With Nokia announcing its bid for Alcatel-Lucent just one day after the two companies confirmed they were in merger talks, long talked of predictions of New IP-related industry transformation and consolidation suddenly became very real.
As the functionality of communications hardware such as routers and switches moves to software-based functions, hardware vendors have to think differently when it comes to packaging, selling and supporting their solutions. This is a big shift for those vendors who've built their business in physical switches and routers for the past 20 or so years, and as predicted, this shift could already be causing some major industry disruption and consolidation. (See Nokia Makes €15.6B Bid for Alcatel-Lucent.)
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While questions swirl as to exactly how and when Nokia and Alcatel-Lucent will become one, we here at The New IP have been wondering about the role that New IP mainstays like virtualization and software-defined networking played in the merger, so we checked in with Caroline Chappell, senior analyst at Heavy Reading, to get her perspective.
"I'm not sure network virtualization per se is driving this. In many ways, this seems like an old-school merger -- almost unfinished business given the fact that both companies have been round the M&A track before," she said via email. "It does concentrate physical network equipment development in even fewer hands, which may not matter as much to operators in an era of virtualization. But network virtualization may be one of the alarm bells ringing at the back of mind."
Chappell continued, "Both companies have developed innovative virtualization solutions ahead of the market, but they need to be able to stay the course until mainstream adoption kicks in, and in the meantime, NFV is attracting new players that can innovate quickly and potentially take early market share. So what happens as a result of network virtualization is bound to be a concern."
As Light Reading reported today, Nokia said that the merger would make it number two in carrier routing. In addition to giving the vendor market leadership in 4G LTE, the new company would also have a strong lead in NFV and SDN thanks to Alcatel-Lucent's Nuage Networks and CloudBand. (See Nokia to Claim #2 Carrier Vendor Ranking.)
However, as these things go, it's going to take a while to see the impact on the market, especially as it relates to New IP, which is still very... new.
Said Heavy Reading's Senior Analyst Roz Roseboro, "I don't think this is immediately game-changing from a New IP perspective. Of course having a stronger, more viable combined company (potentially) would help maintain momentum for transformation, but I wouldn't expect anything huge any time soon. Mergers are always distracting, and this one is a whopper!"
A whopper indeed.
For more about Nokia and Alcatel-Lucent, see Light Reading's extensive coverage:
— Elizabeth Miller Coyne, Editor, The New IP