Brains and brawn

With the level of merger and acquisition activity among network equipment vendors riding a steady crescendo, the telecom manufacturing field is beginning to look a little bit like the World's Strongest Man competition.

Everyone is bulking up. Big, traditional vendors of telco switching and transmission gear are acquiring or merging their way into regions where they've never been seen before, packing on data capabilities and fiber enhancement technologies in an effort to overpower niche competition. Those niche players are likewise looking for the protection offered by more entrenched manufacturers that already have strong ties to the established carriers and are the most recognizable to the emerging ones.

New developments surface all the time. Just last week, Ericsson acquired Advanced Computer Communication, adding an IP-routing and remote-access spoke to its expanding end-to-end network portfolio. Tadiran Telecommunications also made a move last week, merging with ECI Telecom to expand its own data transport holdings.

No consistent strategic pattern has yet emerged: The troubled and still-unsealed deal struck recently between Tellabs and Ciena was driven by both companies' desire to broaden their equipment holdings. Alcatel acquired DSC to shore up its flagging position in the U.S. market.

Some deals, like those of Ericsson and Tadiran, are clearly data-driven: Nortel acquired Bay Networks-as well as Aptis and Avici-as a way to make a fast move into IP data transport. Lucent bought Yurie Systems to get proven access equipment that would give it a better overall position in data networking.

But like the World's Strongest Man contest-which appears to offer its title to the person who can best perform the questionable skill of being able to drag a semi truck around-all of this vendor consolidation seems to be driven primarily by the companies' attempts to outmuscle the next guy.

The contest is far from over, however, and it is not likely to end without yet another round of mergers and acquisitions. The next wave of vendor consolidation will be driven by intelligence rather than strength, as well-equipped hardware providers look for ways to tie their systems together and offer carriers mechanisms for controlling, adjusting and managing their equipment.

Large vendors, including Lucent and Nortel, have already begun to address the software question through both acquisition and creation. Acquisition-hungry ADC Telecommunications is an especially good example: In addition to a series of strategic access and transport hardware buys, the vendor has swallowed several software manufacturers. As a result, the company now has divisions that offer network performance monitoring software, SS7 and enhanced services platforms, network interconnection software and operations support system integration and consulting.

Consider the motivation: Networks can't operate without the management functions and intelligence operations software provides. Large, multifaceted equipment makers want to be the vendors of choice for a given carrier, so it makes sense that they should be able to provide the software support their network equipment demands.

Likewise, services can't be different without enhancement. Once network systems are in place, adjustable and upgradeable software platforms allow carriers to customize the services their networks can provide and change and adapt them as time and competition demands.

Carrier networks are in a state of transformation as they go from traditional voice platforms with some data capabilities to data-driven platforms that also support voice transmission. As that happens, there is a necessary proliferation of new hardware that must take place at many points throughout the network.

Now, however, most carriers have moved into the integration and service enhancement phases of the transformation process-phases that can be accomplished only with a variety of software-driven capabilities.

Having acquired the muscle to elbow their way into carriers' new state of consciousness, network equipment vendors must now begin to demonstrate that they can also acquire the smarts to make that strength effective.