July/August 2009 | Volume 1/Number 4
ADTRAN Advances Access Solutions
By Rich Terhani
We’ve followed the ADTRAN (News - Alert) success story from its beginnings in Huntsville, Alabama, in 1985, though its great accomplishments in developing equipment for the carrier market, then to its move into the enterprise space in the 1990s with their TSU family of Data Service/Channel Service Units (DSU/CSUs). ADTRAN then branched out further into ISDN termination equipment and Integrated Access Devices, quickly becoming the market leader. The 21st century brought ADTRAN into increasingly advanced access solutions. Today, the company is growing rapidly in the areas of broadband access, optical access and Internetworking.
With its tremendous portfolio of over 1,700 products, ADTRAN can satisfy the network needs of not just carriers but any kind of business. They encompass everything: routers, Fast Ethernet, Gigabit and PoE switches; IP Communications platforms; IP phones; IP PBX (News - Alert) platforms; wireless access points; security appliances and management platforms.
I recently spoke with ADTRAN CEO, Thomas Stanton, to get his view of what ADTRAN is up to these days and where things are heading in our industry.
RT: How have you managed to be profitable every quarter for so many years?
TS: Our drivers of profitability are fundamental in nature. Historically, we’ve always focused on product cost. Technology must not just be exciting and advanced, it must also be cost-effective. We also keep our operating expenses in check by empowering employees. We have learned that if you empower employees, they begin to spend money as if it were there own. They manage to reduce expenses themselves without being told to do so. As a result, we have sales margins that have increased over the past 3 to 4 years to an industry-leading range — about 59 to 60 percent.
RT: Tell me about your company’s history of innovation.
TS: In the beginning we had to make a name for ourselves by out-engineering everybody else in terms of product design, both to meet standards and to win market share. An example of this is our plug-to-plug HDSL technology. Back in the 1990s delivering HDSL over extended distances required adding ‘local powering’ for the remote unit or line powering with voltages considered to be unsafe for handling. We developed a low voltage HDSL system allowing the central office unit to provide line power at safe voltages without making things complicated with local powering. It was the first safe, cost-effective method for extended-range HDSL deployment. We also had to out-engineer everyone on the cost side of the card to get to the lowest price point. One way we achieved this was by building our own ASICs [Application-Specific Integrated Circuits]. We still do this — we have a semiconductor development group that we call upon for a large percentage of our products. By doing this we can lower the bottom line cost and have complete control in terms of adding features. Of course, as systems become more complex we have developed a larger ‘toolset’ and we continue to transform innovations into overall solutions.
Consider our Total Access 5000 Multi-Service Access and Aggregation Platform (MSAP) and its more compact brother, the Total Access 5006. These innovative products will shine as the world’s networks evolve over time. Basically, the Total Access 5000 is a carrier-class MSAP that bridges the gap between existing and next-gen networks. We believe that Ethernet is at the heart of the future of the network and, with its all-Ethernet core, the Total Access 5000 supports both legacy and emerging service interfaces over copper and fiber. It scales easily to support bandwidth-intensive applications, so carriers can use it to deal with both legacy and next-gen services as they map out and follow a seamless path toward a converged network. As a Broadband Loop Carrier, the Total Access 5000 can deliver both POTS and enhanced broadband services via ADSL2+, VDSL2 and GPON technologies. It supports any kind of migration path since it can deal with both TDM and VoIP switches. Also, the Total Access 5000’s Ethernet core can serve as a scalable, cost-effective network aggregation point, with interfaces ranging from DS1 to Multi-Gigabit Ethernet. It’s even environmentally hardened, so service providers can deploy it in a CO, remote terminal or any type of remote node location.
The Total Access 5000 fits in perfectly as a great example of how to bring fiber to the node and enterprise. We help customers reduce and/or defray costs by examining a solution’s lifecycle cost. Cost of ownership, ease and manageability are important factors to which we always pay attention.
RT: Tell me about your corporate divisions.
TS: Our Carrier Networks Division provides infrastructure to telcos, such as fiber-to-the-node and optical backhaul products. It mainly focuses on access. We founded our Enterprise Division about five years after the Carrier Division. We initially found we could leverage our CO expertise by infusing carrier ideas into enterprise-class gear. Even today, our customer premises equipment shares the same standards as our carrier products. We always want to facilitate end-to-end connectivity, which brings with it additional benefits. And now, of course, for the first time we’re seeing this connectivity in the Ethernet world, along with service level agreements.
RT: How do you think the broadband stimulus will affect the market and ADTRAN?
TS: We think we are well positioned. The customer base that will see significant benefit is rural service providers that deal with underserved or completely unserved customers. We’ve been selling to rural telcos for 10 years now. All of the large rural, independent telcos have rolled out our Total Access 5000 and 1100 systems, and they are now looking to roll out broadband in areas where previously it did not make sense to deploy. So, we have a great track record because we know our customers and we have the right products.
RT: You spoke highly about Ethernet. How are IP and Ethernet technologies affecting you?
TS: They affect most of our development efforts. About 90 percent of our development work involves IP and Ethernet products. That’s a 50 to 60 percent shift from just five years ago. The network is evolving faster and faster toward Ethernet. Fortunately, our product set allows us to be at the leading edge of this evolution
RT: How do you see business growing in various global regions?
TS: The long-term growth of ADTRAN is dependent upon our ability to grow outside of the United States. We began focusing on global growth approximately two years ago and we are seeing some success, especially in Latin American, Asia and Europe. Over the next two years, you will see ADTRAN increase its focus on global markets and introduce more products with features that are tailored to address the unique needs of service providers and businesses in other regions of the world.
RT: How is the Green movement affecting ADTRAN?
TS: We started a green initiative inside the company two years ago. “Green” is inevitable. It’s not going away tomorrow. Besides, it’s the right thing to do. If rolled out correctly, it can be financially beneficial for everybody. It’s also a positive thing from an employee perspective. Consumers are in the early adoption phase, but I’d rather be at the forefront in this than be the last company to get onboard.
RT: How has ADTRAN done in the current economic climate?
TS: Our Carrier Division proved to be the most resilient in 2008. We did see a slowdown in legacy SMB products. Still, I’d say we were affected less than other vendors in our space. Our new products and ‘growth’-positioned products actually grew in excess of 20 percent last year.
RT: How are you differentiating your products from others?
TS: As a leading provider of both Carrier and Enterprise solutions, ADTRAN is uniquely positioned to leverage the strengths of our two divisions to offer fully managed, integrated, end-to-end Ethernet and IP solutions. We have a strong heritage in engineering and our strength lies in the unique ability to re-engineer solutions to deliver higher performance, reduced costs, and integration of the latest technologies. This ability combined with industry-leading warranties and best-in-class technical support allows ADTRAN to set the bar in delivering industry-leading total cost of ownership to our customers. This is especially important to our service provider customers who depend on our solutions to increase their service revenue, simplify their networks and reduce their costs.
RT: Why should enterprise and carrier customers buy from your company?
TS: We offer the industry’s best customer service as well as terrific end-to-end management capability. We have expertise in both carrier and enterprise technologies. We can take very expensive-to-develop carrier technology and roll it into enterprise products in a much more effective manner than would a company solely focused on the enterprise market. That’s why more and more core technologies on the carrier side can trickle down to the enterprise in a short time. Our carrier-class products are highly reliable. Our enterprise products are of carrier-class quality but at reasonable prices. Indeed, our price points beat the competition. As I said previously, we offer a great TCO, and yet we manage to bring innovation to the market every year, taking it right into the embedded space. And financially, we are very stable in an era when many companies are not.
RT: What does the future hold for ADTRAN? What can customers expect?
TS: Customers can expect an Ethernet-centric product portfolio that will evolve as the market evolves and showcase our engineering talent and innovation. We will take this product set to a global audience and provide those customers with the same top-notch experience that North American customers have enjoyed for almost 25 years. It’s going to be