Lumina’s Funding Announcement: Big SPs Put Their Money Where Their Mouth Is

Emir Halilovic – Principal Analyst

Summary Bullets:

  • Support from AT&T, Verizon, and Rahi Systems is a big thumbs up for both Lumina in particular and hardware-agnostic SDN in general.
  • The fact that Lumina needs external funding to grow shows that growing organically in the SDN business is still difficult.

At its launch last year as Brocade’s networking business spinoff, Lumina Networks’ value proposition focused on building a service-oriented business, catering open-source, hardware-agnostic SDN solutions to telcos and enterprises. Last week’s announcement of the company’s successful $10 million funding round (of which $8 million was from Verizon Ventures) validates this value proposition and underlines the confidence large telcos like AT&T and Verizon have in the company’s solutions and business model.

Beyond the support for Lumina, the move also shows that large telcos are still fully committed to building an open network ecosystem, capable of supporting multivendor environments where the service providers, rather than vertically integrated vendors, are the ones calling the shots. Investment into Lumina also illustrates how important SDN is for telco’s future plans, such as 5G network deployments and wider deployment of automated infrastructures. To put things into perspective, Lumina is not the only hardware-agnostic SDN startup supported by large U.S. carriers. For example, Verizon is one of the key clients of Sedona Systems, which also builds hardware-agnostic SDN solutions, albeit on a proprietary software foundation.

The fact that Lumina needs funding to grow could be viewed from a positive and negative standpoint. The positive is that the company – which began as a 50-person startup – is not fighting for survival and doesn’t need money merely to pay the bills. As Lumina’s founder and CEO Andrew Coward said, the company’s revenues in its first nine months of operation have doubled compared to the revenues of Brocade’s former SDN business. The announced funding round – which equals initial private investment into Lumina – will support new product development and expansion of Lumina’s business into Europe and Japan.

The negative side of the situation is that Lumina’s revenue growth is not enough for the company to scale its business organically. The fact that Lumina needs further funding even though its products are seeing increased adoption illustrates well the state of SDN in the telco infrastructure ecosystem. The market is crowded, with relatively low entry barriers. A whole host of players – vertically integrated vendors, software vendors, hardware niche players, ICT vendors, and startups – are jockeying for position in the SDN marketplace. Finally, SDN is widely seen as a foundation for automation and service orchestration solutions, which leads to vendors bundling SDN with these capabilities. The cutthroat competition will continue, however, because SDN provides the requisite foundation for agile and automated network operational models.

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