Network Equipment Market Faces Big Revenue Challenge, Predicts Ovum

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No happy new year in the single-digit growth telecoms supply chain

Networking equipment providers will face major challenges next year as revenues look set to grow at single-digit figures until 2018, warns a report from analyst firm Ovum.

The growth of over-the-top players, changes in subscriber behaviour, and regulatory policies will stem communications service providers’ (CSPs) revenues, it claimed. The authors said this would limit CapEx growth and restrain revenue growth for network infrastructure vendors. Investments in higher-growth revenue opportunities, for example Big Data-related infrastructure and services, LTE, 100G, and the like, will allow vendors to outpace the general market.

No big boom

In the quest to seek out higher revenue opportunities, vendors should watch five trends over the next twelve months, Ovum advised. These are: small cell adoption; data and customer experience management; the move to software-centric networks; increased optical network capacity in the metro; and changes in the infrastructure value chain.

The firm said a big boom in small cells deployments won’t happen in 2014, but indications are clear that interest in small cells is growing, according to the firm. For 2014, small cell solutions for indoor spaces will be hot.

Ovum also indicated that video analytics and optimisation will prove to be crucial, with improved customer experience and network asset management requiring real time policy-controlled traffic management and data analytics.

Telcos are expected to gain increased confidence when it comes to expanding software-defined networking (SDN), network virtualisation and network functions virtualisation (NFV) trials and early deployments.

Ovum also said that lower-cost coherent optical metro solutions will surface in the market in 2014, with network value progressively being pushed by software-tuneable capabilities.

The group said, in 2014, the equipment value chain will continue to move to benefit application software and chips, with many organisations choosing vertical integration to include more chip design.

However, for merchant chip suppliers and innovative NEPs, over-the-top operators consider a shortened technology adoption cycle.

“The tight revenue climate facing most CSPs is not likely to reverse anytime soon,” said Dana Cooperson, vice president of network infrastructure at Ovum. “For NEPs following these trends, one of the challenges will be of resource allocation.”

“While new trends in network infrastructure cannot be ignored, there must be a balance between putting corporate resources into staying on top of new trends that may take several years to turn a profit versus putting resources into existing, profitable network solutions that have a limited life expectancy.”

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