Has Core Signaling Vendor Consolidation Gone Far Enough?

David Snow
David Snow

Summary Bullets:

  • Conventional market dynamics operating in the diameter signaling market have led to a series of acquisitions; independent players are now few and far between.
  • Consolidation does not necessarily help operators with multivendor networks and a need for flexible signaling mediation; consolidation may have gone too far.

The title of this blog post is deliberately ambiguous, but you’ll probably guess from the outset that we’re thinking the answer is “yes.” Just this month, Mavenir Systems acquired one of the few remaining independent diameter signaling vendors – Ulticom, Inc. – continuing an acquisition trend that’s been going on for several years (think F5 Networks/Traffix, Oracle/Tekelec, Sonus Networks/Performance Technologies). That’s not to say that Mavenir’s acquisition was a bad move; actually, we think it made a lot of sense. But, as ever, it is conventional market dynamics operating: firstly, a new technology is developed by a large number of smaller players; next, the market becomes “ripe for consolidation;” and then, the bigger fish step in and snap up the smaller ones.

Nothing unusual, you say; the free market doing what it does best. But, is consolidation always good for the market?

Perhaps the most basic question to would be: “Is it good for the vendors concerned?” Well, the bigger fish would certainly say so; otherwise, they wouldn’t have bothered. Usually acquisitions fill “portfolio gaps” so that they can offer a more complete solution. Acquired smaller fish generally buy into this too, at least judging by their official press releases where they cite the great opportunities of being part of the bigger fish, such as sales reach, R&D funding, etc. (That said, it’s still hard to ignore the underlying vibe that really they would have preferred to remain independent; after all, that’s why they were working there.)

But, vendors aside, the market includes the network operators, too. And when it comes to core network signaling and specifically signaling mediation, then it’s not all clear that consolidation is a good thing. Here, the elephant in the room is multivendor interoperability. Independent signaling vendors are particularly known for their ability to mediate flexibly between other (usually larger) players in the network. In fact, that’s why operators chose them in the first place: they like the “honest broker” approach. However, once becoming part of those larger players and their broader portfolios, somehow that flexibility becomes eroded, not because it’s not actually there anymore, but because larger vendor portfolios and politics come into play. Sometimes this means that operators become the victims of signaling interface “standoffs” where two large vendors within the operator’s network say “the other guy has to change, not me.” That helps nobody.

So, consolidation can usher in new problems, especially in areas such as these where the parties with the key purchasing power are still unsure of what they need, let alone from whom they want to buy. Now, to be fair, such problems will likely be fewer when mid-size companies, such as Mavenir or Sonus, are acquirers, but nonetheless, consolidation inevitably narrows choices for operators. The diameter signaling market could now be considered “over-consolidated.” It will be interesting to see how the remaining signaling “independents,” such as Diametriq, BroadForward, NetNumber and DigitalRoute, fare over the next few years. Our guess is that operators will still be looking for independents.

Leave a Reply