After sales, service

A while ago I was told by an executive from one of the big network equipment vendors that he had seen proof that a Chinese competitor was spoofing network performance in a competitive trial to try and win business.

One conclusion can be drawn from this accusation, valid or not: Things are getting desperate in the infrastructure supply sector. Falsifying performance data would be a drastic act, after all—but then so would slandering the opposition.

It used to be suggested fairly frequently that it was only a matter of time before either Huawei or ZTE snapped up one of their Western counterparts. It’s all but impossible to see this happening now, given the importance of the North American market and the US Government’s open suspicion of the Chinese vendors’ ties to the Chinese Government and military.

In our recent survey we asked respondents whether they felt Chinese vendors are being unfairly restricted outside of their domestic markets. A little over a quarter of respondents thought they were, and the rest either disagreed or claimed neutrality.

(What was not clear from those who answered ‘no’ was whether they felt there was no restriction or whether they felt that restrictions weren’t unfair. Perhaps a more confrontational question would have yielded a more controversial response.)

And yet there is still clearly consolidation to come, especially as the telecoms and IP infrastructure worlds converge.

Alcatel Lucent lost its CEO Ben Verwaayen last week when he stepped down on the back of a €1.37bn loss for 2012—essentially with the admission that he was out of ideas. NSN’s bottom line for 2012, despite a dramatically improved Q4, was a loss of €799. The shareholder agreement between Nokia and Siemens is due for renewal in April and we know Siemens wants out.

It was against this backdrop that suggestions of a tie up between Nokia Siemens Networks and Alcatel Lucent emerged recently. Given that the two firms’ entire lives as merged entities have been defined by the struggles inherent in large scale integration this seems unlikely.

It’s easier to envisage a Nortel-style breakup, although less so for NSN because it has so effectively slimmed itself down already (in the process fuelling speculation that it’s looking for a buyer).

But if there is going to be some more large scale M&A, might it not be in the form of a bridge between the telco network and IP worlds? NSN and Cisco already have a fairly deep strategic partnership in place covering monbile backhaul, IP backbone, mobile and EPC security and LTE transport security; so there is clearly scope for collaboration between the two sectors…

We are already seeing a new level of differentiation in the vendor community that will eventually lead to a tiered vendor landscape. Yesterday Ericsson announced a move towards managed services SLAs that are based on customer experience KPIs rather than traditional network performance measurements. There are 950 million subscribers on Ericsson-operated networks worldwide and now the firm has moved into handset certification for operators, too.

The Swedish vendor is effectively a network operator in many markets and it is on this side of the business that Huawei and ZTE, while more than capable of competing hard on price, do and will continue to struggle. Operators outside of China, and especially in the West, took a long time to come round to the idea of installing equipment from the Chinese players. Handing over the keys takes that cultural challenge to another level entirely.

But if this tiered market comes to pass, it’s conceivable that a vendor offering deep managed services might find itself being asked to specify purchases from competitor suppliers as part of a wider network upgrade contract.

Leave a comment

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.