Lumina Networks, a startup spun-off from Brocade three years ago, is shutting down. The company, which developed a business on open source OpenDaylight software to provide SDN and virtualization to network operators, raised $14 million in venture capital and counted AT&T and Verizon among its largest investors and customers.

Raising more capital and generating revenue was a challenge for Lumina Networks, but the COVID-19 crisis effectively accelerated the company’s demise, CEO Andrew Coward told SDxCentral in a phone interview. 

“Essentially what COVID did to us was it delayed a whole lot of projects because that money that should have flowed to basically automating the networks was instead flowing to increase the size of them so that more capacity could be delivered, and that basically delayed a number of projects that we had,” he said. 

“Obviously as COVID kind of lasted longer than anybody expected that put a bigger dent in our plans,” Coward said. Conversely though, if the company had successfully raised more funding, “which is incredibly rare, almost impossible to get in the telco space … we would have been less fragile, if you’d like, to that macroeconomic situation.”

Most network operators have said they want to use more open source technology and indicate a desire to automate their networks, but in the interim proprietary vendors have recognized the importance of automation and “they’ve each kind of done that first spin on those tools,” he said.

“The challenge remains that those proprietary tools just simply can’t manage other people’s products, and so they become a lock-in strategy for those vendors,” Coward explained.

The choice that operators face, which he described as an “inflection point” wherein Lumina was the “canary in the coal mine,” is to either “press the easy button and go back to my vendors” or “persevere through with open source and make it happen.”

The company hasn’t named many customers publicly, but Coward said the company had tier one customers in the U.S., Europe, Asia, and Australia, and had trials underway in multiple countries as well. “I think the problem really was that fundamentally everybody was like ‘yep, we really, really want this. … But we’re not ready yet, and so therefore we’re not putting the dollars into it,” he added.

Coward grew up in a village and compared the experience of Lumina to that of a small shop that shut down after a few years in his village because, while many villagers regularly purchased a pack of cigarettes, a newspaper, or a pint of milk from the shop, they still did most of their shopping at major retailers.

“Everybody thought we were important, everybody wanted us to be around, but nobody was willing to put the dollars in to make it a commitment quickly enough for that to transpire,” he said.

While AT&T and Verizon were Lumina Networks customers from the outset and represented the company’s largest deployments and business dealings in North America, it’s not feasible to expect one or two operators to provide all the revenue required to keep the business running. “That’s not how telcos think,” he said. “You have to have a global business” with many customers that can help a company like Lumina “weather the storms of one going up and one going down.”

Despite the outcome, Coward still fundamentally believes in open source as a business model and remains convinced that viable, long-term businesses can be built upon open source technology.

“Our thesis when we started the company was that we’d have a lot more licenses out there, a lot more subscriptions out there, a lot more devices under management,” he said. “The fact that we didn’t meant that we were sustaining a large cost of delivering that very high base load without being able to have all the supporting revenue to drive that.”

Businesses built on open source, particularly in the telecommunications industry, “only work when you’re operating at scale and we weren’t yet at that scale,” Coward said.

“It’s kind of one of the ironies of open source — it’s quite prophetic — which is the software can outlast us and that’s exactly the case. The insurance policy in open source is that you can do your own thing or give it to somebody else. And that’s the beauty of the model, which you can never do with a proprietary vendor,” he said. “So I just guess we just proved our own business value in that very outcome.”

Prior to the closure, Lumina Networks had 65 full-time employees, 20 contractors, and was advertising 15 open positions on its site. Coward and his team are working to help its employees land jobs at other companies and some have already received job offers, he said.

The company is also planning to release some of its technology to the open source community and is looking for a buyer for its remaining intellectual property before the shut down is complete.