Study recommends telco vendors specialise

Telecommunication vendors who hope to supply the equipment for their carrier clients will need to significantly narrow their...

Telecommunication vendors who hope to supply the equipment for their carrier clients will need to significantly narrow their focus if they are to succeed.

This move to supply carriers with equipment is a marked departure from the vertical business models that most vendors were, until recently, trying to adopt, according to Gartner's latest study of eight leading global telecommunication equipment vendors.

"Of the world's eight leading telecom equipment vendors, all of which until this year were aiming to become suppliers of almost all the gear needed by their carrier clients, none will be able to realise this dream," said Bhawani Shankar, principal analyst for Gartner's Dataquest unit.

"Although the leading players will remain, their product portfolios, their market focus and the nature of their relationships with their clients are destined to change radically." As vendors play out their refocusing strategy, they will beat a retreat to their largest clients.

Gartner believes that it is not just the size of the vendors that is important but also the size of the clients. Equipment vendors with a major share of the top 20 carrier accounts will be more likely to remain among the top vendors in 2005, added the report. Companies in this category include Alcatel and Ericsson, which, despite a number of challenges, are judged to be safer long-term bets for carriers than other players, the report said.

Meanwhile, the Singapore market is looking bleak as recession leads carriers to reduce their capital expenditure.

"Even in the best of times, the Singapore market is small and already well developed. The telecom liberalisation thrust by the authorities in 2000 was supposed to create a more vibrant and viable sector in Singapore. However, the severity of the current recession has caused many service-based operators to wind up and the existing facilities-based operators to be more prudent in their capital expenditure," said Foong King Yew, an analyst at Gartner Asia-Pacific.

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