VoiceCon and last week's MetaSwitch Forum provided an interesting mix of reality and optimism for the year ahead.
Reality: Telecom spending is likely to be flat over the year, according to all indicators. That's better than down, but carriers and enterprises alike aren't going to be doing big capital expenditure outlays.
In this recession, enterprises want a six to eight month return on investment. Period. Doesn't matter if it is services or a SBC, the "norm" of twelve to eighteen month payback is out the window.
Smart companies are laying the groundwork NOW to take advantage when the economy picks back up. Of course, this is done in the vein of "Buy our products now, rather than later," but the underlying concept is sound. Carriers and enterprises ready to shift into high gear will reap the benefits once the climate changes.
Optimism: MetaSwitch is putting $35 million into research and development efforts in 2009. This is a serious commitment of resources since the company pulled in $118 million last year. The company had 495 people on payroll in April 2009, up from 442 people in April 2008.
Kevin DeNuccio, vice chairman of Redback Networks and new MetaSwitch board member, was excited about the emerging world of mobile broadband being bigger than even the first generation of the Internet. Mobile broadband is expected to "flatten the world," said DeNuccio. And what will that big mobile network need? Bigger pipes, both for backhaul and the core.
IPTV is also expected go "up and to the right" over the next five years, creating a new revenue stream for carriers of all sizes - not just the big boys. Interest in IPTV from all sides was high. I moderated an IPTV panel on Thursday morning - the last day of the event - and it was packed. MetaSwitch's CTO and CEO both sat in on the discussion.
DeNuccio, who's been around the block with stints at Bell Atlantic and Cisco, believes carriers need to move to an all-IP network as soon as possible, so they can squeeze the costs out from having all that legacy equipment around. Legacy gear is a sunk cost, and there is little prospect of adding value to legacy infrastructure. Once the network is all-IP, dropping in new services - new sources of revenue - is relatively straightforward.
In closing, DeNuccio cited Verizon's investment in FiOS as something that the company couldn't make a logical business case for at the time, but it went and did it anyway because it realized it was necessary. Today, Verizon is now reaping the benefits of fiber-to-the-home, and DeNuccio recommended to the audience of carriers to put in as much fiber as possible as soon as possible because it's not going to get any cheaper to install.
- Doug [1]
Links:
[1] mailto:doug@fiercemarkets.com