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Operators Shift IT Spend to IT Services and Software

2018-05-03 16:50:20

 

The 4Q17 Telecom Infrastructure Services Benchmark report by Technology Business Research (TBR) revealed that the spending shift by operators towards offerings from IT services‐ and software‐centric companies may spell bad news for equipment vendors. The spend coincides with an industry that itself is following the global digital transformation movement.

 

TBR Telecom senior analyst Chris Antlitz noted that operator spend on digital‐related initiatives will accelerate over the next few years. “IT services companies will continue to garner a disproportionate share of digital‐related, software‐centric business from operators as their competencies and capabilities align with what operators need to pursue digital transformation,” he added.

 

Lower RAN (radio access network) volumes globally significantly impacted most RAN vendors’ telecom infrastructure services (TIS) revenue throughout 2017. TBR’s research suggests the global RAN market peaked in 2015 with product-attached services revenue now tapering off as payments are fully recognized. RAN vendors are responding to this headwind by diversifying into other areas, such as the IT domain, and are concurrently restructuring their network deployment businesses to profitably align with the new demand level.

 

The global RAN market is likely to bottom out in 2019 and then return to growth in 2020 as 5G deployments ramp up. Until then, operators are likely to continue to shift spend from RAN and RAN‐related services to other business areas.

 

A Huawei spokesperson noted this trend towards IT, software and services, which forced the company to also make a course correction. “We have been actively investing in and developing these capabilities for some time. In addition, we have built an active global ecosystem of industry partners to support this industry shift, and count many of the world’s leading IT and software providers among our strategic partners today.”

 

It is a similar comment from long time equipment vendor Nokia. Danial Mausoof, head of Strategic Marketing for Asia Pacific and Japan, commented that Nokia has taken steps to help the industry address this.

 

“As an example, we are working on a common software foundation (CSF) which allows for a scalable library of common components and this gives us greater speed and flexibility by using pre-integrated blueprints to address the customer’s needs. In addition, we have identified key enterprise verticals such as energy and public sector transportation where we are able to leverage our extensive solution offerings to help industry players accelerate their digital transformation journeys,” he added.

 

Not just operators

 

“We do see the trend and it is not only happening to operators but many large enterprises as well. Apart from the cloud security and cloud infrastructure are more mature so that buying services on the cloud than the actual equipment on-site is more viable, said Linda Hui, managing director of Ruckus Hong Kong and Taiwan.

 

“Secondly, many enterprises find that the technology has moved very fast, hence, before they can amortize the equipment, they need to upgrade their infrastructure to cope with the existing traffic, hence, it will be easier for them to just subscribe the service.”



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