Telecom infrastructure industry standards and our collective attitudes toward open systems have evolved to the point where it is no longer necessary for telecom equipment manufacturers (TEMs) to design, build, or even integrate carrier-class systems in-house. With network element functionality progressing to the point of being innovative application software hosted on a standards-based, high-availability system, the strategic rationale for a TEM to build its own “plumbing” is actually declining by the quarter. Instead, TEMs should be focusing in-house resources on unique value add–in other words, on developing applications–and turn to the telecom ecosystem for complete, standards-based ATCA systems to run them.

Why Change?

Telecom infrastructure industry norms have evolved significantly over the past two decades. Back in the day, large Tier 1 TEMs developed proprietary systems completely in-house and had to recruit, train, manage and retain hundreds of thousands of employees in order to do it all. Industry economics and the regulatory environment helped facilitate this business model of old, and the barriers to entry for a non-incumbent were nearly insurmountable. Life was pretty good for a TEM, but much has changed since then.

Technology, competition and operator expectations today are such that it is no longer necessary, or even desirable, for TEMs to do everything in-house, regardless of whether they pursue proprietary or standards-based approaches. Market economics make it extremely difficult for a “do-it-all-yourself” TEM to compete with other TEMs that leverage an ecosystem supplying standards-based solutions. The financial and innovative advantages of tapping into the hyper-competitive supplier ecosystem with highly skilled development and manufacturing resources in the most cost-optimized areas of the world cannot be ignored. Designing, building and owning the intellectual property of everything within a system is no longer feasible or profitable with open standards as part of the competitive equation–that’s a luxury that is now too expensive to afford.

As with the evolution of the personal computer (PC) industry, the way to succeed and make money in the business 10 or 20 years ago is clearly not profitable today. In the PC world, titans like IBM, HP and Dell have had to reinvent (or sell off) their PC businesses because of shifting marketplace realities. Likewise, the telecom infrastructure industry also faces unstoppable forces that compel TEMs to evolve and adapt or else go the way of Commodore, Gateway, Wang and dozens of other PC has-beens.

Why Outsource?

OK, so we’ve just convinced ourselves of the need for change. Now it’s time to make the case for a full step forward rather than just a quarter or half step. Knowing human nature and the corporate culture of large organizations, the tendency for TEMs will be to resist any more change than is absolutely necessary. In this case, however, it’s a matter of, “Do it now–or else leave it to luck to see if you will still have the chance to do something about it later.”

Our thesis for action is this: It makes financial and strategic sense for TEMs to outsource the entire standards-based system “below the application” and focus in-house resources on application development. Such an approach requires two key changes by a TEM. The TEM must be willing to relinquish a proprietary design bias in favor of open standards, and must abandon a “do it yourself” bias in favor of outsourcing complete systems.

It is natural for TEMs to assume that buying a telecom system is more expensive than developing one in-house; however, this is not necessarily the case. In fact, the Make vs. Buy decision is not just about purchase price and operating expense, but also about profitability over the entire product lifecycle and long-term strategic advantage.

Continuous Computing’s market research indicates that it takes about three years for a TEM to build a complete system in-house, two years to integrate Commercial Off-the-Shelf (COTS) building blocks, and only one year to create and deploy an application on a fully integrated system–or much less time if the application already exists (Figure 1). These are big differences that impact product profitability and success, and could easily influence one’s career potential if the competition ends up running circles around you in the marketplace!