Demand for Optical Networking Software Will Create a $7.6 Billion Market by 2004, Says New Study from CIR.

Business Editors, High Tech Writers

CHARLOTTESVILLE, Va.--(BUSINESS WIRE)--Nov. 29, 2000

The growing need for optical networking vendors to differentiate their products will create a $7.6 billion optical software market by 2004, according to a new report from Communications Industry Researchers, Inc. (CIR), an optical industry market research and strategy consulting firm based here.

However, the new CIR report titled, MANAGING THE ALL OPTICAL NETWORK, goes on to claim that more than half of the market will be supplied by third party software vendors as optical networking vendors search for the network management functionalities to distinguish themselves.

Less Focus on Provisioning

CIR forecasts the market for optical networking software - including that shipped by the vendor with the original systems - will amount to $2.1 billion this year with almost three-fourths of the market devoted to provisioning software. However, the new CIR report says that current provisioning solutions fail to address service providers' true requirements, i.e. being able to provision services across multi-vendor and multi-service provider networks.

Billing, planning, performance and fault management open new product and service opportunities for both optical networking vendors and third-party software suppliers alike. For example, optical performance management products, which today account for just over $200 million of software sales today will reach close to $1 billion by 2004. Billing software will emerge in order to cope with the new demand for optical services and could be worth almost $350 million in the same timeframe. CIR forecasts also indicate that the optical network planning and modeling market could be worth as much as $560 million by 2004. Today service providers mostly build their own optical networking and planning tools in house, but they are increasingly open to outsourced solutions.

The Need for Third Parties

But while the growth and size of the optical networking software market are expected to be impressive, MANAGING THE ALL OPTICAL NETWORK also poses the question as to how successful optical networking vendors will be if they rely entirely on in house ideas and solutions. The report notes that in the past, equipment vendors (optical and non-optical) have neglected network management and OSS issues which has led to the creation of third-party software vendors who build products for the public network environment.

CIR believes strongly that third party software vendors will become increasingly involved with optical networking and that their participation will be required in order for the networking vendors to meet increasingly short time to market requirements. The report suggests that optical network equipment vendors will have to work in close harmony with software vendors who already have considerable experience with the software requirements of the public network.

According to CIR, by leveraging the existing expertise of software vendors, optical networking vendors will be able to build a significant competitive advantage for themselves over time. Such a strategy, says CIR, provides access to some of the best minds in software development, spreads the cost of software development over several companies, and reduces time to market.

CIR believes that the company that has moved furthest in utilizing this strategy is Sycamore, which through its Silvx partnership program appears willing to bring in outside network management expertise, including companies such as CrossKeys and Syndesis.

As the attached table shows, CIR believes this trend could ultimately segment the optical networking software into three kinds - software designed by the equipment vendor and shipped either with the original equipment or as part of upgrades, software designed by third parties in partnerships with equipment vendors and shipped by these vendors and software designed and sold by third parties.

Listening to What the Service Providers Say

CIR's analysis and forecasts in MANAGING THE ALL OPTICAL NETWORK are based on a primary survey of service provider network management needs. CIR, one of the most highly regarded analyst firms covering the optical networking business, put together a talented team for this report. This team of Dave Anand and Lawrence Gasman has more than 45 years of experience in the telecommunications industry. As a result, CIR's new report is underpinned by a deep knowledge of the industry's economics and an understanding of service provider needs.

The report profiles the optical network management concerns of approximately 20 leading service providers and the optical management solutions of approximately 25 leading optical networking vendors. The new CIR report also contains analysis of the current challenges and opportunities for network management in the optical environment and the all-important topic of how optical networking management will fit into the legacy network management environment. Finally, the report contains five-year forecasts of revenue generation from provisioning management and service creation products, performance management products, signaling upgrades and other optical networking intelligence offerings.

MANAGING THE ALL-OPTICAL NETWORK is priced at $4,000 for hard copy. Electronic copies and corporate site licenses are also available for an additional fee. For a detailed table of contents, see CIR's Web site at http://www.cir-inc.com or contact CIR's VP of Marketing and Business Development, Robert Nolan at [phone] or [e-mail] for additional information. A full Executive Summary is available to members of the trade press.

Based in Charlottesville, Virginia, Communications Industry Researchers, Inc. was founded in 1979. The company publishes market studies and carries out demanding custom market research assignments on the commercial aspects of new communications technologies. CIR specializes in the areas of optical networking and network intelligence and provides objective research and analysis for the optical networking world.

             Optical Network Management By Market Channel

                                               2000          2004
Vendor Produced Software ($ Millions)
Supplied with Equipment                        1256          3037
Aftersales                                      825           772
TOTAL                                          2081          3809

Third-Party Software ($ Millions)
Outsourced Software Marketed by Vendor            0          3182
Software Marketed by Third Parties                0           643
TOTAL                                             0          3825

TOTAL                                          2081          7634