Natural Progression: Consolidation in the Tier-1 Telecom Market
The market for Advanced Telecommunications Computing Architecture (ATCA), Advanced Mezzanine Card (AMC) and MicroTCA products has changed over the last year. Vendors and customers both have gone through a consolidation phase, with new companies forming to take advantage of open platforms and compete for market share.
Two examples of this are the acquisition of Intel's Modular Communications Platforms business by RadiSys, and the purchase of Motorola's Embedded Communications Computing Group by Emerson Network Power.
Industry standard platforms like ATCA provide a flexible, open foundation that enables telecom equipment manufacturers/Network Equipment Providers (NEPs) to leverage a common hardware architecture across multiple network elements. Industry standard platforms also foster a competitive, interoperable ecosystem that gives NEPs easy access to best-of-breed technology and enables them to quickly and cost effectively deliver new features and services based on choice and innovation.
The Tier-1 telecom market has already undergone significant consolidation with Nokia and Siemens forming Nokia Siemens Networks (NSN), and Alcatel and Lucent forming Alcatel-Lucent. These combinations benefit the ATCA space, as both large entities have been expanding their common platform approach. NEPs like Nortel Networks are leading the adoption with common ATCA platforms that work across multiple solutions. In other words, these NEPs are driving forward by consolidating product lines across common ATCA architectures. Such ATCA platforms provide a base set of functions that, together with other commercial off-the-shelf (COTS) building blocks, can be adapted readily to create a broad range of network elements delivering highly differentiated services for applications such as 3G Wireless, IPTV and IMS.
Note too that industry consolidation does not signal a lack of ATCA market uptake, but rather a natural strengthening of industry leaders to increase and defend their competitive position. Consolidation is an indication of market maturity where the COTS technology is moving from an 'enabling' to an 'established' state with widespread adoption across the telecom industry. In support of this, the SCOPE Alliance, founded and headed by the major NEPs, is clear evidence of the NEPs' strong commitment to using COTS building blocks such as ATCA. The group has released a number of open specification profiles to guide vendors to produce the products that they need.
As Tier-1 NEPs consolidate, so too will the supply chain for those companies. For example, the number of ATCA suppliers for Nokia Siemens Networks and Alcatel-Lucent, assuming dual sourcing, has been cut in half from eight to four. The remaining building block suppliers will thus need to become larger themselves in order to accommodate increased demand from a smaller base of healthier, more dominant NEPs like Alcatel-Lucent and NSM.