Sensible start-ups

Let’s consider the business propositions put forth by start-ups Equipe Communications Corp. and WaveSmith Networks Inc.

The companies have developed or are developing switches designed to enable service providers to gradually migrate to IP/Multi-protocol Label Switching (MPLS) service infrastructures – a so-called “disruptive” market, in industry buzz-speak – from existing ATM (Asynchronous Transfer Mode) and frame relay networks. Equipe rolled out its offering, the E3200, last month.

But instead of persuading service providers to overhaul their existing infrastructures, they’re proposing retaining, even growing, revenue from ATM and frame relay services while preparing for future IP/MPLS service delivery.

It makes a lot of sense. With today’s capital crunch, service providers can’t afford to flush their “legacy” revenue stream to build a new infrastructure that would support future services that enterprises might buy months or years from now.

The future is now. And by building switches to support and grow “legacy” services, the start-ups are targeting service providers who are less cash-strapped than green-fields building IP/MPLS infrastructures from scratch. Equipe and WaveSmith have virtually ensured their own survival by ensuring top-line growth for the incumbents.

And they won’t be competing with each other, because they’re targeting different areas of the network. Equipe is after the core, while WaveSmith is perched on the edge.

But they will go up against the likes of Lucent, Nortel, Cisco, Tellabs, Alcatel and Juniper – companies with track records, deep pockets, proven products and established relationships with their customers. These are the same customers Equipe and WaveSmith hope to win.

Another challenge for these companies is the tight capital market. Money may be tougher to come by when they’re up for the next round of funding.

But for starters, these start-ups deserve recognition and consideration for concocting disruptive business plans which aren’t that disruptive.

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Jim Love, Chief Content Officer, IT World Canada

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