One step at a time, behind the scenes, without public declarations, US communications equipment supplier Juniper Networks (Nasdaq: JNPR) has begun the conquest of the voice over Internet protocol (VoIP) equipment and network security sector. The first step indicating the company’s entry into the field was the acquisition of Israeli company Kagoor Networks at the end of March. Up until then, Juniper supplied communications and information security equipment for data communications networks only. The acquisition of Kagoor, whose system makes possible secure voice transmission between two IP networks, marked a new era at Juniper.
The roots of Kagoor founder Opher Kahane, who was CEO of the company until it was acquired, and is currently VP voice technologies at Juniper, go back to a small start-up named ClassX, sold to Israeli company VocalTec Communications (Nasdaq: VOCL). It is said in the communications market that the VoIP sector owes its birth to technology developed at VocalTec. Few people know that, while VocalTec may have developed voice boards for PCs, it was ClassX that developed the technology that makes VoIP transmission possible.
Kahane was both CEO and a co-founder of ClassX. Seven years after the acquisition of ClassX, he left VocalTec to found Kagoor. He isn’t willing to admit it, but his being a co-founder and CEO of Kagoor may well have been one of the reasons why Juniper decided to acquire the company.
Kahane founded ClassX in the early 1990s, together with three friends: Ofer Shem-Tov, Dror Tirosh, and Elad Sion, who died a few years ago in a traffic accident. ClassX developed the first VoIP product in the industry, which enabled PC users to make free voice calls via the Internet.
”We called the product ‘VocalChat’, and later changed the name to ‘InternetPhone’,” Kahane relates. “With this technology, we were absorbed into VocalTec in 1993. We actually brought VoIP to VocalTec. At that time, it was producing voice boards for PCs, which were aimed at enabling a computer to produce voice. In other words, we brought to the merger the application that made it possible to make calls from a computer. The combination of our application and VocalTec’s hardware made it possible to supply Internet telephony capabilities for PCs. That was VocalTec’s first VoIP product. It worked in much the same way as Skype works today.”
"Globes": Why did you leave VocalTec?
Kahane: ”I worked almost seven years at VocalTec. It was an amazing period. As happens with most entrepreneurs, however, after seven years the spirit of entrepreneurship began to move me again, and I decided to leave the company in order to found Kagoor, together with Itzik Parafes and Shai Mohaban.”
What do you think will happen to VocalTec, following the merger with Tdsoft?
”I don’t know the details of the merger. In principle, though, we can expect the beginning of a trend towards mergers and acquisitions in the VoIP industry in the near future. The entry of communications equipment giants into VoIP has greatly intensified competition. In this situation, the market pioneers, which naturally are small companies, have a hard time coping by themselves with the big companies, so a process of mergers is beginning.
”Nevertheless, if the pie continues to grow, there’s no reason why small players shouldn’t operate at the same time as larger ones in the future. Almost every industry has huge companies, and smaller ones that prosper in niches.”
While the majority of the veteran information security players are still concentrating on data communications systems, Juniper realized a year ago that the existence of VoIP networks depends on a high degree of security from security systems specially designed for them.
Kagoor has developed a system, called session border control (SBC), located on the borders between IP communications networks. These borders are considered one of the weakest Achilles heels of VoIP security. All major communications manufacturers, including NEC (Nasdaq: NIPNY), Lucent Technologies (NYSE: LU), and Alcatel (NYSE: ALA; Paris: CGEN), realized over a year ago that they must include in their equipment a solution for problems arising on the borders between communications networks.
One of the question that has recently arisen in the communications market is whether the acquisition of Kagoor will intensify competition between Juniper and other information security equipment suppliers, such as Check Point (Nasdaq: CHKP) and Cisco Systems (Nasdaq: CSCO). “I’d say that competition is being stepped up,” Kahane comments. “Acquisition of Kagoor has broadened Juniper’s current range of information security products.
”SBC comes on top of Juniper’s hardware-based firewalls and other products, including intrusion detection and prevention, the SSL-VPN product line, and network access control technology, whose job it is to prevent network break-ins and dissemination of viruses, Trojan horses, worms, and so forth.
”Juniper had competitive security products even before it acquired Kagoor. The acquisition gave it sophisticated SBC technologies, which are designed for security on VoIP and video on IP networks.”
Do other competitors in the information security market have SBC capabilities?
”As far as is known, none of Juniper’s competitors in the information security market has an SBC solution. I believe that Juniper is now one of the few information security players that has acquired SBC technologies, if not the only one. It is therefore the only player with capabilities in the broad sense that include the three critical elements for building secure and reliable VoIP networks: routers, firewalls, and SBC.”
What plans does Juniper have for Kagoor’s technologies?
”Integration has been successfully completed. Today Juniper is investing resources in examining all the ways in which SBC technologies can be leveraged through their inclusion in the company’s other products.”
What are the main trends today in VoIP?
”The most important development in VoIP is the fact that more and more incumbent local exchange carriers (ILECs) are now deploying extensive VoIP infrastructure. The most impressive example of this is British Telecom, which announced the creation of a 21st century network, based entirely on VoIP infrastructure.
”British Telecom plans to have its entire network use VoIP by 2010. Within a few years, it will replace all its current generation equipment with the next generation. I think that the same thing will probably happen with other ILECs around the world.
”Another trend starting to gather steam is cable television companies providing VoIP services. The expected entry of ILECs into the Internet protocol television (IPTV) sector creates direct competition between them and the cable companies. As a result, the cable companies are more motivated to provide national inland telephony services. Like the new communications operators, they are also using VoIP infrastructure to enter the field.”
Is the trend among cable companies towards entering VoIP also expected to speed up outside the US?
”I believe that it will. For example, the Israeli cable companies (through HOT) are already providing VoIP-based telephony services. HOT is actually one of the pioneers among the cable companies outside the US that have begun providing VoIP services. In the next two or three years, I predict that we’ll see this trend strengthen in Europe and the Asian Pacific region, too.”
How do communications equipment vendors fit into this picture?
”As deployment of the infrastructure spreads, VoIP infrastructure will have to provide more extensive IP telephony services than previously, to tens of millions of subscribers, and meet the same quality requirements that current telephony must meet. Demands on the infrastructure are therefore rising steeply, which will open a huge market for equipment vendors. Furthermore, equipment requirements will be much stricter, making the entry barrier in the communications equipment sector much higher than in the past.”
How will that affect security equipment?
”The more the need grows for equipment capable of providing service at a high level of quality, reliability, and durability, the greater the need will be for specialized VoIP information security equipment. The fact that VoIP deployment is moving into high gear will cause a sharp upturn in the technological requirements for communications equipments in reliability, information security, quality of service, and scalability.”
Published by Globes [online] - www.globes.co.il - on December 15, 2005