Cisco on Starent: Mobile play wedge into massive IP opportunity

Cisco’s Kittur Nagesh

Cisco (NASDAQ:CSCO) today closed its $2.9-billion deal for Starent Networks in what could be one of its most strategic purchases yet in the service provider market.

While the deal gives Cisco access to key mobile packet core technologies it lacks, as well as an immediate role in key 4G roll-outs – notably Verizon's LTE push next year – overall the acquisition even better positions it for the larger opportunity to help carriers build the more intelligent, end-to-end IP networks they need to deliver not just greater bandwidth but new revenue-producing applications and services, Cisco executives said.

As part of the deal, first announced in October, Starent now becomes part of Cisco's newly-created Mobile Internet Technology Group, a part of its larger Service Provider Group. Ashraf Dahod, former president and CEO of Starent Networks, will be senior vice president and general manager of this new mobile-focused group.

"There's a real opportunity to bring all of our joint assets to bear and really transform the mobile Internet in terms of scale, performance and personalization -- and [help operators] make money in the process," Kittur Nagesh, director of solutions marketing for the service provider segment, said in an interview today. "The correlation right now between traffic [growth] and revenue is going negative. We've gotten very good comments from customers [since] our intent to acquire, strong approval of the benefits they believe they'll see from this combined solution. In instances where just Starent alone or Cisco alone wasn't enough, the combination is opening new doors for us."

In addition to significant market momentum, Starent brings to Cisco some key 4G wireless technology pieces. Specifically, Starent's ST40 platform fills in critical holes in Cisco's portfolio such as the mobility management element of the LTE core and the serving GPRS support node on high-speed packet access networks. Cisco has always been able to route IP traffic on the mobile network. But with Starent's gear, it can now terminate all data sessions coming off of the radio network.

Combined with its core routers, Cisco now offers an end-to-end IP play from the 4G edge to the data center core that few vendors can match. Its main market challenge remains, however, large network equipment providers like Ericsson or Nokia Siemens Networks that not only have the mobile IP core piece but 4G radio access elements as well.

"What we've seen with carrier capex in the past, the radio access network [portion] was so dominant while the rest of the decision [such as the mobile core and switching] was secondary," Cisco's Nagesh said. "[But] with high-performance 3G and 4G networks, the decision-making that we see people making realizes that how they make money with these new networks is really determined by the intelligence of the network [not just the speed of the radio access interfaces]. This has been articulated to us fairly worldwide. The scale of the IP infrastructure; how I do personalization and policy; how to scale to IPv6 [driven by new M2M devices, in particular]; the role of the data center; these are all critical success factors" for tomorrow's 3G networks, Nagesh said.

Indeed, perhaps Starent's biggest claim to fame was that it convinced mobile operators to split their mobile platform buys between players, bringing in a specialty vendor like itself to handle the IP core. Now, as part of a huge global vendor like Cisco, that proposition may be even more appealing to customers. "We definitely see RFPs that decouple the RAN and the rest of the network," said Nagesh, noting that Cisco's IP platforms not only support virtually any radio access network, but the company has its own radio solutions in the WiMax area, still an important 4G technology even amidst all the attention paid to LTE.

Cisco does face some key product decisions in absorbing Starent, in particular whether and how to keep selling Starent's fairly tightly-integrated IP core hardware and software platforms versus its own approach of integrating mobile core gateway software into its multi-service IP routers.

"Until today, we couldn't get into this very much, but there are a lot of interesting capabilities from both companies – we believe we are in a position where we can make one plus one equal three or four," Nagesh said, adding in some instances customers will want to immediately deploy Starent's existing mobile gateway platforms as is, while other customer may have a longer-term view and look for Cisco to pull some Starent software onto its own router hardware.

 "If you look layer by layer through the end-to-end mobile IP architecture," he said, "we have a [product] portfolio at every layer. It's not just one product and won't be. We have customers that use both [Cisco and Starent products], and there will continue to be areas of overlap.