Rakuten acquires Innoeye for its push into 5G and communications services

Rakuten, often referred to as the “Amazon of Japan” with extensive holdings in e-commerce and streaming media, has made an acquisition that will help it build up and flex a newer arm of its business: communications services. Today, the company announced that it is buying Innoeye, an engineering company based out of Herndon, VA, with offices also in India, which builds cloud-based solutions aimed at carriers and enterprises to manage networks and deploy services across them. The financial terms of the deal were not disclosed.

Rakuten and Innoeye — which was privately held, and didn’t appear to have outside investors — already had a relationship. The Japanese company has been working with Innoeye in its bid to build and operate Rakuten Mobile, a new 4G and 5G mobile network in Japan that launched in April to go head to head with Docomo and others. Rakuten Mobile projects it will have 3 million customers by the end of this year but its losses are mounting in the meantime.

That is not the only area where Innoeye will be active, though. Rakuten Mobile is part of a newer business unit called Rakuten Communications Platform, and a Rakuten spokesperson confirmed today that while Innoeye will continue to support Rakuten Mobile, it will also be selling its services globally to carriers and enterprises.

Innoeye has around 500 employees, so this presumably will also mean that current customers of Innoeye will continue to remain so, although the company has never disclosed who those customers might be.

We typically think of traditional carriers are the key holders when it comes to building and operating mobile and other communications networks, but newer generations of technology, new regulations, and new customer demands have turned that premise on its head.

Carriers might still account for the vast majority of traffic, but these days it’s become much easier for enterprises to build these — for example, to run machine-based IoT systems, or to better manage fleets of workers or customers — and for new entities to emerge to take on carriers at their own game, or at least (thanks to apps and other over-the-top services) nab a decent proportion of services revenue away from carriers.

That is the opportunity that Innoeye has been targeting, and that Rakuten is also trying to capitalise upon. And that is because — as Amazon has done with voice-based home hubs and AWS — Rakuten is focused on finding its own window of opportunity to expand beyond, or capitalise further on, its existing business, using its own economies of scale to get there.

“Since we first envisioned the launch of Rakuten Mobile two years ago, we have also planned to bring to market our own expertise and technology stack as a unique service that will enable operators around the world to deploy fully cloud-native telco networks of the future,” said Tareq Amin, Representative Director, Executive Vice President and CTO of Rakuten Mobile, in a statement. “With the planned acquisition of Innoeye, we are one step closer to closing the circle in bringing to market a carrier grade telco cloud product that is as simple as click, purchase and deploy.”

The services that Rakuten plans to offer through RCP is pretty extensive. It includes cloud-based OSS components to run carrier networks; the necessary hardware and software to run 5G networks on behalf of clients; infrastructure to provide communications services; and a multi-vendor “marketplace” of apps aimed at telcos and enterprises that run their own networks.

“Innoeye is delighted by the opportunity to become part of the Rakuten Mobile family,” said Rajeev Gupta, CEO of Innoeye. “Joining hands with Rakuten Mobile will provide us with unique ability to contribute towards this large industry movement and create a highly innovative cloud-based communication platform that is open, scalable and highly secure. Rakuten Communications Platform will disrupt the industry and pave the way for the next level of innovation. We look forward to being a part of this journey.”

The company’s acquisition of messaging app Viber several years ago initially might have looked like a way to expand the company’s e-commerce ambitions — and indeed it has built links within Viber for that purpose — but now, you could also see that deal as its first foray into providing text, video and voice communications services, an area it is now expanding with a more concerted business unit.

The companies are in the final stages of due diligence, the spokesperson said.