Acme Packet and Oracle – the Shape of Things to Come
Without resorting to the Delphi connotations here, I do want to share some back-to-the-future thinking about this major move last week. Fellow UCStrategies Expert Dave Michels was quick off the mark – as usual – with his thoughts, and if you haven’t read that yet, it’s a good primer for this post.
Aside from being unusually busy last week, I’m pretty reflective about these things, and wanted to offer another perspective, not just about UC, but the broader communications space as a whole. The news items have been parsed over enough by now, and I’d rather step back and talk about the bigger picture.
Billion dollar deals don’t happen every day in the UC space, and I think that speaks volumes about why Oracle’s move to acquire Acme Packet is important to anyone reading this post. The session border controller space has never been well understood, and it’s debatable whether this is a good thing, as well as if it’s by design. I say this not to be cheeky, but because this applies equally well to UC and in my view is part of the reason why adoption has been slow. On that note, the lessons learned from SBC will likely translate well for UC – all the more reason you should be following this portal regularly.
Getting back to SBCs, I have followed this market since its inception in 2004, and been especially close with Acme Packet, a company that has achieved a level of dominance rarely seen in telecom. Nothing lasts forever, and I suspect this exit is exactly what Andy Ory and company have had in mind for some time. I’ll get to the market timing thing in a moment, but want to go back a bit further to set the stage.
When I became an analyst in 2001, one of the first things I used to talk about was “the service provider of future.” Even back then, it was clear to me that IP broke down all the walls, making it possible for every operator to offer everything. Cablecos were invading telecom, and telcos tried to counter with IPTV to neutralize this new threat. Once broadband reached critical mass, it really came down to a winner-take-all race to own the digital home by virtue of having the fattest, fastest pipe.
The business market has evolved more slowly, but outcome is the same – you could just as likely get UC from your telco as your cableco – or even your utility. IP gives everyone the same tools, and for a long time, I’ve been saying that tomorrow’s service provider will look very different from what we’re used to. There isn’t much reason to distinguish between a telco and a cableco any more – they can both do the job, and over time, I think something else will emerge from the communications swamp as the operator world evolves.
While I don’t see today’s major operators disappearing any time soon, they are all under siege and struggling to figure out a sustainable business model. The threats coming now from OTT are just the beginning, and as cloud and virtualization both mature, physical network infrastructure will become less of a barrier to entry and source of competitive differentiation. In short, the future is software and applications, which should come as no surprise to UCStrategies followers.
I don’t know if Oracle was thinking this way in 2001, or even in 2004 when the SBC space emerged, but they are absolutely doing so now, and that’s why they bought Acme Packet. Google has put a few scares into the telecom space, and while they haven’t really displaced anyone, it’s clear that outsiders can enter this market and there’s not really much the telcos can do to stop it. Oracle is just another example of how outsiders are the drivers of disruption and innovation in communications, and from that, it should be clear how Acme Packet can help make them a serious player. In my view, Oracle fits the bill for a “service provider of the future” as well as anyone else.
Of course, there are market dynamics at play here. As the worlds of IT and telecom further overlap, it becomes easier to see how Oracle can leverage Acme Packet not just to reach deeper into the communications market, but to counter what the likes of Cisco are doing to enter their home turf. By the way, the timing is also good for Acme Packet. Not only is it hard to say no to $1.7 billion, but their stock is a far cry from headier times when they could ride a dominant market share and fat margins to a very successful IPO.
Since then, they have been a target for vendors of all sizes, and there is now an out-of-control variety of SBC offerings. The market is just too competitive now, and Acme Packet has nowhere to go but down. This is even more relevant in the enterprise segment where they have real competition, and actually lag behind Cisco. I don’t see how their timing to sell now could possibly be better.
With Acme Packet, Oracle can truly personify the service provider of the future – maybe not for connectivity, but for everything related to networks and applications, which is where the real value lies. Oracle already offers a UC suite, and with all that Acme Packet brings, they can provide a rock solid end-to-end IP experience that other solutions will be hard-pressed to match. UCStrategies readers should be well versed in the opportunities presented by video, mobile endpoints, LTE, WebRTC, RCS and SIP trunking – all of which Acme Packet understands very well.
Ultimately, success with UC is all about real time communications, and these opportunities become adoption drivers when your network can seamlessly support them. Acme Packet is deeply immersed in IMS, and along with Oracle they are embedded in virtually all the major carrier networks. By having the pieces in place with both carriers and enterprise networks, they can address the entire value chain for UC, which will become increasingly important as communications shifts from desk phones to both the desktop and the mobile environment.
Whether or not you view this as a new species of service provider – or solutions provider – I think this will present a serious competitive challenge to telecom-based UC offerings, and going a step further, I believe this is the shape of things to come altogether. I’m not saying that Oracle will now become a player in the conventional sphere of UC – voice/video/text – nor do I think they acquired Acme to get in the UC market. This move, however, can certainly leverage their UC suite into something this is built more around CEBP, which we view as the highest form of UC.
Software and IT vendors like Oracle are naturally positioned for this, and if that’s where the long-term value of UC lies, then I think that’s what matters the most here. Acquiring Acme gives them more network control from the inside out, and that capability will resonate with both service providers and enterprise IT decision-makers. Voice and video can be commoditized fairly easily, but CEBP is far more complex, and in Oracle’s hands, this form of UC just might get the traction that other variations have missed.
This move will no doubt cause the incumbents like Avaya, ALU and Siemens to rethink their UC roadmap, and likewise for the network and software vendors to do the same. Before long, I would expect to see countermoves from the likes of Cisco, Ericsson and SAP, any of which could quickly change the way we think about Unified Communications. I don’t know how things will change, but they will, and my main message is to maintain a broad perspective and an open mind when considering how to move forward with UC.