SIP Trunking Featured Article

April 16, 2014

New Ovum Report Says Tough Times Ahead For CSP & Telecom Vendors

By Steve Anderson
Contributing SIP Trunking Report Writer

On the surface, one might think that these would be grand times for telecommunications providers. As more companies discover the value associated with a variety of telecommunications products ranging from voice over Internet protocol (VoIP) to videoconferencing and remote collaboration tools, one might expect the market for such services to climb. But as is often the case, some new technologies will depress the impact of some older technologies, and that may mean some difficult times ahead for telecom vendors according to a new report from Ovum.

The Ovum report suggests that capital expenditures (capex) for 2019 will be around $367 billion U.S., but at the same time, vendors will have a tough time getting in on that capex spend. Why? Because, as the report notes, the market in general will be a tough one—revenue counts for the field will be modest at best as carrier growth remains weak. Part of this will be the result of a new breed of competitor making it more fully known: the software-based market. With things like software-defined networking (SDN) and network function virtualization (NFV) on its side, the traditional telecom market will have more companies than ever going after slices of a pie that's not likely to change much in size from now until 2019.

As explained by the report's author, who also serves as the principal network infrastructure analyst at Ovum, Matt Walker, the rapid changes found in the telecom world are meaning some tough times in the market for the companies that provide telecom services as margins become slim and innovation in service must be sped up to keep up with the growing array of competitors in the field. This means big benefits for consumers, meanwhile, who must be catered to in order for firms to hold a position in the market.

The report wasn't all bad news for telecom companies. Walker's report goes on to note that, for companies willing to bring out a presence in both hardware and software, there could be a substantial upside market to deal with. More and more digital media companies, at last report, are on the hunt for CSP-grade network infrastructure, and that hunt alone could add as much as $50 billion to the market by 2019. That's quite a bit of extra room for those companies prepared to be one-stop shopping sources for communications technology.

The report even notes how the market will shape up geographically, as 45 percent of the expected capex spending will come from just three places: China, Japan, and the United States. The remaining 55 percent of the market, meanwhile, is split among a laundry list of countries. Some of which, like Thailand, represent as little as 0.8 percent of total spending, so there could be some advantages in terms of being a niche market provider. Further advantage can be found in adding new services, like big data and analytics, items of growing value to many businesses.

Basically, the communications landscape is changing, and pretty rapidly. Those companies that aren't prepared to change along with it run the risk of being neutralized by the market as a whole, and that means some bad times ahead for some companies who aren't prepared sufficiently. It's going to be a rather tight run, but for those companies ready to take advantage of the changes, and apply those changes before the rest of the field can catch up, it may mean some big opportunity ahead as well.

Edited by Maurice Nagle
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