Check for Loose Connections

 
 
By eweek  |  Posted 2001-03-26 Email Print this article Print
 
 
 
 
 
 
 

There's lots of static on the line, but there's still time to plug into this market.

Every day, the news gets gloomier. It started last year with the carriers. Then came layoffs from the telecom equipment manufacturers like Lucent Technologies Inc., which had to secure an onerous $6.5 billion loan to help it restructure. Now its the suppliers to the suppliers that are suffering, like Vitesse Semiconductor and LSI Logic, which recently issued earnings warnings because communications and data storage companies arent buying enough of their chips.

Up and down the telecom industry food chain, the news is ominous. Only the automotive industry has it worse. According to international outplacement firm Challenger, Gray & Christmas, in the first two months of the year telecom companies laid off 42,879 people, second only to the automotive industry. And things will get worse before they get better, since telecom providers are expected to cut capital spending this year. Giga Information Group Inc. thinks spending on IT by telecom companies could drop as much as 30 percent, says Lisa Pierce, research fellow at the Cambridge, Mass., research firm.

So, is there a silver lining for solutions providers targeting the telecom industry? Well, yes and no. Business is contracting but the telecom market is still a huge business, about $50 billion by most estimates. Gigas Pierce and others say there are opportunities in telecom, including working with telcos to interface converged services such as Voice over IP to their existing networks or integrating disparate operations support systems. But telecom companies are retrenching and narrowing their focus, and the key for solutions providers is to do the same.

Telcordia Technologies Inc., spun off from the Bell system in 1984 and acquired by Science Applications International Corp. in 1997, is zeroing in on the largest telcos and steering clear of the competitive local exchange carrier (CLEC) market after getting burned last year.

"With the explosion of the CLEC market two or three years ago, we were targeting a lot of what we call tier-two or -three CLECs," says Jerry Surak, general manager at Telcordia in Piscataway, N.J. "That market went quite soft midyear last year."

Telcordia still may take CLEC work, says Surak, only after carefully scrutinizing the potential client. But the Morristown, N.J., company, which provides IT, business and network integration services, is really putting its resources into the largest telcos. "We havent seen as much contraction there, and there is still considerable work to be done to move into new technologies like IP-based VPNs [virtual private networks] and optical fiber."

Bright Spot For Sun Microsystems, probably the leading computer hardware supplier to the telecom industry, its telecom work is still the companys fastest growing business segment, according to Alban Richard, director of marketing at Suns Network Service Provider Group in Menlo Park, Calif.

Its hard to believe, but Richard says the industrys woes are good news for Sun, because telcos and telecom equipment suppliers are outsourcing more. "Nortel once produced their own processors, but theyve been buying them instead for a while. The telcos used to have their own real-time operating systems, but now theyre buying boards with run-time systems," says Richard.

As the logical next step in that progression, at the GSM World Congress last month Sun announced two new carrier-grade, CompactPCI servers and three CompactPCI boards. The hardware maker is expanding what Richard calls the Netra Ready Partner Program, and, according to Suns Web site, will soon launch a Solaris Ready for Netra certification and branding program for third-party products developed for Netra. Netra is Suns brand name for its line of carrier-grade servers.

IBM last November announced a program for addressing telecom service providers that includes Alcatel, Cisco Systems, Lucent, Nortel and Telcordia as partners. The program covers a broad range of IBM hardware and software, from IBMs pSeries Unix servers to WebSphere, as well as IBM Global Services. A main focus of the program is to work with telcos to build and deploy Internet data centers. "It is one area that is still growing," says Dan Bennewitz, VP, Communications Sector, Americas, at IBM.

Losing Your Voice? Data services, not voice, is what is driving the telecom industry. DSL especially, despite the long list of failed service providers and resellers, is full of possibilities for third-party providers.

"We have a shakeout, but dont think that means the demand for broadband has dried up," says Adam Guglielmo, DSL analyst at TeleChoice Inc. in Denver. "The first six months of the year will be a wait-and-see period. No one wants to commit money to DSL right now." But once its clear which providers are going to survive, those companies are going to be looking to attach value-added services to their DSL service, such as VPNs over DSL, to beef up revenue. Those survivors, predicts Guglielmo, will be the RBOCs, as well as some long-distance carriers like Sprint and WorldCom, which are starting to focus on DSL. And theyll be looking to ISPs, content distributors, application providers and other partners to patch on value-added services.

That may be the first good telecom news of the new year.

 
 
 
 
 
 
 
 
 
 
 

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