Research & Education Optical Market: ADVA Doing Well; 100G Not Anytime Soon

Implications: 1.ADVA started looking at the research and education optical networking market 2 ½ years ago.

2.ADVA seems to relish going head to head with Cisco Systems in this space.

3.The cost on 100G will keep it from adoption on a wide scale for quite a while.

Analysis: It appears that ADVA Optical Networking has focused on a vertical market winner – the Research and Education (R&E) sector. Given its level of penetration into the space as well as its superior optical offerings, ADVA seems to welcome any type of bakeoff with Cisco Systems. Still, ADVA’s success undoubtedly is helped by Cisco tending to ignore the R&E optical market because it is relatively small potatoes for the big gorilla in the private networking market.

It is quite a culture shock if one moves from trying to get business from a lot of the other vertical markets -- to working with universities. For example, companies in the financial sector do not tend to collaborate about networking issues. The educational institutions are more socialistic in nature and are apparently prone to gentlemen’s agreements (such as increasing tuition in lockstep) – so they are not even close to being as competitive as many enterprise customers. The users involved in the R&E portion of the market are very open and transparent – they have no problem talking amongst each other about their environment or their applications. With most of them being faced with similar challenges, it is easier for ADVA to leverage previous sales. It is also relatively simple for ADVA to gather pertinent information and feed it back to its marketing and design teams.

As a result of security being a part of any educational conference today, ADVA has been required to address this matter. At this point, in terms of providing encryption, the supplier has been working with various manufacturers of appliances. It has also developed some features and functions that are unique to ADVA based upon the needs of one of its largest customers, Morgan Stanley. It is an intrusion detection feature that was added onto ADVA’s platform that also looks at where the service is degrading. If the fiber is tapped, the customer gets a warning. ADVA is going to continue to move more security features into its systems.

One of the benefits of working with state university systems is that it provides a backdoor for ADVA to get additional government business.

Concerning 100G, in the R&E space and other vertical markets, ADVA realized that it needed to show to its customers that it was a part of its future product development. However, there is not going to be an opportunity for that speed any time soon. Although ADVA is looking to deliver that capability on its platform next year, from a practical perspective, the most optimistic GA for a 100G single lambda would be 2010. Of course, the switch and the router vendors first need to develop that interface. And just like the industry saw with 10G – just like it sees with 40G – the price points have to come down before acceptance on a broad scale.

ADVA’s roadmap for 100G will have both a client and line side. One implementation will have an inverse mux feature that will allow 10 x 10G capabilities. The module will also have a “straight” 100G for both the client and line sides. The speed/clock rate will be 110 Gbit/sec -- including the error correction scheme (FEC).