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Where will Network Equipment Provider (NEP) Revenue Come from in Five Years?
 

Where will Network Equipment Provider (NEP) Revenue Come from in Five Years?

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With the days of double-digit revenue growth long gone, Tier 1 network equipment providers (NEPs) are scrambling to deliver new software, services and IT solutions to maintain at least ...

With the days of double-digit revenue growth long gone, Tier 1 network equipment providers (NEPs) are scrambling to deliver new software, services and IT solutions to maintain at least low-single-digit revenue growth. Growth in core telecom network equipment businesses slowed to a 3.2% CAGR over the last four years and is unlikely to rebound. The key reason is that NEPs’ chief customers — communication service providers — are shifting spending to lower overall spend on capex and opex and migrating capex spend from hardware to software and services.

On Tuesday, Feb. 4, 2014, TBR’s Networking & Mobility Practice will present a webinar discussing how Tier 1 NEPs’ positioning will evolve over the next five years. The webinar will assess how diversification into IT and the introduction of SDN and NFV will impact business models and revenues and how NEPs plan to adjust to stay relevant as their industry undergoes transformational changes.

Analyst Chris Antlitz will share his perspective on the latest trends and provide webinar attendees with additional insight into vendor performance and the future of NEPs. An audience Q&A will follow the presentation.

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    Where will Network Equipment Provider (NEP) Revenue Come from in Five Years? Where will Network Equipment Provider (NEP) Revenue Come from in Five Years? Presentation Transcript

    • Where will Network Equipment Provider (NEP) revenue come from in 5 years? Technology Business Research (TBR) Webinar Series Feb. 4, 2014 TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .
    • Webinar Presenter TBR Chris Antlitz Networking and Mobility Practice Analyst Email: chris.antlitz@tbri.com Twitter: @chrisNMP Phone: 603.758.1850 2 TBR Webinar Series | 2.4.14 | www.tbri.com | ©2014 Technology Business Research Inc.
    • NMP Overview TBR TBR’s Networking and Mobility Practice covers telecom operators and network vendors on a global basis Networking and Mobility Practice Portfolio Operator Research Telecom Operator Vendor Research 3 Equipment Enterprise Networking Telecom Vendor Services (TIS) Benchmark Enterprise Operator Addressable Market Forecast (AMF) Software Services (NIS) Margin Benchmark TBR Webinar Series | 2.4.14 | www.tbri.com | ©2014 Technology Business Research Inc. Equipment and Software
    • NMP Overview — Telecom Vendors TBR TBR conducts extensive research on telecom vendors, which enables us to obtain unique insights to help clients make business decisions Telecom Vendor • Services (TIS) • • 4 Telecom Infrastructure Services (TIS) Benchmark Expanded TIS Benchmark Equipment Addressable Market Forecast (AMF) Benchmark • • TIS Global AMF TIS North America AMF Telecom Vendor Benchmark Margin Benchmark • TIS Margin Benchmark Software Telecom Vendor Reports • Accenture • Alcatel-Lucent • Cisco • Ericsson • HP • Huawei • IBM • Juniper • Samsung • NSN • ZTE TBR Webinar Series | 2.4.14 | www.tbri.com | ©2014 Technology Business Research Inc.
    • TBR Networking and Mobility Practice Syndicated Topics 4Q13: Telecom Vendors TBR Telecom vendors are investing in NFV and pushing into the converged enterprise and telecommunications space to foster long-term growth Quarterly Topics TBR Discussions • Evaluate vendor road maps for this nascent technology. Determine the impact NFV will have on the network infrastructure and services market. Assess vendor LTE strategies and identify which companies are leading in LTE revenue and contract count. • Monitor the status of LTE globally, including spectrum availability and small-cell deployments. • Monitor and benchmark the progress vendors are making in pushing into the enterprise networking market. • Identify leaders and laggards in the enterprise networking market across a broad list of financial, go-to-market and resource management metrics. • Analyze and size market opportunity for network vendors in the enterprise. • Track the shift in LTE spending from North America, South Korea and Japan to China, Europe and Latin America. • Analyze trends in technology throughout different regions, including the deployment of TD-LTE in Asia and the increasing number of overlay projects in Europe.  LTE Information and Communication Technology (ICT) Regional Shifts 5 • •  Determine which vendors are the early leaders. • Network Function Virtualization (NFV)   Related Reports TBR Webinar Series | 2.4.14 | www.tbri.com | ©2014 Technology Business Research Inc. Alcatel-Lucent, Cisco, Ericsson, HP, Huawei, IBM, NSN, Juniper, ZTE Alcatel-Lucent, Cisco, Ericsson, Huawei, NSN, Samsung, ZTE Alcatel-Lucent, Cisco, Ericsson, Huawei, Juniper, Samsung, ZTE Alcatel-Lucent, Cisco, Ericsson, Huawei, Juniper, NSN, Samsung, ZTE
    • Market Trends TBR Market demand for telecom equipment is slowing, while IT, software and services take priority in telecom operator spend decisions TBR Tier 1 NEP Telecom Equipment Revenue Key Takeaways $90,000 $79,435 Revenue (In $ mi llions) $80,000 $70,000 $73,447 $70,905 $66,858  NEPs’ chief customers — telecom operators — beginning major spending shift  Operators’ focus is on consolidation, new business models, and opex reduction  Growth in NEPs’ core equipment business is slowing.  $60,000 NEPs are accelerating into software, services and IT to jumpstart growth. $50,000 $40,000 $30,000 $20,000 $10,000 $0 2009 ZTE 2010 NSN Huawei 2011 Ericsson Cisco 2012 Alcatel-Lucent SOURCE: TBR AND COMPANY DATA TBR Tier 1 NEP Software and Services Revenue $50,000 $46,451 $43,302 Revenue (In $ mi llions) $40,000 $37,370 $34,725 $30,000 $20,000 $10,000 $0 2009 ZTE 2010 NSN Huawei 2011 Ericsson Cisco 2012 Alcatel-Lucent SOURCE: TBR AND COMPANY DATA 6 TBR Webinar Series | 2.4.14 | www.tbri.com | ©2014 Technology Business Research Inc.
    • Vendor Strategies Operator spending shift requires a new NEP strategy NEPs responding to market transition with three main strategies: 1. 2. Invest in software and services 3. 7 Move into IT Focus on a primary domain at the convergence of these trends TBR Webinar Series | 2.4.14 | www.tbri.com | ©2014 Technology Business Research Inc. TBR
    • Strategy 1: Move into IT TBR NEPs are branching out of their core network market to capitalize on opportunities from the convergence of network and IT technologies 2012 NEP Network and IT Revenue Split TBR TBR 4% 2017 NEP Network and IT Revenue Split 19% Network Network IT 81% 96% SOURCE: TBR IT SOURCE: TBR Key Takeaways   8 All Tier 1 NEPs are moving into IT, but are following different paths NFV and SDN implementations will drive rapid increase in IT contribution TBR Webinar Series | 2.4.14 | www.tbri.com | ©2014 Technology Business Research Inc.
    • Strategy 2: Invest in software and services TBR Operators to spend increasing amount on software and services that can leverage their existing networks and tap into new market opportunities TBR Tier 1 NEP Software and Services Revenue $50,000 $46,451 $43,302 Revenue (In $ mi llions) $40,000 $37,370 $34,725 $30,000 $20,000 $10,000 $0 2009 ZTE 2010 NSN Huawei 2011 Ericsson Cisco 2012 Alcatel-Lucent SOURCE: TBR AND COMPANY DATA Key Takeaways  9 Operators are using software and services to serve two purposes: to create new sources of revenue and to reduce opex. TBR Webinar Series | 2.4.14 | www.tbri.com | ©2014 Technology Business Research Inc.
    • Strategy 3: Domain focus at trend convergence TBR NEPs are following 2 paths but trying to achieve similar a goal, which is to capitalize on the convergence of network and IT technologies Traditional NEP Business Model Bifurcation of Strategy Focus • Alcatel-Lucent • NSN Expand • Ericsson • Cisco • Huawei • ZTE Key Takeaways   Other vendors pursue M&A or organic growth to expand.  10 Alcatel-Lucent and NSN narrow portfolio and specialize in specific domains. All vendors are placing more emphasis on software and services and increasing exposure to IT. TBR Webinar Series | 2.4.14 | www.tbri.com | ©2014 Technology Business Research Inc.
    • Conclusion TBR What are the opportunities?  Help operators increase revenue by implementing new business models o o  Leverage CEM to better monetize subscribers Security Help operators increase margins by providing cost-reduction solutions o o NFV o 11 Cloud SDN The provision, implementation and operation of these technologies will spur software revenue and lead to the sale of a wide range of services spanning consulting, systems integration and additional outsourcing opportunities for NEPs. TBR Webinar Series | 2.4.14 | www.tbri.com | ©2014 Technology Business Research Inc.
    • Conclusion TBR What is key to success? Vendors must make transformational changes to their organizations to stay nimble and competitive — this includes portfolio and goto-market changes. 12 Software and Services organizations must gain greater influence over corporate strategy despite hardware being the largest revenue contributor. TBR Webinar Series | 2.4.14 | www.tbri.com | ©2014 Technology Business Research Inc.
    • TBR Webinar: Where will Network Equipment Provider (NEP) revenue come from in 5 years? Questions? Chris Antlitz Analyst, Networking and Mobility Practice chris.antlitz@tbri.com @chrisNMP James McIlroy Vice President of Sales Email: mcilroy@tbri.com Telephone: 603.929.1166 13 Twitter: @TBRinc SlideShare: www.slideshare.net/TBR_Market_Insight YouTube: www.youtube.com/user/TBRIChannel TBR Webinar Series | 2.4.14 | www.tbri.com | ©2014 Technology Business Research Inc. TBR
    • TBR Networking and Mobility Practice Syndicated Coverage TBR NMP Syndicated Research Coverage Telecom Vendors • • • • • • • • • • • Accenture Telecom & Mobility Alcatel-Lucent Cisco Systems Ericsson HP Telecom & Mobility Huawei IBM Telecom & Mobility Juniper Networks Nokia Solutions and Networks Samsung Telecommunication Systems ZTE Operators • • • • AT&T Sprint T-Mobile USA Verizon Benchmarks • Telecom Vendor Benchmark o  • • • • • • Accenture Telecom & Mobility Cisco Systems HP Telecom & Mobility Huawei IBM Telecom & Mobility Juniper Networks 14 • Comcast Time Warner Cable • Telecom Infrastructure Services Addressable Market Forecast  (Reports include content on Ent. Networking) Telecom Infrastructure Services Margin Benchmark  Cable Providers Telecom Infrastructure Services Benchmark  Enterprise Coverage: • AT&T Business Solutions • BT Global Services • Orange Business Services • Verizon Enterprise Solutions • Vodafone Enterprise Services Enterprise Networking • Telecom Infrastructure Services (TIS) Telecom Infrastructure Services North America Addressable Market Forecast Enterprise Network Vendor Benchmark o o Internet Companies • • Google Microsoft Telecom & Internet • Enterprise Networking Addressable Market Forecast Network Infrastructure Services (NIS) Benchmark U.S. and Canada Mobile Operator Benchmark TBR Webinar Series | 2.4.14 | www.tbri.com | ©2014 Technology Business Research Inc.
    • About Us Contact Us Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators. 1.603.929.1166 info@tbri.com www.tbri.com 11 Merrill Drive Hampton, NH 03842 USA Serving a global clientele, TBR provides timely and actionable market research and business intelligence in formats that are tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis. TBR has been empowering corporate decision makers since 1996. To learn how our analysts can address your unique business needs, please visit our website or contact us today. This report is based on information made available to the public by the vendor and other public sources. No representation is made that this information is accurate or complete. Technology Business Research will not be held liable or responsible for any decisions that are made based on this information. The information contained in this report and all other TBR products is not and should not be construed to be investment advice. TBR does not make any recommendations or provide any advice regarding the value, purchase, sale or retention of securities. This report is copyright-protected and supplied for the sole use of the recipient. Contact Technology Business Research, Inc. for permission to reproduce.