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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 …

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

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