ACG Research: Startups will drive telecom innovation

ACG Research
01 Feb 2010

The industry analysts at ACG Research have looked into the future and conjured 14 key 2010 telecom industry trends and technology predictions designed to help service providers capitalize on the trends rather than just acknowledge their existence. Their shout-outs range from the pace of technology innovation to chip integration and from optical networking to networking architectures, with many stops in between.

One thing is certain in the telecom industry: As business and demands for products and services increase and technology continues to evolve rapidly, change is inevitable, and winners are those that can best and most quickly adapt to these changes. The savvy provider knows it is not enough simply to recognize trends and changes; it must also position business models to capitalize on them when they open up. To give you a head-start and help you survive and thrive in this competitive landscape, ACG has identified emerging and changing telecom industry trends likely to affect service providers in 2010, including business, network, devices and applications.

1. Startups will lead innovation and technology development. Over the past five years, we've seen many service providers consolidating, with networking vendors following suit. This consolidation has led to increases in internal bureaucracy, slower technology releases, numerous layoffs and, ultimately, employee disillusionment, which has affected innovation. Even though companies have decreased their number of product and service innovations, the cutting-edge ideas keep coming. In 2010 and beyond, we will see skilled employees leaving large companies to join or launch startups to foster their progressive ideas, which will lead to new technologies coming to market.

2. The level of chip integration will continue to increase, adding more functionality. Vendors will have to deal with multiple challenges associated with this integration, such as integrating the new technology quickly or dealing with the increase in complexity for software development. Mature vendors like Intel are being challenged by such competitors as ARM, a microprocessor design company that has introduced the Cortex A5 MPCore CPU, a low-power chip designed to make the Internet available on a wide selection of devices.

3. The Chinese approach to business is a model for changing how U.S. businesses operate. According to a Newsweek survey, 81% of Chinese think the U. S. is staying ahead in innovation, but only 41% of Americans agree with that statement. Why do we feel so technically challenged by China? In the U.S., our approach to the markets is focused on education. The Chinese access the market through problem solving, and innovation comes by listening and solving problems, not directing. This approach has benefited Chinese vendors in the telecom space and will continue to do so as they integrate and grow revenue worldwide and as they slowly penetrate the U.S. market. We suggest that technology vendors heed the Chinese lesson and work faster to integrate features within silicon, as well as approaching the market by identifying problems and solving them. Americans still do not understand the innovation that can be leveraged within China and India, fearing that outsourcing leads to job losses. Just the opposite should occur: Outsourcing should lead to faster delivery of feature sets.

4. The optical market will continue to consolidate, with mid-tier vendors joining forces. We anticipate that Tellabs, ECI, Ciena, ADVA, Infinera and Fujitsu will be players in this consolidation. We are also past the point where an optical system is just the sum of technically independent components. Nortel's electronic dispersion technique has clearly identified a trend toward silicon and electronic integration. The sooner optical vendors realize this, the more competitive they will be in 2010 and beyond.

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