Lanka Telecom, reckons the industry is not yet ready to build networks based on open source technology, but will have to adapt. "Whether we like it or not, open source software is coming into telco networks and the real question is whether we can accept that as operators and change the mindset," he said. "We are trying hard to educate the staff and do that cultural change in the organization."
Perhaps unsurprisingly, some of the vendors that have grown rich off their proprietary technologies have shown signs of resistance to the adoption of open source principles.
Ulf Ewaldsson, the head of digital services for Swedish equipment giant Ericsson AB (Nasdaq: ERIC), thinks a lot of the software used in the telco industry will remain off limits to the open source movement. "I find it hard to see that very large portions of software in the telco industry will be open sourced because, ultimately, if there are no vendors then every operator has to build its own system," he told Light Reading during an interview earlier this year. "There is a tendency to think about doing that, but for the majority it is not close to being an option." (See Ericsson's Ewaldsson Takes Aim at Telco 'Conservatism'.)
Saxena says there is a possibility that operators back away from using open source technologies and instead focus on getting their mainstream suppliers to reduce prices. "I see operators dabbling but then falling back on the traditional way of doing things when the rubber hits the road," he said.
— Iain Morris, News Editor, Light Reading