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Telecom industry trends hint at big changes to come

Telecom industry changes stemming from network convergence and interest in driving IT-oriented service-level architecture could cause upheaval in the equipment-buying and management process, vendor professional services requirements and CIO/CTO relationships.

Kate Gerwig, Site Editor
Kate Gerwig

Yet another telecom transformation is going on beyond efforts to recreate business models that drive revenue from converged networks. The early signs of changes in the way telecom equipment is bought and sold, and from whom, will become more obvious in the next six months. The result, however, is that the business of telecom could change radically. Through the haze of events, we see three trends developing that will bring change to operators and vendors as tech recovers from the recession.

With a kick-off overview of the coming telecom sea change, we plan to follow these unfolding trends closely in coming months:

We see three trends developing that will bring change to operators and vendors as tech recovers from the recession.

  • Increasingly IT-oriented networking places more corporate reliance on the CIO than the CTO.
  • Telecom carriers move toward establishing "procurement zones" that will change the way equipment is purchased and from whom.
  • Integration and maintenance contracts with carriers place emphasis on vendors' professional services capabilities.

In a recent "state of the industry" discussion, CIMI Corp. president Tom Nolle and I talked about some of the recent findings of his company's telecom operator surveys, which he discusses in his monthly Netwatcher newsletter. The changes Nolle sees on the horizon just happen to be tied to the fact that technology spending is up in the second half of 2009, which has created what he calls a "threat of recovery" scenario that carriers and vendors need to prepare for now.

To set the scene for the fall, as more companies release 2009 budget funds at the same time as they finalize their 2010 spending plans, here's a look at why these trends are important.

The incredible shrinking CTO: A number of service-layer architecture projects have been under way, and CIOs rather than network-centric CTOs have been taking the lead, with the increased focus of new revenue opportunities on the IT side, Nolle says. That gets sticky for CTOs, as the departure of BT's CTO without a replacement shows. If corporate reliance falls increasingly on the CIO, and the CTO's organization generally manages the standards relationships, telecom reliance on and patience with the standards process could also change. Which ties into…

Carrier procurement zones: Service providers have wanted vendors to take their network convergence and business transformation goals more seriously, Nolle says, and their disappointment on that score isn't a secret. The resulting change is a move toward establishing technology procurement zones. With this change, a carrier would select one or two lead vendors for a particular technology area, and those vendors would be responsible for installing, integrating and managing projects over the length of the contract. The result? Jockeying for position among vendors, less focus on standards because someone has a contract to make a technology project work, so accountability is assigned. Which ties into…

Vendor integration contracts: We've seen an increasing number of contract announcements in which vendors will be managing parts of a carrier's network infrastructure. Time will tell whether a vendor's technology or reputation among carriers will make the bigger difference. Ericsson doubled NSN's bid for Nortel's wireless assets. "Why?" Nolle asked. "Nortel had credibility with North American operators like Verizon in CMDA, and the transition to LTE will happen fast, putting Ericsson in a good position."

Nolle predicts that it will all happen fast -- and we'll spotlight the changes.

This was last published in August 2009

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