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NGN Transformation in the Midst of Recession
by Shai Perach, Director Product Marketing, Data Platform
2/23/2009
In response to the current economic downturn, some telecom executives are considering deferring plans for transitioning to Next Generation Networks (NGN), believing that at a time of credit crunch the capital spending required for the transition is a luxurious upgrade rather than a necessity. However, by adapting plans to the economic conditions, telecom executives may find the recession to be an opportunity to successfully transform to NGN, rather than an obstacle.
Recession-driven Demand
The main drivers for network transformation - increasing customer demand and rising operational costs to satisfy them - have not disappeared as a result of the current economic environment. In fact, as the digital era ramps up, customer demand for packet-based services continues to grow. It is the willingness to pay premium for these services that may be negatively affected in the short term.
In the residential sector, at-home entertainment from over-the-top services in the immediate term and on-demand services in the midterm is often replacing other forms of entertainment, especially in times of reduced expenses on outdoor entertainment and recreation. On the Enterprise front, customers are looking for more flexible services that will better adapt to their dynamic needs in these uncertain times. Travel budget cuts are leading to more online collaboration in the form of teleconferencing and videoconferencing. The downturn may therefore actually increase the demand for cost-effective network capacity growth.
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A Next-generation Reality in the Making
The inevitable evolution to NGN has already begun. Many global and local telecom operators have already started the transformation to NGN. Equipped with a more flexible and adaptable infrastructure, these operators are able to offer new, advanced services to more customers and at lower operational costs. Moreover, since NGN is able to support all services over a converged infrastructure, this transformation is reshuffling the operator's competitive landscape, blurring the borders between fixed-line, cable and mobile operators in terms of the services they can offer.
In order to achieve return on investment, NGN operators are eager to satisfy the customer requirements inspired by the digital life. Operators that will defer their network transformation may be betting their customer base, ultimately risking their entire business as the market emerges from the current downturn and premium NGN-based services flourish.
Growing at a Time of Slowdown
These predictions, resulting from the fact that the NGN revolution continues even in the midst of a global economical recession, may be perceived as challenging for operators looking to cut back on investments. However, by embracing the revolution telecom executives can use the recession as an opportunity for a more successful transformation of their network and their business.
The current slowdown may actually give telecom operators the opportunity to devote the necessary staff and resources to plan and train for the business transformation required to become an NGN operator. Moreover, organizational changes, often needed during the transition to NGN are a more accepted practice during these times.
Creating a Win-Win Partnership
In addition, telcos should note that their suppliers, the telecom vendors, share much of the same concern they have. The vendor competitive landscape is also reshuffling as a result of the telecom transformation. In the midst of the recession, the borders between Data, Transport and mobile equipment vendors are blurring as all are offering MEF certified, carrier Ethernet based solutions. This should enable operators to negotiate better terms with their vendors and strengthen the strategic partnership with them. Vendors may be able to facilitate the necessary cost-cuts operators wish to implement, while still making the transition to NGN possible. Operators should look to choose vendors that will be their strategic partners and will assist them to grow in the time of slowdown.
STRATEX -- a Mind Shift in the Making
Professor Robert S. Kaplan of Harvard Business School coined the term STRATEX (strategic expenses) to define resources required to implement initiatives that deliver long-term benefits. During an economic slowdown, these resources should be segregated from OPEX and CAPEX and protected from being deferred or transferred to achieve short-term financial goals. Operators who need to cut down on spending should cut on OPEX and CAPEX leaving STRATEX as a last resort, in order to continue building capabilities for the future while eliminating the excesses of the past.
In light of the severe credit crunch reality, operators may adapt their STRATEX by striving for a network evolution -- a slow and steady approach in which they can keep investments to a minimum while offering the services customers are asking for. Once the demand for NGN services ramps up, operators can increase their investment to take part in the NGN revolution.
Such investment minimizing optimal transition path to NGN should depend on customer demand, the regional competitive landscape and the current transport infrastructure in use. This again calls for a strong operator-vendor partnership to find a path that works for their specific situation and execute it collaboratively.
The recession is in full swing. However, falling into the trap of cutting out the wrong things may leave operators far behind in the market once the recession is over. Instead, telcos should look at the recession as an opportunity -- partner with a vendor that enables them to think long-term, invest in STRATEX in an optimal way and take a slow and steady approach. As the NGN revolution is also in full swing, now is the time to think strategically and transform to what has already become the next frontier in Telecom.
About the Author
Shai Perach serves as Director of Product Marketing at ECI Telecom, responsible for the end-to-end marketing strategy and delivery of the company's Carrier Ethernet solutions.
Prior to joining ECI, Mr. Perach held several senior product management positions in leading hi-technology companies, including Hewlett-Packard (HP) and Alvarion. He received his Bachelor of Sciences in Mathematics and Computer Science Summa Cum Laude at Tel-Aviv University, and holds a joint MBA from Tel Aviv and Columbia (New York) universities.
About ECI Telecom
Founded in 1961, Israel-based ECI has consistently delivered customer-focused networking solutions to the world's largest carriers. The Company is also a market leader in many emerging markets. ECI provides scalable broadband access, transport and data networking infrastructure that provides the foundation for the communications of tomorrow, including next-generation voice, IPTV, mobility and other business solutions. For more information, please visit www.ecitele.com.
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