Vello's mission is to deliver IP plus optical systems for carriers, cable operators and the Enterprise market. To this end Vello purchased the physical assets of OpVista, which included both intellectual property and an extensive patent portfolio. Prior to Vello acquiring OpVista’s assets, the company was actively courted by several large vendors on the market for OEM deals because of its low-cost ROADM technology. None of these propositions resulted in deals so OpVista’s secured lender took over, and
Vello Systems now owns the physical assets and intellectual property. Based in Silicon Valley, the company is largely employee controlled.
The acquisition and transition was relatively seamless for Vello. There was approximately four months of interruption in manufacturing but no interruption in business for the customer base, as Vello’s staff continuously communicated with the customers to keep them abreast of developments within the company. This emphasis on communication resulted in a backlog of orders for Vello.
Vello is currently operating as a profitable company with very healthy margins and to date has over 1300 optical platform units deployed worldwide.
TECHNOLOGY DIFFERENTIATORS
Vello Systems has the following key differentiators:
The company can deliver 40G over 10G engineered fiber networks. This 4x10G transmission actually uses only one ITU channel, which is a benefit for cable operators or carriers with fiber exhaust or have older networks and want to increase bandwidth without wholesale changes. Vello Systems plans to support this same multiplexing capability for 10x10G, which will support 100G transmission on a single ITU channel.
Another differentiator is their Adaptive Optical Services Routing (AOSR), which is a sub-carrier or sub-wavelength routing in the optical domain for 10GE, FC-10, OC-192/STM-64 and OTU-2. The technology enables a new level of traffic routing, performed at the optical layer, to alleviate routers and to boost overall network efficiency.
But perhaps most understated is the ability to go longer distances (and at a very low cost point too) on the 50GHz and 100GHz grid than most metro suppliers. These factors were key elements to the successful deployment 1300+ units worldwide.
Vello's main product is the CX16000, which is a 17 slot (14-RU) large box. The company just introduced the 5 slot (3-RU) CX4000 and a new line card CX40A (also 4x10G), which is single-slot 4 x10G board for ultra-dense 10G or space-saving edge or data center applications. A 2 slot 1 RU pizza box version will be released this fall.
CUSTOMER BASE
Vello’s customer base is largely cable operators and carriers, with key customers being Cox, Time Warner Cable and Comcast. These customers are using Vello for high bandwidth video distribution and IP over optical transport and in some cases Ethernet business services. These types of operators are now serving the business market as well as the residential market, thus increasing the number of deployable applications. Carriers are using the same metro optical Ethernet platform for Ethernet over lambda transport and mobile backhaul with LTE, the largest application, driving the increasing demand for additional low-cost bandwidth.
Vello is also acquiring more customers from the enterprise market. Harvard University is using Vello for a 10G metro regional network with spurs leading to extended regional hubs. Applications such as data center to data center or data center to business headquarters is often being driven by the server 10G interconnects within data centers. There are low-latency applications, backup and disaster recovery and even virtual machine applications within the enterprise optical market where Vello’s products can be deployed. This market is approximately 15 percent of the total optical networking spend, which is a significant amount!
BEHIND THE COMPANY
What advantages or disadvantages does Vello Systems bring to the market? The employee owned structure allows for nimble and flexible business decisions internally and with its partners. Vello’s supply chain differentiation—they only purchase discrete parts, not subsystems or modules — helps control cost and operation expenses.
ACG RECOMMENDATIONS
Vello is dealing with the same, typical challenges that all small companies face. Foremost, Vello needs to establish stronger partnerships to grow the business and move deeper into larger accounts. Vello Systems is located in Silicon Valley; strategically, it offers a vendor a prime opportunity for an OEM deal and/or an acquisition. Any major vendor might consider adding Vello to its portfolio to enhance its IP/optics strategy.
In just one year, Vello has positively positioned itself in the market. However, to show its value to executives Vello needs to produce evidence of success as well as a cost/benefit analysis on how and why they've won deals. ACG Research predicts that Vello Systems will become a formidable contender in the optical market.