Upgradeability is Main Potential Hurdle for Infinera and Other PIC Firms

Implications: 1.      Optical gear needs to be readily upgradeable. 2.      The last thing that a service provider wants is to do a forklift. 3.      System integrators getting back to vertical integration will be necessary in order to have extensive and long-term usage of PICs in fiber optic systems.

Analysis:  There is always the possible risk that Infinera and other optical system vendors taking advantage of PIC solutions will have an enduring technology problem.  Migration to the new requirements can be a long, drawn-out, and difficult process.   It is always bad news to have to pull out a system that has already been installed.  Any permanent roadblock to service and capacity upgradeability on an existing system will limit opportunities to smaller service providers that do not anticipate significant changes in their networks.  

In order to confront such huge potential obstacles, outsourcing is not going to be the answer.  Infinera’s penetration into the market clearly demonstrates that all of the development from the chip to the full system needs to be done by a single entity.  Given the high stakes in such an undertaking, it will require larger, well-established system integrators to take full responsibility for such projects as well as assume the entire financial risk.  Suppliers such as Alcatel-Lucent will need to go back to the old Western Electric model of developing and supplying components in-house.