Network-based carriers are experiencing rapid decline in voice services revenue and are looking for vendors of softswitch architecture solutions that can deliver value-added services in addition to providing cost efficient voice over IP (VoIP) services. Vendors in the Magic Quadrant for Softswitch Architecture, 2007 (see Figure 1) are providing a call-control layer for VoIP networks, but they are also offering — in various forms and portfolios — an environment for additional value-added services. So, while voice will be the predominant service to be deployed or converted into next-generation networks (NGN), the industry will recognize the shift in market definition from softswitch architecture toward session control in the TISPAN and 3GPP/3GPP2 IP Multimedia Subsystem (IMS) framework. Subscribers want access to services at any time and anywhere. Therefore, those softswitch vendors that have a clear migration path from softswitch to IP transformation — and an integrated portfolio that can deliver long-term value to both mobile and wireline operators — are more likely to be successful.

Many vendors have good vision of how their customers need to change their networks to compete more effectively, not only with rival network providers but also with application service providers that offer VoIP via Web portals. However, while their vision is well expressed in marketing plans and communications, it provides incomplete solutions with regard to the immediate carrier transformation milestones and migration road maps. Vendors need to be able to build workable network migration scenarios for their customers that address specific needs in terms of architecture, regulatory stipulations, primary and value-added services, systems integration, managed or outsourced architecture, as well as quality of service and service-level agreements.

Gartner expects that many of the vendors outside the Leaders quadrant will have to position themselves around their solutions capabilities, bringing immediate value, as well as future innovation, to their customers. Gartner recommends that customer centricity is key to developing network transformation processes. Gartner expects that, by 2010, a third of the vendors currently present in this quadrant will have either formed viable "ecosystems," to enable end-to-end solutions, or will be acquired. This quadrant will be reviewed in 3Q07 to take into consideration the consolidation in this market — mainly Nokia Siemens Networks and General Bandwidth's acquisition of Tekelec's switching portfolio.

Traditional voice service revenue continued to decline in 2006, so many operators are now taking the decision to invest in their networks to make service delivery for voice services more efficient. Investment in VoIP technology has been increasing steadily. This will also open operators' networks to next-generation voice applications, allowing them to upgrade at marginal cost. VoIP deployment scenarios entail implementing IP in the core of the network, thus cutting operating and maintenance expenditure, and benefiting from the economies of scale offered by a VoIP implementation. In the broadband network, VoIP is offered either as part of a "triple play" service or to circumvent the incumbent operator's termination. As a result, softswitch architecture has matured significantly and the delivery of carrier-grade voice has become a reality.

With the emergence of IMS topology, wireline operators are considering either a pure telephony emulation architecture using softswitches or a session-controlled IMS framework. We believe that using softswitching as a stepping stone toward IMS is often the right strategy. Many vendors putting the IMS label on their softswitch technology and product solution road maps have failed to articulate a business justification for IMS migration. IMS will not offset the voice revenue decline for most operators, as it will only be leveraged when advanced functions like presence and multimedia applications are implemented — functions which have uncertain revenue prospects. A phased approach using softswitches is a more prudent investment as the business models for new services become clearer. Therefore, to deliver VoIP cost-efficiently, operators should choose softswitch vendors with service and application "ecosystems" that can migrate to advanced services and an IMS topology approach in the future.

VoIP ports and license shipments have increased for all vendors across the Magic Quadrant, but product-offering strategies, technology milestones and road maps, migration plans, and customer and industry "mind share" have shifted for many, so the scoring for "completeness of vision" and "ability to execute" has also shifted. In the meantime, operators that want to build out multimedia networks or move into fixed mobile applications will be deploying IMS topology-based voice services in conjunction with presence and location applications and services such as instant messaging. Gartner expects the upgrade from softswitch to IMS, as well as the "pure" call session control function (CSCF) build-outs, to increase throughout the forecast period.

As anticipated in the 2006 Magic Quadrant, market dynamics have led to some vendors improving their position. This has led to a doubling of vendors in the Leaders quadrant. In the Niche Players and Visionaries quadrants, some vendors have moved because of their execution and technology vision, with some exchanging scores between the two axes.

Gartner expects that cable multisystem operators (MSOs) will also be making the decision to build out VoIP networks using IMS topology. Here, they will deploy softswitch or call control layers that are PacketCable 2.0 compliant. This is especially attractive when cable companies want to combine voice and multimedia content in one session, particularly when they can use a partnership with a mobile operator. However, many MSOs focus on triple or quadruple play bundling, and therefore the integration of IMS with MSOs that have more than voice services is expected to be at least two years away. PacketCable 2.0, while not a competitive benchmark today, will become interesting for vendors that are trying to build out networks for cable companies in the future.

The softswitch architecture market, comprising softswitch/call control and VoIP gateways, has gone through some iterations of industry hype, from an initial claim that "packet will replace all legacy infrastructure" to a now more moderate network migration and packet overlay approach. In future, softswitch architecture will be deployed for pure telephony emulation purposes, or to deliver VoIP in a broadband bundle. VoIP delivered through IMS will use CSCF.

In a softswitch architecture, the underlying hardware is decoupled from the call control, subscriber logic and service creation. The application server is not part of this Magic Quadrant; it accommodates features and applications to the subscriber. The softswitch accesses, enables and applies those applications according to predetermined profiles for the subscriber. The linkage between the call control layer and the application layer is the application programming interface (API). BroadSoft or Sylantro Systems, vendors of application servers, are not included in this Magic Quadrant.

According to Gartner's methodology, this Magic Quadrant for Softswitch Architecture, 2007 has adopted the following benchmarking rule for regional and worldwide players: In cases where the market is being analyzed at a global level, but where a vendor does not serve all regions, the vendor should be evaluated in respect of the regions in which it does operate — thus, a vendor operating in a single region that qualifies as a leader in that region should be shown as a leader.

Vendors were included that had more than five reference customers in 2006 and more than $10 million in revenue.

Nokia

Genband

Gartner analysts evaluate technology providers on the quality and efficacy of the processes, systems, methods or procedures that enable IT provider performance to be competitive, efficient and effective, and to positively impact revenue, retention and reputation. Ultimately, technology providers are judged on their ability and success in capitalizing on their vision.

Evaluation Criteria Definitions and Weights

Product/Service: Core goods and services offered by the technology provider that compete in or serve the defined market. This includes current product/service capabilities, quality, feature sets and skills, whether offered natively or through OEM agreements and partnerships. This includes specifically the development of "ecosystems" to support specific operator requirements, such as IP-Centrex; systems integration and distribution; and after-sales support in different regions (where applicable). The support of third-party non-SIP-based applications and end-user databases will be crucial. The consistent delivery of quality-of-experience (QOE), quality-of-service (QOS) and policy-based functions are also evaluated. The availability of comprehensive systems integration services will be important, too.

Overall Viability (Business Unit, Financial, Strategy and Organization): Viability includes an assessment of the overall organization's financial health, the financial and practical success of the business unit, and the likelihood of the individual business unit to continue investing in the product, continue offering the product and advancing the state of the art within the organization's portfolio of products. This also includes an assessment of financial prudence and value of acquisitions of companies delivering for example, applications or session border control technology.

Marketing Execution: The clarity, quality, creativity and efficacy of programs designed to deliver the organization's message in order to influence the market, promote the brand and business, increase awareness of the products and establish a positive identification with the product/brand and organization in the minds of buyers. This "mind share" can be driven by a combination of publicity, promotion, thought leadership, and word-of-mouth and sales activities. Since the softswitch architecture market is diverse in terms of topology and its affiliated migration to session control in the IMS, it is necessary to consider the different market share and mind share as a result of equipment deployments.

Operations: The ability of the organization to meet its goals and commitments. Factors include the quality of the organizational structure, such as skills, experiences, programs, systems and other vehicles that enable the organization to operate effectively and efficiently on an ongoing basis.

Gartner analysts evaluate technology providers on their ability to convincingly articulate logical statements about current and future market direction, innovation, customer needs, and competitive forces and how well they map to the Gartner position. Ultimately, technology providers are rated on their understanding of how market forces can be exploited to create opportunity for the provider.

Evaluation Criteria Definitions and Weights

Market Understanding: Ability of the technology provider to understand buyers' needs and to translate those needs into products and services. Vendors that show the highest degree of vision, understand buyers' wants and needs, and can shape or enhance those wants score highest.

This includes:

• Understanding operator requirements for network convergence from time-division multiplexing(TDM) to IP, or voice over broadband and true VoIP.
• Activities in standards bodies.
• Vendors with wireless and wireline softswitching portfolios targeting IMS.

Marketing Strategy: A clear, differentiated set of messages consistently communicated throughout the organization and externalized through the Web site, advertising, customer programs and positioning statements. This also includes participation in industry education through webcasts and conference presentations, in service and application development activities in industry, as well as leading those efforts.

Offering (Product) Strategy: A technology provider's approach to product development and delivery that emphasizes differentiation, functionality, methodology, and feature set as they map to current and future requirements.

This also includes:

• Physical footprint and network management features.
• IMS capabilities and migration, where appropriate.
• Partnerships and ecosystems.
• Configurations to meet regional or country requirements (for example, interfaces, power consumption, heating, air-conditioning, regulatory compliance and equipment measurements).
• Support of new and emerging applications including IMS session control and application layer.
• Support of 3GPP and TISPAN releases.
• Support of systems integration.

Innovation: Direct, related, complementary and synergistic layouts of resources, expertise or capital for investment, consolidation, and defensive or pre-emptive purposes.

This also includes:

• New product development milestones and compliance with a road map of milestones.
• Migration path for existing softswitch technology to include new interfaces such as Session Initiation Protocol (SIP) and IMS control functions.
• Support of emerging applications in conjunction with fixed-mobile convergence (FMC) and IMS.
• Support of test labs and test profiles.
• Road map and support for Advanced Telecom Computing Architecture (ATCA).

These are high-viability vendors with a broad portfolio, significant market share, broad geographic coverage, a clear vision for how service provider needs will evolve and a proven track record for delivering products. They are well positioned with their current product portfolio and are likely to continue to deliver leading products. Leaders do not necessarily offer the best solution for every customer requirement, and their products may not be best-of-breed in every area of their portfolio. However, overall, they provide solutions that offer relatively lower risk and higher quality.

Vendors in this quadrant are Cisco Systems, Nortel, Siemens, Huawei Technologies, Ericsson and Sonus.

These are vendors with strong market capabilities and good solutions for specific markets, but the products overall lack the breadth and depth of those from Leaders. The solutions do not offer a clear vision of how the market is evolving and are not as innovative or advanced as those of Leaders.

Vendor in this quadrant is Nokia.

Visionaries demonstrate a clear understanding of the market and provide key elements of innovation, illustrative of the future of the market. However, they currently lack the ability to influence a large portion of the market, have not yet expanded their sales and support capabilities to a global reach, or do not yet have the funding to execute with the same capabilities as a vendor in the Leaders quadrant.

Vendors in this quadrant are Italtel, MetaSwitch, Tekelec, Fujitsu, ZTE, Thomson (Cirpack) and NEC.

The vendors in this quadrant offer products that focus on a segment of the market or a subset of functionality. Customers that are aligned with the focus of a Niche Player can find such providers' offerings to be a good fit.

Vendors in this quadrant are CopperCom, UTStarcom, Cedar Point and Veraz.

• Focus on service provider IP transformation and convergence.
• Proliferated installed base in traditional switching and VoIP.
• Strong marketing and positioning effort.
• Mobile softswitching driven by Alcatel's acquisition of Spatial Wireless.
• Global presence with strong support centers, and the "mind share" for broadband triple play including VoIP.

• Both Alcatel and Lucent have implemented a strong organization through addressing convergence and carrier transformation strategies. However, the compromise on internal alignment and integration efforts may cause delay in executing short-term strategies, for instance in selecting critical elements that will be needed to complement the product portfolio, reducing product and resource overlap, and saving costs.

• Its partnership with Motorola is strategic and will aid its entry into the mobile operator market.
• Its total cost of ownership is claimed to be 66% less than that of competitors and therefore provides a pricing advantage for small deployments.
• Financials are relatively strong for a small Niche Player (it has doubled its revenue from the previous year).

• While successful with its target market in the MSO space, the company will have to differentiate itself as, increasingly, more softswitch architecture vendors will be moving to become PacketCable 2.0 certified.

• Cisco is a tightly run and focused organization.
• It has a growing service provider portfolio. It has made several acquisitions, including Arroyo Video Solutions, Meetinghouse Data Communications, Orative, Scientific Atlanta and Five Across. Cisco has also developed new voice technology in-house with its Session Border Control routing platform for service providers.
• Cisco's IP Next-Generation Networks (IP NGN) is a standards-compliant architecture and vision for service providers, which supports three linked infrastructure convergence layers — application, service and network convergence.
• Cisco is driving the integration of voice and IPTV through pragmatic solutions available today, as well as through standards bodies — such as TISPAN, 3GPP and 3GPP2 — in which it is heavily involved.
• Its financial status is solid.

• Despite gaining traction in the MSO space, Cisco needs to continue to penetrate the Tier 1 carrier space for VoIP, beyond cable operators and its routing platforms.

• Its customer-centric product line is focused on rural operators.
• It has strong financial backing by an umbrella organization for a company of its size.
• Competition is limited in its target market.

• As many Tier 2 and Tier 3 carriers are moving toward triple-play services using advanced broadband alternatives such as fiber to the x (FTTx) or WiMAX, those customers will be looking for vendors that can provide an end-to-end solution for them. Hence CopperCom has to form partnerships with companies that offer both broadband access technology and applications to be able to show revenue generation on a broadband network. Tellabs is the strongest partner that supports CopperCom. The platform is also not scalable to accommodate larger carriers.

• It provides choice for carriers via a two-product strategy for telephony emulation and simulation. Its IMS-ready softswitch solutions target mobile and wireline operators.
• It has growing traction in the market. With the 21CN contract, Ericsson offers a lot of contract announcements on voice migration and the NGN roll out. This contract remains its biggest indication to date of its ability to execute.
• Its layered architecture allows migration from TDM to VoIP in a step-by-step approach, supporting efficiencies in voice delivery and enabling voice revenue generation in both mobile and fixed networks.
• It is making a good business case for carriers. It has shown how efficiency and new service capabilities will drive the need for softswitching and IMS.
• Ericsson further strengthened its portfolio and market presence with the Marconi acquisition, and Marconi's portfolio is now fully integrated with Ericsson's.

• The years 2001 to 2003 were very rocky for Ericsson's wireline business, with multiple reorganizations resulting in major downsizing. The period since then, however, has been relatively successful, and has included major softswitch wins such as BT 21CN, Telecom Egypt and Korea Telecom. While the acquisition of Marconi gave Ericsson a good start in regaining strategic strength, gaining broader traction of telephony emulation contracts the size of 21CN might challenge Ericsson's ability to execute on those contracts, especially if its mobile IMS business opportunity continues to grow strongly.

• Fujitsu has a strong VoIP base in Japan and, since 2004, has had a shipment record throughout Japan for IP telephony on broadband access such as asymmetric digital subscriber line (ADSL) and fiber to the home (FTTH).

• Fujitsu's market share in Japan has fallen, based on the fact that overall investment for IP telephony declined in 2006. Furthermore, since 2004, Fujitsu has lacked the ability to improve product innovation.

• Huawei demonstrates an understanding of carriers' needs by simplifying network structure, improving network capacity and providing new applications.
• It has vision in all areas of IP network development and a migration path to future IMS.
• In 2006, it was awarded contracts by various Tier 1 carriers, including KPN, SingTel, China Telecom and China Mobile.
• Its softswitch solutions have many deployments among mobile and wireline operators.
• Its international revenue increased in 2006.

• Huawei must focus on marketing its contracts for wireline core switching more intensively and communicate more openly with the market. Huawei needs to put more effort into delivering voice in conjunction with multiservice enablement to enhance carriers' business cases.

• There is a focus on migration of voice networks for Class 4 and Class 5 operators, in conjunction with Cisco Mediagateways. Cisco remains a strong partner of choice, and also engages in joint marketing.
• There is a focus also on Next Generation Services (NGS) solutions to create value for the NGN
• It has an IMS migration path and CSCF implementations.
• It has made investments to achieve platform evolution and NGN software simplification, developing service enablers, moving to commercial Linux-based ATCA hardware, embracing ICT philosophy, and engaging in partnerships with IT companies such as BEA Systems, Wipro Technologies and Accenture.
• Its business development strategy is going strong, with the build-out of new subsidiaries in Dubai and the strengthening of its existing presence.
• It has a dedicated customer education and innovation display center called i-Comm. It is designed to teach executives how to translate new technologies into service opportunities for carriers.

• Italtel has to enforce its marketing and positioning throughout Europe, the Middle East and Africa, and in emerging European countries, as it has done in Western Europe and Latin America. Although the main customer segment has shifted away from Italy, Italtel's global reach has been limited. The company has to increase its mind share outside the Italian market.

• It has a strong product portfolio and good backing from its parent company. It acts as an OEM to Nortel and Tekelec, IBM, and others. It also participates in a vendor ecosystem.
• It is committed to addressing customers' current problems/issues and developing technologies that will help solve future issues.
• Its product road map will include support of embedded home subscriber servers (HSSs) and external HSSs.
• Plans are in place to help service providers "market" their services, which will help strengthen relationships between MetaSwitch's customers and improve the success of those customers. Service providers need to understand how to market new and developing products and services.
• MetaSwitch brings in half of the parent company's revenue.

• Focus continues to be on North America. It is not visible in emerging markets, but it has had some success in the Latin American region, which contributes largely to the success of its business and to diversifying regional presence. However, the company lacks visibility and focus on wireless operators.

• NEC is the main equipment vendor for all major telecom operators in Japan that began to upgrade their networks from PSTN voice to VoIP. In 2006, NEC changed its business focus toward NGN. As a result, its software development engineering section was reinforced, and customized development and support of IMS and softswitch solutions for telecom operators increased substantially.
• The NC9000 series, which was aimed at supporting the shift from the softswitch product to IMS and NGN (ITU-T specification), was announced in 2006.

• Although NEC is venturing abroad, the company lacks customers outside Japan. The company has engaged in partnerships with Siemens and Nokia, but this has not resulted in any major activity in Europe, the Middle East and Africa.

• The merger with Siemens means that Nokia will be able to complement its product portfolio with a wireline and converged NGN strategy.
• Mobile softswitching is key for Nokia's unified core networking strategy.
• Major application-level partners are related to IMS multimedia, business voice applications and video applications.

• As the company is joining the alliance with Siemens to form Nokia Siemens Networks, the new company will face the challenge of merging and migrating its product portfolio, and establishing a new identity and brand with wireline and mobile carriers.

• Continued market leadership in next-generation switching, particularly with Media Gateway port shipments.
• Nortel has more than 100 active open developers in its program. It has conducted over 100 interoperability tests and has issued 32 certificates of compatibility to date.
• It has a strong commitment to standards bodies and a partnership with IBM, which shows dedication to market and ecosystem.
• Its IMS portfolio has three purpose-built elements — Call Session Controller 1000, Service Capability Manager 1000 and Home Subscriber Server 1000 — delivering an open network solution, and which are IMS standards compliant (3GPP, 3GPP2, PCMM, TISPAN and IETF).
• The new Nortel tag line "business made simple" is being applied not only to the way Nortel positions itself in the marketplace, but the way it operates as a business. It summarizes the value preposition for its customers.
• Large installed base of TDM equipment.
• IMS product development for incumbent and rural customers demonstrates Nortel's commitment to the market and its feistiness in fending off the competition.

• Despite all the success on the product shipment level, the viability of the business and the ability to execute is being challenged by continuous financial reporting problems. Although those at executive level are committed to revamping Nortel and returning it to operational efficiency, the ability to innovate within the VoIP portfolio and its migration path to a session control layer might become more complicated.

• Good market understanding of fixed network IP transformation, particularly for voice services.
• Large installed base of TDM switches with large mind share and well-known brand.
• The merger with Nokia will complement its existing mobile switching portfolio.
• It has a fixed–mobile convergence (FMC) solution based on IMS, namely CSCF and HSS, together with voice feature server and PSTN interworking.
• It has a design strategy integrating ATCA, AdvancedMC and Carrier Grade Linux for cost efficient and open architecture platforms.
• It has mind share in the voice over cable market.
• Siemens has an end-to-end ecosystem for advanced services and applications, as well as a third-party weSurpass alliance, to drive greater flexibility. At one point, it will be subsumed into the IMS program.

• As the company is joining the alliance with Nokia to form Nokia Siemens Networks, the new company will face the challenge of merging and migrating its product portfolio and establishing a new identity and brand with wireline and mobile carriers.

• It has a worldwide presence in leading countries. Development centers in the U.K., U.S., and Asia/Pacific also provide presence and mind share. And it has a strong and growing ecosystem.
• There is a new emphasis on the wireless carrier space through partnerships — particularly with Motorola — in access and distributed mobile switching centers (MSCs).
• Sonus exhibits a good understanding of the cornerstones of telephony emulation to simulation migration.

• Sonus' overall revenues are still derived mostly from tandem replacement for wireline operators. Its share of Class 5 deployments is growing, but the company must position itself to become a strong choice in international markets. The company is spreading in Europe, the Middle East and Africa, and also selectively around the world, but it needs to ensure that expansion will include the service and customer support facilities, either through subsidiaries or partnerships. Since it forms a cluster of vendors by itself, Sonus will continue to have a positioning sandwiched between the large telco vendors with end-to-end provisioning and the Niche Players.

• It has a strong product portfolio.
• It has a strong presence in emerging markets.

• It has signed a definitive agreement with Genband for the purchase of its entire switching portfolio.
• Its revenues for switching have declined quarter over quarter during 2006.
• Marketing efforts are geared more toward its core competency signalling business.
• There is a lack of a migration path from VoIP in a telephony emulation mode toward voice in an IMS architecture.

• It has a solid focus on voice migration, allowing telephony emulation with backward compatibility to traditional network interfaces, signaling and intelligent networks (IN)
• The company has a forward-looking migration path toward IMS topology, converging and reusing call control layer elements for session control.
• Its products are based on IBM blade architecture with a modular design, which allows for cost efficiencies in deployment and configuration.
• As part of the Thomson SA family, the Cirpack VoIP switching portfolio is closely aligned with the parent company's focus on delivering triple-play and IPTV solutions including IMS, hence providing the end-to-end solution focus generated by R&D, marketing and product support and service perspectives.
• It continues to build out its presence globally, to include markets in Latin America, North Africa, and Central and Eastern Europe.

• Thomson (Cirpack) has gained a lot of ground in terms of building out a "footprint" in the wireline VoIP market, for telephony emulation and also IMS service upgrade for voice. The company has to increase its mind share for mobile softswitching.

• It targets carriers in the high-growth emerging market segment.
• IPTV platform is very synergistic with its switching product line in emerging markets.
• Its pricing is attractive for price-sensitive target audience.

• Its product has an "all in one" structure.
• There is a lack of participation in standards bodies.
• Its iPAS product line has significant limitations and UTStarcom will have to evaluate its opportunity in the market. The Chinese operators, a key revenue stream, have delayed investment in the segment in favor of 3G investment. This challenges the company to look for a new customer base.

• Veraz has visibility in emerging markets.
• It keeps the cost of R&D for various products down through operations facilities in India and Israel.
• Product enhancements show some dedication or focus on the wireless market vs. a previous focus on wireline.
• An increase in product sales of over 100% indicates loyalty and trust from its new customers.

• Its application and solutions vendor ecosystems focus on few of the current market players. And it still lacks the capabilities of an incumbent vendor in terms of provisioning VoIP overlays vs. PSTN emulation and/or simulation.
• Veraz needs to balance its worldwide presence and also needs to facilitate and maintain partnerships with third party providers and systems integrators to service its contracts.

• ZTE has moved into the position of Visionary. It was a Challenger in last year's Magic Quadrant.
• It has continued to promote its fixed 3G concept, and its unified IMS core for CDMA, WCDMA and fixed broadband solutions.
• It has demonstrated that its product road map will accommodate IMS features in the future.
• It was selected as a softswitch vendor by several carriers in emerging markets such as Russia, Pakistan and India.
• ZTE has a clear migration plan in its CDMA MSS solution.

• ZTE needs to improve its marketing effort to increase its market performance and share. As it expands its business overseas, it will be a challenge to ensure the service quality needed to improve the customer experience.