Interview with John Dunne, founder and CTO
Introduction
Intune Networks, founded in 1999 by John Dunne and Tom Farrell and based in Dublin, Ireland, is focused on developing a carrier-class optical packet switch. The company now has approximately 155 full-time staff, with design centres in Dublin and Belfast and sales offices in the UK and the U.S.
Intune has developed technology, termed Optical Packet Switch and Transport (OPST), designed to address the challenges for service providers of handling the rapidly increasing and unpredictable traffic on their networks.
The company has raised two rounds of funding from venture capital firms, including a Euro 13.5 million Series A round and Euro 29 million in Series B. Intune is currently seeking further funding in a Series C placement of Euro 30 million.
Early background
Intune's founders started out in 1994 performing research on tunable lasers primarily through involvement in European research projects while at University College Dublin. After establishing Intune in 1999 the company was initially engaged in calibrating and developing technology for controlling other vendor's lasers at its lab in Dublin before embarking on building control systems for laser suppliers.
Mr. Dunne noted that at the time there were more than thirty companies building tunable lasers, representing a decent market for Intune's first products - now there are far fewer.
Intune subsequently won a contract to supply products to JDS Uniphase for its Eindhoven site in the Netherlands, formerly a Philips operation. However, this facility was shut down in 2001 and Intune was then forced to seek alternative markets for its technology.
Meanwhile, companies in the oil industry required a swept laser source for optical
sensing applications and Intune started developing and offering products for this market.
At the time Intune was also engaged in a project funded by the European Space Agency and another similar program with DARPA in the U.S. to develop an optical backplane utilising fast tuning lasers. Both projects were seeking to address the challenges presented by the problem of situating a large Cisco router in a satellite or high-altitude airship where weight and power consumption are key issues.
Birth of the optical packet switch
By 2005, Intune had developed its own optical switch design and spent the next two years on refinements. This necessitated raising funding to enable the company to bring the switch to market. In 2006, Tim Fritzley, a member of the technical advisory board, was appointed as CEO to help raise the first round of funding.
Prior to joining Intune, Tim Fritzley was running Microsoft's IPTV division and before that served with Tellabs. At Microsoft he realised that the existing network architecture was not suitable for handling traffic generated by sites such as Youtube and Facebook that had launched around 2003/4.
That network architecture, comprising a static optical layer with fixed lasers and Layer 2/3 switches and routers, remains fundamentally unchanged today.
Under this established network architecture, processes are centralised at the routers, which have had to grow ever larger as network traffic and the demands upon them increase, while the pipes that feed the routers have to carry greater loads and so are now being upgraded to 40 and 100 Gbit/s capacity.
Tim Fritzley saw that Intune's product could offer a solution to the problem facing carriers, which presently is inhibiting the development of new services such as cloud computing and interactive low-latency services. The carriers are also evaluating how to advance their metro infrastructure to enable efficient delivery of services such as virtual desktop and bandwidth on demand.
To address this market the Intune optical switch needed to be carrier-class. In 2007, Flextronics acquired Nortel's European design team for 10 Gbit/s systems in Belfast, but subsequently closed down the site, at which time Intune recruited approximately 45 of the staff to work on the optical switch.
Manufacturing services companies Flextronics and Celestica make the carrier-class package and also helped with its design.
Intune launched a commercial carrier-class product under the Verisma name on May 23, 2011 at the TM World Forum.
Verisma Platform
Describing the Verisma product, Mr. Dunne said the first commercial model is a carrier-class optical packet switch distributed around a fibre ring. In the future, different versions will be offered to address different end markets.
At the 2011 TM Forum Intune debuted and demonstrated the Verisma solution in collaboration with BT, Openet and Amartus, showing how a user can improve the quality of a video service on-demand by requesting extra bandwidth in real-time.
Intune has made the optical layer packet-responsive through the use of tunable lasers, thereby enabling increased utilisation of fibre capacity. Mr. Dunne explained that the product also enables operators to reduce the number of router ports required, so lowering costs, and employs web services software for control of the switch by an end-user:
"As Facebook has a programming interface whereby any programmer can join and develop an application - and the same goes for iPhone and Android - Intune offers an application interface for the network that is embedded in the switch. A user can thus set up an application for a web services portal that will call up bandwidth on demand from the network. For example, a user could provide a network for a social network on Facebook which would only be paid for when used".
The Intune solution means that operators can allow their customers to create new services on the network, effectively allowing business customers to create any service they need.
Financing market entry
The three main investors participating in Intune's Series A funding - Balderton Capital / Benchmark Capital Europe, Amadeus of London and Park Ventures in Boston - recognised from the start that this would be a long-term commitment since the length of time required to win business with large carries is a major issue for a small start-up company with limited funding.
In 2009 the company raised Series B funding from its existing and new investors, although the round took 13 months to complete due to the economic crisis. Mr. Dunne believes this was the largest private investment in the optical networking space to close during 2009.
Intune is currently seeking to raise Series C financing of Euro 30 million to support the company through the go-to-market phase of its development and into breakeven or profitability.
With respect to revenue, Intune generated sales of Euro 11 million in 2010 and expects to increase this to around Euro 20 million in 2011, including projects with the Irish government, before it finally begins to see revenue from carriers in 2012.
Mr. Dunne emphasised that Intune is already engaged with major carriers, having worked with BT since 2006 and with Telefonica in European projects since 2002.
The optical switch product was shipped in beta to carriers in 2009 and is now available in a carrier-class package that must be trialled with customers for a minimum of six months. Therefore it will be 2012 before Intune sees commercial deployments with existing carrier partners and trials with additional carriers.
Intune is currently involved with carriers in network modelling demonstrating that even with less than five percent of traffic deriving from cloud services a new approach is required to handle the traffic effectively.
Partnerships
Intune addresses the metro network space, specifically the optical transport and switching sector. Within this market each carrier has its own upgrade cycle, with some due to upgrade their networks towards the end of 2012 and Mr. Dunne said this is the window that Intune is targeting with its new carrier-class solution.
The company does not plan to sell direct to carriers and is engaged in developing partnerships with systems integrators used by the large carriers. While Intune recognises that as a small company it cannot address such customers directly, it is also aware that it needs to present the value proposition of its technology to carriers if it is to avoid being blocked by their existing equipment vendors.
Mr. Dunne feels that a current problem, particularly in the optical networking space, is that the established vendors are not innovating, and while the carriers wish to reduce the number of router ports they have to buy and to transition to a new network architecture there is nothing available from the major vendors at present:
"Ultimately it is down to the carriers to adopt new technology and help it to succeed in the market - the equipment vendors cannot create a market for their products. This means that at some level the carriers need to support small companies developing new technology or it will never reach market. For example, carriers are now becoming desperate for an alternative to the way they have been operating their networks for the past twenty years because they know they are not able to support emerging services such as cloud computing".
To date, Intune has focused on Europe due to limited resources, although it does now have an office in the U.S. and is engaging with Tier 1 carriers there. The company is also involved in projects in India and Africa via partners. The new funding round is intended to be used to help with expansion into additional geographic markets.
Mr. Dunne explained that if a carrier decides it requires a product from a supplier such as Intune it will instruct its integrator partner to work with the company to enable deployment of the equipment in its network.
The systems integrators for large carriers are the major global companies such as Ericsson, Nokia Siemens Networks and Alcatel-Lucent, which deploy carrier solutions based on their own equipment and products from third party suppliers.
Intune anticipates being in a position to announce systems integrator partners, along with carrier customers, before the end of 2011.
Competition
Mr. Dunne cited Matisse Networks, a developer of optical packet transport solutions, as a former competitor that ceased operations at the end of 2009 after being unable to raise new funding. The company had been planning to upgrade its enterprise-class product to a carrier-class solution when it ran out of cash. Matisse is believed to have been the only other start-up company working in the optical burst switching space.
However, it was noted that Huawei announced an optical burst product at OFC in 2011 and other large equipment vendors are working on similar technology that may or may not be productised at some time in the future.
The interest from major vendors in the technology Intune has commercialised is seen as helping build credibility with large carriers, which are aware that something needs to be done at the optical layer and can see evidence that suppliers apart from Intune are working on this.
Path to growth
Mr. Dunne expects Intune to increase the number of employees to around 600 from the current nearly 200 full-time and contract staff over the next two years as the company expands its customer base and addressable market through partnerships.
The additional staff, he noted, would be needed to support integrator partners as well as to meet the demands of a wider geographic reach, aside from the as many as several hundred engineers that will be required to develop the company's technology and provide optical integration expertise:
"From that point Intune could opt to acquire another company or assets as a path to continued growth, or it could decide to launch an IPO, it will be up to the company's board to decide how best to develop the company once it has established its technology and a position in the carrier market".
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