This installment of TMCnet's "Executive Suite," a feature in which leading executives in the Voice over Internet Protocol/communications industry discuss their companies’ latest developments as well as providing analysis on industry news and trends.
Technology Marketing Corporation President and Editor-in-Chief Rich Tehrani recently interviewed Sonus Networks’ CEO, Hassan Ahmed.
March 16, 2006
I recently had the real pleasure of interviewing Hassan Ahmed, CEO of Sonus Networks. (news - alerts) The company was around from the beginning and has been a true pioneer in VoIP. There are many companies today competing head to head with Sonus who downplayed VoIP and the products Sonus sold in the late nineties, yet now Sonus is a benchmark that many other companies aim for.
Sonus was a Wall Street darling with a valuation well over $10 billion at its peak; it also crashed to lows that put it in line with most other VoIP companies in the 2001-2004 downturn. During that downturn, many industry publications and analysts suggested that people won’t buy from Sonus, that they will only buy from large telecom equipment manufacturers — the incumbents, if you will. If you believed the word on the street, you would have assumed that Sonus was doomed. Much to the contrary, Sonus was one of the few that weathered the storm and, just like the VoIP industry in general, bounced back like a SuperBall off concrete, surprising everyone at once.
Here is my long overdue interview with Hassan Ahmed.
What can you tell me about the down years?
Ahmed mentioned that Sonus was one of the last companies into the meltdown and the first out. The company’s big focus at the time was how to keep from succumbing to the downturn — his specific words were, “Powerful downdraft.” He went on to say that the company earned its stripes on the way down; he is most proud of his team and the company, since many others didn’t make it through. They saw the bottom with a 20-cent stock. They also thought the end of ’02 was going to mark the end of the downturn.
At a certain point, they realized their growth would come at expense of something else, that the overall pot was not going to increase. They had to be able to demonstrate short-term value and focused their products on that. They had to make sure that, for service providers, it was worth taking money from legacy projects and applying it to new ones.
Sonus realized it was not a field of dreams, where you tried every new technology. Furthermore, they realized that VoIP (define - news - alerts) was becoming global and all carriers were moving to VoIP. More specifically, they zeroed in on Europe and Japan. The company decided to focus on a distributed architecture and, according to Ahmed, they didn’t make naive bets.
The company had decisions to make regarding its target audience. Ultimately, the decision was a focus on supplying large public infrastructure. They didn’t want small “mom and pops” and CLECS: They wanted the large service providers.
This focus, of course, led Sonus to focus on scale and reliability, as they realized these weren’t things they could bolt on later. This customer-focused decision helped reinforce the decision to build distributed systems and related architectures.
These decisions subsequently drove large performance increases. For example, Sonus’ softswitch could handle six million busy-hour call attempts while others were in the few hundred thousand range.
Hassan continued to note that the industry is now coalescing around IMS. “It’s all about SIP and distributed networks. These were bets Sonus made early on, and they were bets that paid off nicely. We have been hardening and developing this technology for eight years. For us it is just software upgrades.”
What about industry comments about service providers only buying from incumbent providers?
Hassan started by telling me that popular thinking was that the class 5 market would be bigger than the class 4. Many companies decided to focus on class 5 replacements. They thought that that incumbent circuit switched providers have thousands of class 5 switches and these would grow packet interfaces. Migrating these old switches to VoIP was going to be the right answer, as this is where the money was.
“There was no question class 5 was bigger in ports, but the world doesn’t change overnight.” Ahmed said. “You have to ask what the right way to do it is. The core has to evolve before the edge. Sonus embarked on a path focusing on dominating the core first,” he continued.
They also bet that class 4/5 divide will have different switches, since the ones on the edge terminate in copper pairs. In the IP world the connection to the network can be disaggregated from the delivery of service, Ahmed said. You wouldn’t just morph the switches in the network. The difference was software, not hardware.
The fact that you have thousands of circuit switches is not an advantage — that is not where you deploy the switches in the IP world. Also, look at the wireline world: lines were declining. Morphing circuit switches didn’t make sense
How does SIP play into your plans?
SIP is, in their view, a very important protocol from a variety of perspectives. It is a protocol they have honed and field-hardened for 15 billion minutes a month. It is used for Peering IP networks at VoIP level. Sonus used Sip-T early on to allow two networks to communicate with each other.
Sonus felt one of the big values of SIP was that it could open up the service model that once was closed — you used to have to go to a switch vendor for custom programming. They further provided the Open Services Partner Alliance or OSPA.
“This has enabled a lot of creative companies to develop really interesting applications,” according to Ahmed.
Sonus feels the IMS architecture is built on technology they pioneered and the choices they made early on; the rest of the industry has now coalesced around. In the beginning, the industry was all about cost savings, not separate networks. Now, cost is table stakes. The wireless and wireline opportunities are now about service and service convergence, according to the company.
Hassan was very passionate when he said, “The goal is to empower next gen consumers with the way they want to communicate.” He looks at his children to see the next generation of consumer. In them, he sees lots of IM sessions that lead to VoIP as well as lots of collaboration.
Consumers want to get services once they have subscribed, regardless of how they connect. The common service model needs to be agnostic in terms of how you join the network. That is what IMS is all about.
Creating services and driving innovation is a big part of Sonus’ focus. The IMS platform is about taking open service architecture to the next level. In weeks you can build brand-new applications.
Ahmed continued, “In the wireless arena, VoIP is now being adopted by operators. When wireless operators have broadband wireless access, the last mile becomes IP. The way you build wireless networks is IP instead of circuit-based MSCs.”
“IMS plays a prominent role in the future as we see it,” Ahmed exclaimed.
Where is the growth in the world?
VoIP started in the United States. Sonus then invested in Europe, Japan, and other parts of Asia. Their Japan investment was very good, for it became the second strongest Sonus market. Customers tell them they are the de facto VoIP standard in Japan. They work with wireline operators (Softbank, NTT, Softbank, JCOM) and now wireless providers.
Europe is a different story. There have been a few false starts and, early on, there were few decisions being made. After the slow start, however, Europe is now growing nicely and Sonus recognized better performance there in the last quarter. Ahmed thinks availability of licenses is what will keep a ceiling on growth in this area.
What about China and Huawei?
They haven’t seen Huawei outside Asia — not in the VoIP market, anyway. Rather, they have seen the large incumbent circuit switch providers.
What about the competitive environment?
From a competitive standpoint, Sonus sees Lucent and Nortel in the U.S. and Alcatel, Ericsson, and Siemens in Europe. Finally, Cisco is not as focused in the VoIP carrier space as the other players.
Can you stay independent and compete with all these players?
“We are five years in and this is a 15-year opportunity. Innovation counts. All operators are coalescing on a common approach that is increasingly friendly towards technology we pioneered.
Sonus is a bonafide provider to large networks. Our focus is on building our company and we don’t worry too much about others and if they need to be part of them. We are a leader and can continue to build on that leadership.”
What is biggest impediment to your growth?
The company’s growth is a function of development of the global market. It’s not about early adopters anymore — All providers have embarked on VoIP. Different opportunities arise at different times and, as the market develops, so will Sonus.
Ahmed points out that anyone can become a service provider, which has enabled a set of operators like Yahoo! and Google to become providers
He went on to say these are interesting times and these developments enable more competition, as you don’t need to own the last mile.
It was an honor to have this long overdue interview and it is exciting to see one of the early adopters in our space doing so well. As the IMS market matures, Sonus will no doubt continue its position as an industry leader and continue to supply the next-generation of converged communications solutions.
Rich Tehrani is President and Editor in Chief at TMC.
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