Vendors must focus on cost of ownership during downturn
Published: 1 December, 2008
Wireless infrastructure vendors are bracing themselves for a very tough year in 2009, as recent cutbacks at Nortel, Nokia Siemens and Alcatel-Lucent indicate. But with demand for mobile internet exploding in established and emerging markets, the operators will not have the option of freezing spending altogether. Instead, their suppliers must focus on delivering more value for money and identifying investments that will improve the carriers' own survivability.
This means prioritizing network upgrades that stretch the performance of current systems, like EDGE and HSPA+; new RAN approaches that increase capacity or coverage at low cost, like femtocells; and improvements to backhaul and the core network to lower total cost of ownership and improve customer retention.
Cisco has already taken up this call, claiming the new needs of cellcos will play into the hands of the kind of all-IP systems it makes. Now Nokia Siemens is preaching a similar message, even while it predicts a fall in the market next year. The joint venture is laying off a further 1,820 staff but is concentrating heavily on squeezing more price/performance and quality of service from HSPA.
Kamlesh Patel, head of strategy and business development at Nokia Siemens Asia Pacific, said in an interview: "Cost optimization will be high on operators' priority list. They will look at total cost of ownership (TCO) across their capex and opex. Our TCO solutions were available long before this crisis began."
He added: "Legacy replacement is a constant in an operator's business process, and that will always be the case. The question then becomes: do they do it over the course of X number of months, or spread it out further?"
But for all this looking on the bright side, the outlook remains gloomy. Ericsson says 2009 will be flat, and some analysts are more pessimistic. Kulbinder Garcha of Creidt Suisse is looking for a fall in wireless infrastructure investments of as much as 12% in 2009, pointing to financing risks at the top carriers, those that account for 25% of global wireless spending.
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