The Transformation of Adtran
From gadgets and gizmos, IT powerhouse Adtran has reinvented itself as a software solutions provider broadening the reach of lightning-quick internet access.
Kurt Raaflaub, head of strategic marketing solutions for Huntsville’s Adtran, says the company’s Mosaic platform is the “change agent” that allows cloud-based, open-software solutions.
Founded in 1985, Adtran Inc. (Nasdaq: ADTN) is one of the oldest and largest of Alabama’s technology companies, though it largely goes unnoticed — like all those boxed widgets in data banks that make the internet work.
Adtran makes the networking equipment used by internet service providers to run their information highways. It’s a highly competitive business, and to have stayed among the front of the pack for over three decades would be no small achievement, if Wall Street investors gave credit for endurance.
In the middle of 2017, Adtran’s stock is selling at about $20 a share, about its median price in the last 15 years. In the highly volatile tech sector, Huntsville-based ADTN has held its own.
And to do so, it has had to do some fancy footwork, especially in the last few years.
“Wait too long to make the shift and you are too late, out of business like Blockbuster Video. Too early and you have much more work to do as a trailblazer,” says Kurt Raaflaub, who leads Adtran’s strategic solutions marketing. “But being first has rewards. This is why we made the early move, to lead.”
Raaflaub says that during the last five years Adtran has moved toward becoming much more of a software and services company.
“What we recognized a few years back — really because it was in our face as we viewed other transformed industries — was that the approach to services has changed; the world is changing. We are moving to a sharing economy of user-driven services. Operator networks must have the flexibility, bandwidth and scale to meet this challenge.”
In response to the emerging broadband boom, Adtran announced its pledge to ensure that access networks are open, programmable and affordable as carriers look to construct the foundation for 5G, which will make network connectivity 10 to 100 times faster than 4G networks. 5G is expected to be available in 2020.
The platform Adtran has been creating to do this entails a cloud-based, open software architecture branded “Mosaic.”
“We have gone out to create the change agent, which is Mosaic,” says Raaflaub.
The Mosaic Cloud Platform and Mosaic OS are Adtran’s claim to a leadership position in the rapidly emerging internet enterprise known as in Software Defined Access (SD-Access).
Mosaic allows service providers to accelerate their path to SD-Access architecture, enabling them to catch up with the unceasing innovations of their “over-the-top” (OTT) competitors — companies like Apple and Google.
Value of the networking hardware Adtran manufactures won’t disappear, says Raaflaub, but it will become a smaller portion. Network functionality and value will move from residing mostly on the hardware to residing within cloud platforms such as Adtran’s Mosaic. For some time, there will remain a more specialized and higher value hardware that the outside equipment manufacturers, also called white box vendors, do not have the expertise to develop, he says.
Individual network and consumer apps launched from cloud platforms — used to help drive down the cost of running a network, as well as developing and delivering services — will be a key component of the new value stream, says Raaflaub.
“Anchoring it all will be integration services, offered to the service provider to help put these open, multi-vendor pieces together in a robust and reliable fashion. Larger operators like AT&T will do so themselves, but the hundreds of smaller communications services providers will look to their suppliers, such as Adtran, to provide this integration.”
The new architecture will provide more flexibility in adding functions and services, much like the apps and the “internet of things” — the interconnection via the internet of computing devices embedded in everyday objects, enabling them to send and receive data.
“This is the key reason we are making this fundamental shift in building networks. So that telco [telecommunications] and cable companies can compete at web-scale. The companies with the highest value, those with the highest priced share value or market capitalization, are no longer GE, Exxon or Citi. Ten years later only Microsoft remains in the top five.”
Raaflaub points out that today the top five companies with the highest value are web-scale companies such as Apple, Google and Facebook.
As service providers build out their networks to prepare to deliver increased bandwidth, the access network has been a “hotbed of innovation” in copper-based G.fast and fiber-based XGS-PON and NG-PON2, said Adtran CTO Kevin Schneider at the company’s 2016 press and analyst event.
G.fast is front and center in Adtran’s strategic plan, offering ultrahigh bandwidth technology that’s good news for consumers, Raaflaub says. It solves the fiber optic problem by using existing copper infrastructure and can therefore deliver ultrafast broadband in much less time and at a lower cost.
“G.fast is an amazing technology, which, like Wi-Fi, has the potential to extend gigabit services deeper into our neighborhoods and homes,” he explains. “There are several key network-wide technology upgrades that are occurring over the next decade. G.fast is the first to be ready to transform services, like next generation FTTH [fiber to the home] and 5G wireless will do in subsequent years.”
All these new technologies will be deployed using cloud platforms. Raaflaub says Adtran already has more than 100 G.fast customer trials, all of which are being managed by using the company’s Mosaic cloud platform. The G.fast equipment deployed at neighborhood curbs and apartment building basements run on Adtran’s Mosaic OS software.
“2018 will see many nationwide rollouts of G.fast technology,” says Raaflaub.
The warp speed in which telecommunications technology is changing can make it a challenge to foresee every development. That’s why Adtran’s shift to more user-driven, more software-centric and programmable networks is critical, notes Raaflaub. The Software-Defined Access architecture combines modern web-scale technology with open source platforms to facilitate rapid innovation in multi-technology and multi-vendor environments.
“The entire industry built and deployed closed proprietary telecom and datacom systems, which held back long-term network and services innovation,” he says. “Open, multi-vendor, multi-domain operating models greatly improves the long-term agility in which a network operator can move much more at web-scale.”
Adtran is succeeding not only in software development, but on the services side as well.
Says Raaflaub: “We went from no reportable services revenue to services representing 12 percent of company revenue in 2015 and 17 percent of company revenue in 2016. We will continue to see strong growth in this area.”
Adtran employs about 2,200 people and about 1,700 of them work in Huntsville. The roughly 500 remaining employees work in sales and research and development offices worldwide.
Adtran Chairman and CEO Tom Stanton observes: “We experienced substantial global growth and customer diversification following our acquisition of Nokia Siemens Networks Broadband Access Business in 2010. Adtran now has customers in over 60 countries.”
Anne Burkett, executive director of the Huntsville-based North Alabama International Trade Association, praises Adtran for its technological advances and contributions to North Alabama’s global economy.
“As the No. 1 Tech Community in the country, Huntsville is on the global map, thanks to companies like Adtran that showcase our technical talent and entrepreneurial spirit,” says Burkett. “Adtran’s extensive global footprint is a key factor in Huntsville’s economic outreach and diversity.”
Significantly changing course with a new company strategy requires courage, as well as the right timing. When making such changes, Raaflaub notes, a company must unlearn past behaviors and experiences to make room for new ideas.
During the next five to 10 years, Raaflaub says the company will continue to develop software and services. Today, more than 90 percent of Adtran’s Mosaic Cloud Platform is based on Open Source software, but 80 percent of the company’s focus is on leveraging its singular domain expertise.
Adtran will continue to excel in optics and access innovations and its drive toward SD-Access, adds Raaflaub. Its acquisition of the Commscope Fiber Access portfolio has helped accelerate the company into the cable and MSO (Multiple Systems Operators) markets with EPON and R-FOG solutions.
“And you’ll see Adtran leverage our SDN (Software Defined Networking) expertise to help transform the MSO industry into an open disaggregated architecture. As the industry moves into 5G, Adtran leadership in NG-PON2 will help drive the high capacity deep-fiber infrastructure that will support these mission-critical, latency-sensitive applications such as autonomous vehicles and tactile internet.”
Jessica Armstrong and Dennis Keim are freelance contributors to Business Alabama. She is based in Auburn and he in Huntsville.