GENBAND and Sonus Merger—IP to the Max

There is an old Chinese saying about mergers and acquisitions and why they typically fail—“same bed, different dreams.” We seasoned tech industry observers can cite a very long laundry list where transactions that looked good on paper and/or were touted by financial and other analysts because “strategically it makes sense,” crashed and burned. Indeed, ranking the top 20 examples just in the telecoms space would make for an interesting contest of some type. 

It is why for several decades with few exceptions I have been skeptical when such deals are announced. In fact, I leave it to the academics who ponder such things to see which has a higher probability of long-term success -- startups or companies grown mostly via M&A. That said, there are exceptions to the rule. The announcement on May, 23, 2017, that Sonus Networks™ and GENBAND™ were merging appears to be such a case. I say this under full disclosure that I have no dog in this hunt, and that my prediction track record over four decades has been uneven. 

For the respective parties’ justification of the move and some granularity on the financial and organizational aspects you can take a look at their press release. And, while the lens through which I view such things has significant overlap with the reasons the companies’ executives state, you might find useful a little more color on why this is a potential rule exception. 

This combination represents what can be characterized as “IP to the Max.” This is a good thing. The reality of the internetworking world is that it really is becoming IP-centric regardless of whether a network is fixed, wireless or hybrid, premise-based or Cloud, local or wide-area. This is along with becoming software-centric, data center-centric and application-centric to use a few popular terms. 

Readers are invited to come up with your own list but here is a shortened version of mine focused solely on IP that is part of a longer list of capabilities vendors will need to possess going forward to have a reasonable chance at creating and sustaining competitive advantage:

• Internet Protocol (IP): Sonus with its IP-centric solutions, particularly its session boarder controllers (SBCs) has been a major player in moving enterprises and service providers to all IP networking while helping transition legacy systems and services to the lingua franca of digital communications. It is what has allowed GENBAND to prosper in the real-time communications business.
• Instantaneous Presence: Another way of saying real-time communications (RTC) which Sonus solutions enable and again GENBAND as a CPaaS company is foundational.
• Intellectual Property: Established and protected for both companies.
• Intelligent Periphery: Not only are networks moving to IP and the Cloud, but intelligence is moving to the edge and that is where with complementary capabilities Sonus and GENBAND play.
• Immersive Partnering: Okay. A bit of literary license but substitute in the need to have an expansive, scalable, extensible global footprint ecosystem-friendly portfolio which covers the needs of enterprises and service providers alike.
• Intense Protection: As we are all painfully aware the need to secure networks and protect against all things malicious including fraud is a must have and this combination thanks to security efforts and capabilities from both partners is more than just a check list item for the combined entity. It is potentially a meaningful differentiator.
• Impressive Permissions: Part of the previous point, but worth a pull-out since the world is moving to even greater reliance on the creation and enforcement of policies and rules, aka permissions. Sonus and GENDBAND understand this and are and will leverage this as part of their positioning in network transformation projects.
• Interoperable Parts: As correctly pointed out, there are very few overlaps in the combined portfolios and they play nicely with each other.
• Identifiable Personality: A global brand needs global reach and this accomplishes that objective as the executives note.

This deal is also of note because it is consistent with inexorable industry trends.

The first is that not only are networks transforming/converging, but thanks to the things we all love to talk buzz about—movement to the cloud, pervasive next gen wireless networks of all sorts, The Internet of Things (IoT), cognitive computing, AI, real-time becoming the only time, privacy and security, etc.—the lines between enterprise and service provider networks are becoming almost indistinguishable. Indeed, what used to be a question of command and control has become more one of ownership and liabilities. It is why to be a player going forward there are a lot more bases that have to be covered.

The second is a corollary of the first. In an increasingly complex, real-time world where the pace of innovation (its risks as well as rewards) is accelerating, enterprises are shortening their preferred vendor lists. Hence, what might be called a “scale of trustworthiness” is emerging. Where one sits on the scales is a function of multiple variables but important elements will be having a reputation in the market that you have the heft, vision, expertise, human and financial resources to be around for the long-term. While not quite “go big or go home,” size does matter.  It is why the sector is going to continue to be rife with M&A activities as the hunters look to fill in their missing mission critical pieces ala this transaction.

For the moment, as pertains to GENBAND and Sonus tying the knot, having known both companies since their inceptions, I resonate with the remarks from their leadership about the lack of contentious challenges on multiple fronts. This does appear to be a case of same bed and same dreams, and being IP to the Max is more than just directionally correct. Whether they can fulfill those dreams in a rapidly changing world is obviously a chapter to be written, and one certainly to keep a watchful eye on.