Optical Vendors: The News of Our Death Has Been Highly Exaggerated
The recent announcement that Facebook has developed an open-source, white-box optical transmission platform has led some pundits in the industry to predict the imminent death of traditional optical vendors. While there will certainly be an impact, that prediction is significantly premature.
The operating system software market provides an interesting analogy. When Linux was developed as an open source alternative operating system, similar predictions were made. Today’s market, while not entirely comparable to the optical vendor market, provides interesting insights.
These are the technically savvy, the users and companies that can’t imagine paying for an operating system when such a nice one is available essentially for free. Sure, it requires a bit more setup and perhaps the number of commercial options is lower, but it does what they need it to do and the price is right.
The analogy in the optical vendor space is the companies who will immediately jump onto the Facebook open optical system bandwagon, develop their own way of managing them, and implement them according to their own design rules. The application space is limited and many of the advanced optical networking features available in other systems (integrated packet-optical transport, long-haul transmission, etc.) will not be available, but for these customers the limited application space is all they want. The traditional optical vendor model will indeed fall apart for these customers, and the fact that these may be the fastest growing segment of the market makes analysts nervous. However, fastest growing does not necessarily mean largest, and – as with the operating system market – there are still a lot of other customers out there.
The Red Hat model
Red Hat and its competitors have made a great business selling an open source, nominally free Linux operating system by making it easier to use and providing service and support. Users and companies that like the idea of open source but don’t want to spend the time and resources necessary to get it working like this model.
The optical vendor analogy does not yet exist (note to self: write a business plan), but likely will look like traditional vendors or new players offering the Facebook-type open optical systems bundled with a design, implementation, and support offerings. Traditional vendors, like the founders of Red Hat, have extensive experience with the underlying technology and can provide additional value through software development. This added value will combine the benefits of a low-cost, open-source platform with the usability and single point of support that a traditional vendor supplies. The application space will still be limited, but the user experience will be more robust. Network operators who are price-sensitive, need simple optical interconnect, but not interested in building their own internal optical expertise will be the ideal customer base.
Despite the low-cost, open-source option that Linux offers, some companies continue to insist on full-blown Unix from vendors like Oracle. These are customers who are extremely risk-averse and are willing to pay for a known brand to get superior performance and support. The fact that these users still exist in enough numbers to justify a business should make traditional optical vendors a bit more optimistic.
For the optical market, the Solaris model represents the traditional vendors who will continue to offer high quality and premium service at a price. Their customers are Tier 1 operators, financial services companies, and other network operators with critical reliance on very high reliability. Customers who have strict reliability and performance requirements and who insist on superior support will continue to see value in the traditional vendors and their traditional products.
Windows is still a ubiquitous operating system platform, especially for smaller businesses but with a not insignificant targeted large business market. It is easy to use, has a huge number of applications available, and is familiar to every IT professional. While disdained in many cases by the technologically elite, it has shown no signs of disappearing from the business OS landscape and has shown a remarkable ability to continue to innovate in ways that keep business customers captive and relatively happy.
On the optical side, the Windows analogy is full-service vendors who offer optical products that are more than just open line systems. Packet-optical systems, full-featured optical transport boxes, OTN switches, and a comprehensive network management system all come out of the box to build a working network. The customers for these vendors include not only the thousands of smaller service providers and businesses, but also larger businesses who view optical networking as an enabler of the services that they offer rather than as their core business. They just want it to work, and they aren’t interested in building an entire team to figure out how to make it work. The Facebook announcement is not going to impact these customers, at least not for the foreseeable future.
So What About Facebook?
The bottom line is that the Facebook announcement is a game changer in the optical market. Open-source optical systems will have an impact in many parts of the network, and optical vendors will need to change and adapt. But, as seen in the operating system market, there is still a big customer base out there that will demand more and the traditional optical vendors should be expected to live a long, healthy, if somewhat more svelte life.