Last week Ovum principal analyst Matt Walker released a provocative report entitled, “Is telecom innovation at risk?” In it he argued that the lack of venture funding for network-equipment startups is endangering new advances in telecom infrastructure, because most game-changing innovation springs from the small startup level, not from the major, established vendors.
“Although telecoms vendors continue to spend in the range of 13–14 percent of their revenues (on average) on R&D, VC funding of telecoms vendor start-ups has fallen steadily in the last few years,” Walker stated. Despite the fact that telecom-related patent filings continue to rise, “We worry that current trends in venture capital and vendor R&D threaten innovation.”
Walker was writing specifically about “the telecom vendors that design, build and hopefully improve the guts of the telecom networks,” he told VON/xchange in an e-mail, because “they are still the central players in this story.” Nevertheless, his findings raise a broader question: Where will the next generation of innovation in telecom come from?
That question was underlined by the lackluster performance of the IPO earlier this month by BroadSoft, which is one of the most innovative players in the next-generation, IP communications vendor space. If Wall Street doesn’t like companies like BroadSoft, and if, as Liz Kerton, president of the Telecom Council of Silicon Valley, has pointed out, Silicon Valley VCs are loath to invest in any startup with the word “carrier” in its business plan, who’s going to fuel the next wave of communications innovation?
The most obvious answer is “third-party developers.” The success of the iPhone App Store – and the many would-be developer marketplaces that have tried to follow in that success – has demonstrated that making cutting-edge platforms open to outside developers will fuel a level of innovation that vendors and operators cannot duplicate on their own.
Alcatel-Lucent, one of the world’s biggest telecom equipment vendors, acknowledged this reality earlier this week, when it acquired ProgrammableWeb, one of the largest directories of application programming interfaces (APIs). The purchase, the next step in what AlcaLu calls its “Application Enablement Strategy,” gives Alcatel-Lucent a significant new window onto the developer community and a repository of more than 2000 APIs from startups, large enterprises, and telecom carriers.
App Enablement is essentially a counterattack designed to siphon off some of the resources and developer innovation that have flowed to mobile devices, particularly the iPhone and Android, in the last two years, said Laura Merling, VP of developer platforms at AlcaLu.
“What’s happened is that around 18 months ago there was definitely a change in the landscape in terms of understanding that this isn’t just a fad,” Merling told VON/xchange in a phone interview. “Apps are here to stay. Network services use isn’t a fad.
