Business models under pressure

Network equipment providers’ core business model is under pressure due to a combination of business and technology trends impacting the telecommunications industry.

Technology trends impacting network equipment providers include increasing software intellectual property (IP) component in physical products, mainstreaming of virtualization technology, the ability to decouple software from hardware and an increasing desire for service providers and enterprises to transition from using custom hardware to generic, commercial off the shelf (COTS) hardware powered by software.

Network Function Virtualization and Software Defined Network are two of the more dramatic technology shifts impacting network equipment providers, with the potential to disrupt their business models.

Business trends impacting network equipment providers include pressures from service provider and enterprise customer segments to reduce costs, demand for flexible buying and consumption models that involve a combination of capital and operating expenses (Capex and Opex) and the advent of smaller, nimbler competitors that are looking to capitalize on the technology trends to leapfrog incumbents. These trends are fundamentally disrupting the core businesses of many network equipment providers and maintaining status quo is not a luxury they can afford.

A successful response to these challenges is dependent on the competitive position of the network equipment provider - their product strength, domain expertise, breadth of product portfolio, relationship with customers and channel partners and the ability to provide an integrated solution. However, the five considerations outlined below are fundamental to the way network equipment providers need to adapt their business and are imperative to staying competitive and making money.

  • Manage Business Model Complexity
  • Develop Software Pricing Strategies and Capabilities
  • Capitalize on Software Maintenance
  • Orchestrate the Physical and Digital Supply Chain
  • Protect Software IP

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