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Metaswitch Networks acquires OpenCloud to tap into next-generation mobile services and virtualisation

Gorkem Yigit Senior Analyst, Research

"This acquisition enables Metaswitch to fill gaps in its mobile solutions portfolio and strengthen its position in next-generation virtualised communications services."

Metaswitch Networks announced its acquisition of OpenCloud on 15 February 2017 for an undisclosed sum. OpenCloud is a UK-based specialist independent software vendor (ISV) that provides standards-based solutions including Rhino Telecoms Application Server (TAS), service broker products and the Sentinel family of VoLTE and real-time charging applications. It has more than 60 communications service provider (CSP) customers worldwide including large Tier 1 CSPs such as BT, Deutsche Telekom, Orange, Softbank, Telefónica and Vodafone.

Metaswitch has been traditionally strong in the service delivery platform (SDP) for fixed networks market with its MetaSphere TAS; its broader portfolio comprises mobile, business and interconnect solutions. The vendor has increasingly focused on delivering solutions for mobile networks; Metaswitch and OpenCloud have been solution partners for a few years. This acquisition bolsters Metaswitch’s mobile network solutions and its position as an end-to-end service layer solution provider for fixed, mobile and converged networks. Analysys Mason estimates that Metaswitch’s and OpenCloud’s combined TAS product revenue was USD49 million in 2015, which would put the combined entity among the top 10 vendors.1

Metaswitch Networks seeks to increase its share of CSPs’ IMS-based investments for mobile communication services

VoLTE has become mainstream; most CSPs have launched VoLTE services in developed markets. Neither of the two companies has achieved a strong position in CSP VoLTE deployments. Metaswitch lacked its own mobile standards-compliant (that is, IR.92/IR.94 for VoLTE and IR.51 for VoWiFi) solution with which to establish roadmaps with large Tier 1 CSPs, while OpenCloud had limited market reach and resources. The addition of OpenCloud’s solutions, particularly Rhino TAS and Sentinel VoLTE, fills Metaswitch’s gap and complements its Clearwater IMS core and Perimeta session border controller (SBC) products to create a more complete next-generation communications solution portfolio.

Metaswitch can use its enhanced portfolio to capture CSPs’ investments in two areas: it can target CSPs that want to launch new IP-based mobile communications and digital economy services on top of their existing VoLTE/IMS networks, and it can target those CSPs that have yet to launch VoLTE and VoWiFi services. Metaswitch has a third significant opportunity in co-existence and migration of legacy 2G/3G services and subscribers to an IMS domain as CSPs increasingly decommission their legacy networks and the number of VoLTE subscribers increases rapidly (at a CAGR of 77% between 2015 and 2020).2

The fast-growing enterprise services market is a key area for Metaswitch: it has a large number of hosted PBX customers, predominantly in North America, and it uses a mix of its own products and partnerships to deliver unified communications (UC) applications and infrastructure. It aims to extend into mobile-centric UC by introducing innovative solutions that help CSPs improve QoS/QoE and provide new service features akin to T-Mobile’s Digits and Verizon’s OneTalk services (that is, multiple numbers in one device and numbers shared across devices). Metaswitch plans to capitalise on OpenCloud’s Open SDK framework and APIs for further differentiation and customisation of CSP services. In addition, Metaswitch wants to build on OpenCloud’s experience in enabling residential services such as family shared plans to enhance VoLTE/IMS-based services, although CSPs’ overall reluctance to invest in the declining consumer voice and messaging services market will pose a challenge for all vendors, including Metaswitch.

Virtualisation of mobile networks and services is a key opportunity for Metaswitch

CSPs are increasingly embracing network virtualisation, and this trend will accelerate further after 2018. Analysys Mason estimates CSPs’ spending on VNF software will grow at a CAGR of 93%, from USD142 million in 2015 to USD3.8 billion in 2020.3 vIMS for VoLTE is one of the most prominent virtualisation use cases, because it can potentially provide up to 33% net cost savings with automated orchestration.4 Metaswitch is one of the early movers in the space. It has built virtualised solutions such as Clearwater vIMS (also released as open-source Project Clearwater), and Perimeta vSBC, which has commercial deployments in several CSP networks, most notably that of AT&T. It partners with key MANO and NFVI providers in the market such as Amdocs, Dell, HPE, Mirantis and Red Hat, and participates in working groups and ecosystems including Intel Network Builders, OpenECOMP, ETSI OSM and OPNFV. Integration of OpenCloud’s vTAS to its portfolio will strengthen its virtualisation capabilities and help it further develop cloud-native, orchestrated, micro-services-based solutions to compete for network virtualisation opportunities. CSPs that are familiar with Metaswitch have a positive perception of its vIMS and vSBC solutions, but are clustered in North America. It will be important for Metaswitch to increase its visibility and gain share in the crowded VNF market by building on OpenCloud’s footprint in Europe and Asia–Pacific, where Metaswitch’s market presence is not strong, and cultivating industry partnerships.

1 For more information, see Analysys Mason's Service delivery platforms: worldwide market shares 2015. 
2 For more information, see Analysys Mason's Communication services: worldwide trends and forecasts 2016–2021. 
3 For more information, see Analysys Mason’s Software-controlled networking: worldwide forecast 2016–2020.
4 For more information, see Analysys Mason’s VoLTE business cases: the value of spectrum reuse, an enhanced feature set and virtualisation.