Network Equipment Providers: Opportunities and Challenges


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Network equipment providers (NEPs) face unique challenges like falling margins and increased competition. They need to up their game, work closely with carriers (service providers) and be a one-stop shop for their needs. Partnering with an experienced IT services firm can help them move up the value chain.

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Network Equipment Providers: Opportunities and Challenges

  1. 1. Network Transformation:Opportunities and Challenges for Equipment Providers (NEPs)<br />Cognizant Research Center | August 2011<br />
  2. 2. 1<br />Carriers: Treading a Difficult Path<br /><ul><li>Communication Service Providers (CSPs) operate in a challenging business environment
  3. 3. Declining average revenue per user (ARPU) in the wireless voice area
  4. 4. Increasing competition from non-traditional players — mobile virtual network operators (MVNOs) and over-the-top (OTT) providers such as Skype, Yahoo and Google
  5. 5. Growing technology complexity
  6. 6. Mounting mobile broadband customer base
  7. 7. Increasing customer demands for ubiquitous and customized services
  8. 8. Reducing Cap-Ex and Op-Ex</li></li></ul><li>2<br />Need for New OSS/BSS Systems<br />Problem with the legacy OSS/BSS Systems<br /><ul><li>The emergence of new technologies (3G, LTE, etc.) has made CSPs’ operations and billing procedures complex putting pressure of legacy OSS/BSS systems
  9. 9. Legacy OSS/BSS systems hinder the quick roll-out of new services as they need to be configured and tested rigorously
  10. 10. Deploying new OSS/ BSS systems creates a complex environment with several multi-vendor systems (hardware and software) that operate in silos, each silo supporting only a subset of services
  11. 11. Integrating legacy systems with new systems can prove to be a big challenge</li></li></ul><li>3<br />CSPs’ Quest for Partners<br />Under pressure to roll out next-generation networks and services with aggressive deployment schedules and reduced time-to-market, CSPs are looking for partners that can…<br /><ul><li>help transform legacy systems that hinder new product launches
  12. 12. enable rapid provisioning of new services
  13. 13. work closely with them and develop customized, scalable end-to-end solutions
  14. 14. accommodate new solutions with minimum integration issues as they move toward an all-IP environment.</li></ul>This provides an opportunity for NEPs, the closest and biggest vendors to CSPs, to strengthen their strategic partnerships with CSPs.<br />
  15. 15. 4<br />Imperatives for Change<br />The last five years have been especially challenging for NEPs due to<br /><ul><li>Overall decline in equipment sales
  16. 16. Competitive pricing as a result of emergence of low-cost players from Asia
  17. 17. Higher bargaining power of CSPs resulting in reduced margins
  18. 18. Increasing demands from CSPs to deliver new products quickly at lower costs</li></ul>This means NEPs need to focus even more on <br /><ul><li>working closer with CSPs and become a part of their success
  19. 19. ensuring that their products support growing network complexity and interoperability</li></li></ul><li>5<br />What Should NEPs Do?<br />NEPs should leverage their size and scale of operations to emerge as a one-stop-shop for network equipment. NEPs should…<br /><ul><li>vertically integrate their equipment by supporting next-level OSS/BSS solutions and offer systems integration and testing services to present a complete solution
  20. 20. focus on OSS/BSS sub-segments that are expected to grow more rapidly such as performance management, provisioning and service activation and inventory management
  21. 21. help Tier 2 CSPs (that do not possess cloud computing expertise) offer cloud solutions to large and medium-size businesses and government organizations.</li></li></ul><li>6<br />Challenges<br /><ul><li>Threat from large IT services firms
  22. 22. CSPs generally prefer big IT services firms for high-level OSS/BSS transformation
  23. 23. Big IT services firms have considerable experience in building and delivering new and more cost-effective IT and business capabilities.
  24. 24. Crowded Market Place
  25. 25. OSS/BSS market is highly fragmented with more than 400 vendors, mostly offering niche services.</li></li></ul><li>7<br />The Way Forward<br /><ul><li>In order to achieve the goal of becoming a one-stop-shop for all CSP needs, NEPs can adopt any of the following strategies
  26. 26. Enhance product portfolio by acquiring companies possessing capabilities in systems integration and software development
  27. 27. Enter into strategic partnerships with companies that have complementary capabilities. </li></li></ul><li>8<br />The Way Forward<br /><ul><li>Acquisitions
  28. 28. can be an expensive proposition
  29. 29. may not be the best choice for NEPs that have already invested heavily in future technologies
  30. 30. is delay-prone and
  31. 31. is usually accompanied by post-merger integration challenges.
  32. 32. Entering into strategic partnerships
  33. 33. involves less complexity
  34. 34. yields benefits of partnerships quickly
  35. 35. allows NEPs and their partners to focus on their core competencies</li></li></ul><li>9<br />Choosing the Right Partner <br /><ul><li>NEPs should seek partnership with a Tier 1 IT services company that…
  36. 36. has a strong proven record
  37. 37. considerable experience in systems integration and consulting services that extend beyond current products and services
  38. 38. has deep understanding of CSPs
  39. 39. has ability to provide pre-integrated and pre-configured solutions
  40. 40. provides access to the latest technologies and other resources on-demand
  41. 41. is willing to make combined investments in the co-development of solution accelerators and differentiating intellectual property
  42. 42. ultimately enables NEPs to react to customer demands effectively and efficiently and focus on developing highly differentiating solutions</li></li></ul><li>10<br />Thank You<br />Vinaya Kumar Mylavarapu, Cognizant Research Center<br />Prashant Yagnavajhala, Cognizant Communications Business Unit<br />For more information, please visit:<br />Or email us at:<br />