The ongoing consolidation craze in the networking market coincides with many small and midsize businesses moving to converge their wired and wireless networks. Looking ahead, growing businesses need to brace themselves for more changes as established providers and startups jockey for market position.
The most recent consolidation in the networking market is HP's acquisition of Colubris Networks. By snapping up the second-tier supplier with a record of success, particularly in hospitality, education, and health care, HP filled a gap in its Wi-Fi product line.
As fledgling startups joust with established vendors and angle for buyouts, the HP acquisition stands to be just one of many shifts in the networking landscape during a time of turmoil and upheaval.
HP ProCurve's acquisition of Colubris Networks is a strategic move to increase its visibility in the wireless LAN market, where it has been a bit player to date. Though HP has made significant strides with its wired products, it has been a nonfactor on the wireless side. The company has not invested big research dollars in wireless products, instead relying on third parties, such as Motorola, to supply its systems.
In fact, HP did not have 802.11n products, which represent one of the market's hottest segments, prior to the acquisition. Once a tough sell in the business market because of security and performance concerns, Wi-Fi networks now have sufficient bandwidth and security functions, and have become widely accepted corporate technology. In addition, there has been a dramatic upswing in the consumer market, spurred in part by the growing popularity of Wi-Fi hotspots.
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Now, WLAN features are showing up in cell phones, and analysts expect a significant portion (perhaps as many as half of them) to include those features in a few years. HP recognized that, to be a significant networking supplier, it had to become a bigger player in the Wi-Fi segment.
Colubris had also been tracking market changes. At the turn of the millennium, venture capital firms were handing chests of dollar bills to startups focused on building wireless network products. As Wall Street turned its back on the tech sector, these companies needed new long-term strategies. In April 2007, Colubris hired exit specialist Rob Scott as its CEO and began seeking out potential acquisition opportunities. Although the company was early in developing 802.11n-capable products, it was hampered by small size and lack of marketing punch.
Also, the codependency between wired and wireless networks has become clearer as mobile technology gains traction; there's a connection to a wired switch on the back end of any wireless LAN. With the number of wireless access points increasing, small and midsize businesses want to ease their management functions and have all of their network equipment (access points, switches, routers) run under a single management umbrella, rather than various autonomous systems. Small niche suppliers such as Colubris would be hard pressed to meet that need.
Although the acquisition makes sense from a business perspective, the two companies face some technical and management challenges. Colubris controller code has to be inserted in HP ProCurve Ethernet switch blades. Both companies' management features must be improved, so unified ProCurve shops can manage policies centrally across both wireless and wired networks.
There are also operational issues. HP, which has 172,000 employees, has a distinct large-enterprise, West Coast persona, whereas Colubris is much smaller and based in Massachusetts. How the two will mesh is unclear.
The newly melded HP-Colubris enterprise is just the latest combination to vie for second place behind Cisco in the networking market. Earlier this year, Belden purchased Trapeze Networks to add WLAN products its copper and fiber-optic connectivity portfolio, and Siemens and Enterasys decided to pool their resources.
What other established networking vendors may be looking to expand their product lines? Motorola acquired Symbol in January 2007 but is largely a wireless play. Juniper Networks, which has no WLAN products of its own and was rumored to have attempted to purchase Trapeze Networks, may make a move into the wireless space.
What will happen to the remaining WLAN vendors? Aruba's purchase earlier this year of AirWave Wireless, a wireless network management vendor, illustrated its laser focus on the wireless market, but will that tunnel vision eventually be its downfall as converged wired and wireless networks take hold? Meru Networks seems to be building a sound business and may be an attractive acquisition candidate. Aerohive, Extricom, and Xirrus are probably banging on many large-company doors. Surely, other shoes will drop, so the only questions now are who will buy whom and how much time will pass before the next purchase takes place?
See more columns by Paul Korzeniowski.
Paul Korzeniowski is a Sudbury, Mass.-based freelance writer who has been writing about networking issues for two decades. His work has appeared in Business 2.0, Entrepreneur, Investor's Business Daily, Newsweek, and InformationWeek.
