where will network equipment provider (nep) revenue come from in five years?

TBR

T EC H N O LO G Y B U S I N ES S R ES EAR C H , I N C .

Where will Network Equipment Provider (NEP) revenue come from in 5 years?

Technology Business Research (TBR) Webinar Series

Feb. 4, 2014

TBR

2 TBR Webinar Series | 2.4.14 | www.tbri.com | ©2014 Technology Business Research Inc.

Chris Antlitz Networking and Mobility Practice Analyst

Email: [email protected]

Twitter: @chrisNMP

Phone: 603.758.1850

Webinar Presenter

mailto:[email protected]

TBR


TBR’s Networking and Mobility Practice covers telecom operators and network vendors on a global basis

NMP Overview

Networking and Mobility Practice Portfolio

Operator Research

Telecom Operator

Enterprise Operator

Vendor Research

Telecom Vendor

Services (TIS)

Benchmark Addressable Market Forecast (AMF)

Margin Benchmark

Equipment Software

Enterprise Networking

Services (NIS)

Equipment and Software

TBR


TBR conducts extensive research on telecom vendors, which enables us to obtain unique insights to help clients make business decisions

NMP Overview — Telecom Vendors

Telecom Vendor

Services (TIS)

Benchmark

Addressable Market Forecast (AMF)

Margin Benchmark

Equipment Software

• Telecom Vendor Benchmark

• Telecom Infrastructure Services (TIS) Benchmark

• Expanded TIS Benchmark

• TIS Global AMF • TIS North America AMF

• TIS Margin Benchmark

Telecom Vendor Reports • Accenture • Alcatel-Lucent • Cisco • Ericsson • HP • Huawei • IBM • Juniper • Samsung • NSN • ZTE

TBR


TBR Networking and Mobility Practice Syndicated Topics 4Q13: Telecom Vendors

Telecom vendors are investing in NFV and pushing into the converged enterprise and telecommunications space to foster long-term growth Quarterly Topics TBR Discussions Related Reports

Network Function Virtualization (NFV)

• Determine which vendors are the early leaders.

• Evaluate vendor road maps for this nascent technology.

• Determine the impact NFV will have on the network infrastructure and services market.

Alcatel-Lucent, Cisco, Ericsson, HP, Huawei, IBM, NSN, Juniper, ZTE

LTE

• Assess vendor LTE strategies and identify which companies are leading in LTE revenue and contract count.

• Monitor the status of LTE globally, including spectrum availability and small-cell deployments.

Alcatel-Lucent, Cisco, Ericsson, Huawei, NSN, Samsung, ZTE

Information and Communication Technology (ICT)

• Monitor and benchmark the progress vendors are making in pushing into the enterprise networking market.

• Identify leaders and laggards in the enterprise networking market across a broad list of financial, go-to-market and resource management metrics.

• Analyze and size market opportunity for network vendors in the enterprise.

Alcatel-Lucent, Cisco, Ericsson, Huawei, Juniper, Samsung, ZTE

Regional Shifts

• Track the shift in LTE spending from North America, South Korea and Japan to China, Europe and Latin America.

• Analyze trends in technology throughout different regions, including the deployment of TD-LTE in Asia and the increasing number of overlay projects in Europe.

Alcatel-Lucent, Cisco, Ericsson, Huawei, Juniper, NSN, Samsung, ZTE

TBR


Market demand for telecom equipment is slowing, while IT, software and services take priority in telecom operator spend decisions

Key Takeaways

NEPs’ chief customers — telecom operators — beginning major spending shift

Operators’ focus is on consolidation, new business models, and opex reduction

Growth in NEPs’ core equipment business is slowing.

NEPs are accelerating into software, services and IT to jumpstart growth.

$34,725

$37,370

$43,302$46,451

$0

$10,000

$20,000

$30,000

$40,000

$50,000

2009 2010 2011 2012

Re

ven

ue (

In $

mil

lions

)

Tier 1 NEP Software and Services Revenue

ZTE NSN Huawei Ericsson Cisco Alcatel-Lucent

TBR

SOURCE: TBR AND COMPANY DATA

$66,858$70,905

$79,435

$73,447

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

2009 2010 2011 2012

Re

ven

ue

(In

$ m

illio

ns)

Tier 1 NEP Telecom Equipment Revenue



TBR

Market Trends

TBR


NEPs responding to market transition with three main strategies:

1. Move into IT

2. Invest in software and services

3. Focus on a primary domain at the convergence of these trends

Vendor Strategies

Operator spending shift requires a new NEP strategy

TBR


NEPs are branching out of their core network market to capitalize on opportunities from the convergence of network and IT technologies

96%

4%

2012 NEP Network and IT Revenue Split

Network

IT

TBR

SOURCE: TBR

81%

19%

2017 NEP Network and IT Revenue Split

Network

IT

TBR

SOURCE: TBR

Strategy 1: Move into IT

Key Takeaways

All Tier 1 NEPs are moving into IT, but are following different paths

NFV and SDN implementations will drive rapid increase in IT contribution

TBR


Operators to spend increasing amount on software and services that can leverage their existing networks and tap into new market opportunities

Strategy 2: Invest in software and services

Key Takeaways

Operators are using software and services to serve two purposes: to create new sources of revenue and to reduce opex.

$34,725

$37,370

$43,302$46,451

$0

$10,000

$20,000

$30,000

$40,000

$50,000

2009 2010 2011 2012

Re

ven

ue (

In $

mil

lions

)

Tier 1 NEP Software and Services Revenue


TBR


TBR


NEPs are following 2 paths but trying to achieve similar a goal, which is to capitalize on the convergence of network and IT technologies

Strategy 3: Domain focus at trend convergence

Key Takeaways

Alcatel-Lucent and NSN narrow portfolio and specialize in specific domains.

Other vendors pursue M&A or organic growth to expand.

All vendors are placing more emphasis on software and services and increasing exposure to IT.

Bifurcation

of Strategy Traditional NEP

Business Model

Focus

• Alcatel-Lucent

• NSN

Expand

• Ericsson

• Cisco

• Huawei

• ZTE

TBR


Help operators increase revenue by implementing new business models

o Leverage CEM to better monetize subscribers

o Security

Help operators increase margins by providing cost-reduction solutions

o Cloud

o NFV

o SDN

The provision,

implementation and

operation of these

technologies will

spur software

revenue and lead to

the sale of a wide

range of services

spanning consulting,

systems integration

and additional

outsourcing

opportunities for

NEPs.

Conclusion

What are the opportunities?

TBR


Vendors must make

transformational changes

to their organizations to

stay nimble and

competitive — this

includes portfolio and go-

to-market changes.

Software and Services

organizations must gain

greater influence over

corporate strategy despite

hardware being the largest

revenue contributor.

Conclusion

What is key to success?

TBR


Chris Antlitz

Analyst, Networking and

Mobility Practice

[email protected]

@chrisNMP

TBR Webinar: Where will Network Equipment Provider (NEP) revenue come from in 5 years?

James McIlroy Vice President of Sales Email: [email protected] Telephone: 603.929.1166

Twitter: @TBRinc SlideShare: www.slideshare.net/TBR_Market_Insight YouTube: www.youtube.com/user/TBRIChannel

Questions?


https://twitter.com/TBRinc

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NMP Syndicated Research Coverage

Telecom Vendors Operators Benchmarks

• Accenture Telecom & Mobility • Alcatel-Lucent • Cisco Systems • Ericsson • HP Telecom & Mobility • Huawei • IBM Telecom & Mobility • Juniper Networks • Nokia Solutions and Networks • Samsung Telecommunication

Systems • ZTE

• AT&T • Sprint • T-Mobile USA • Verizon Enterprise Coverage: • AT&T Business Solutions • BT Global Services • Orange Business Services • Verizon Enterprise Solutions • Vodafone Enterprise Services

• Telecom Vendor Benchmark

o Telecom Infrastructure Services (TIS)

Telecom Infrastructure Services Benchmark

Telecom Infrastructure Services Margin Benchmark

Telecom Infrastructure Services Addressable Market Forecast

Telecom Infrastructure Services North America Addressable Market Forecast

• Enterprise Network Vendor Benchmark

o Enterprise Networking Addressable Market Forecast

o Network Infrastructure Services (NIS) Benchmark

• U.S. and Canada Mobile Operator Benchmark

Enterprise Networking Cable Providers

(Reports include content on Ent. Networking)

• Accenture Telecom & Mobility • Cisco Systems • HP Telecom & Mobility • Huawei • IBM Telecom & Mobility • Juniper Networks

• Comcast • Time Warner Cable

Internet Companies

• Google • Microsoft Telecom & Internet

TBR Networking and Mobility Practice Syndicated Coverage

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