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The New OEM Relationship
Web Seminar
The New OEM Relationship:Winning Business and Technology Strategies
for Equipment Providers
Mark Winther
Group Vice President
Worldwide Telecommunications
IDC
Brough Turner
Senior Vice President Technology
NMS Communications
www.nmscommunications.com
The New OEM Relationship
Web SeminarAbout NMS Communications! Leading provider of systems, system building blocks, and
services for next-generation communications solutions" With a focus on wireless, voice-driven applications, and
packet infrastructure markets
! With a history of creating value for communications solution innovators: equipment suppliers, application developers and service providers based on" NMS-built technologies and services" Strategic relationships with technology partners" Industry-leading supply chain and integration partnerships
www.nmscommunications.com
The New OEM Relationship
Web Seminar
NMS at a Glance
! 20+ years in telecom! Products deployed in 90 countries! 24/7 worldwide technical support
! Solid financial position! ~500 employees
0 210+ in product development0 ~150 in field, support
Product DevelopmentSales & SE supportChannel Partners’ Headquarters
www.idc.com
Bright Spots in a Challenging Communications Market
Mark WintherGroup Vice President
Worldwide Telecommunications
Opportunities for Telecom Industry Suppliers
AgendaAgenda
#Overall carrier spending climate– Declining & changing
#Carrier capex growth sectors– Growth — value-added services revenue– Defense — customer retention– Productivity — operating efficiency
#Value-added Services#Opportunities for industry suppliers
The Current ClimateThe Current Climate
Carrier StrategyAbsolute priority on free cash flow generation– Staff reductions– Asset disposals– Cut capital spending– Cost transformations
Market Factors# Weak economy# Sluggish demand# Competitive pressures# Decelerating mobile
growth# Regulatory standoff in
North America# 3G delays in Europe
Worldwide Carrier Capital Spending Is Down and DecliningWorldwide Carrier Capital Spending Is Down and Declining
#Deferred investments#Portfolio planning,
cross-company investment review
#Getting better value from suppliers
# Improved asset and network utilization
# Improved project management
$157
$195$187
$137$127 $121
23%
26%24%
16%15%
14%
1999 2000 2001 2002 2003 2004
Capex ($B)Capex as % Sales
Carriers are learning to do more with less
Source: IDC Carrier Capital Expenditures Special Report, 2003
Capital Efficiency Trend by RegionCapital Efficiency Trend by Region
0%
5%
10%
15%
20%
25%
30%
1999 2000 2001 2002 2003 2004
U.S. Europe AP Latin
Equal Opportunity Downturn
Source: IDC Carrier Capital Expenditures Special Report, 2003
Carrier Capex BreakdownCarrier Capex Breakdown
Traditional# Legal & regulatory compliance # Meet current business demand# Maintain current operational performance
Transformation# Value-added services revenues — IP, broadband, mobile data# Profit defense — customer retention and churn# Low-cost business processes — operating efficiency/productivity
60% 40%
30% 70%2005
2001
Traditional Transformation
Wireless Carrier Capex by Investment CategoryWireless Carrier Capex by Investment CategoryIn 2005, non-network spending reaches 27% of total capex, compared to 11% in 2002
Non-network
11%
Switching22%
RF Network67%
Non-network27%
Switching23%
RF Network50%
2002 2005
Sophisticated new terminalsAffordable transaction chargingNew applications and services
Simple user interfaces
Sophisticated new terminalsAffordable transaction chargingNew applications and services
Simple user interfaces
Transformation — Value-Added Services Transformation — Value-Added Services
$14$20
$31
$47
$59
2002 2003 2004 2005 2006
Worldwide Broadband Connections (M)Worldwide Broadband Connections (M)European & U.S. Mobile Data Revenues ($B)European & U.S. Mobile Data Revenues ($B)
1 million new broadband connections
every 15 days in 2003
1 million new broadband connections
every 15 days in 2003
#Broadband is booming worldwide#Mobile data is on its way
Source: IDC, 2003
5985
116
151184
2002 2003 2004 2005 2006
Extending the Carrier Value PropositionExtending the Carrier Value Proposition
Telecom Operators Need Applications to Protect and Extend Their Position in the Value Chain
NetworkApplicationApplication
ApplicationApplication
ApplicationApplication
Content Providers Telecom EquipmentSuppliers
Terminal Vendors
Leverage Operator’s central position in communication
> To be the multimedia service aggregator> To offer key multimedia services
Transformation — Mobile DataTransformation — Mobile Data
Sprint PCS Vision# Introduced August 2002# Data speeds and device capabilities are highly differentiated# A source for sustaining revenue growth:
– Digital pictures– Multimedia messaging– PCS Vision service is attracting high usage, high value customers– Estimated 750,000 Vision customers, adding 125,000 per month
# To date, voice MRC is well above overall average– All but low-end handsets will be Vision capable in 2003
J-Phone —Total ARPU and Data ARPU RatioJ-Phone —Total ARPU and Data ARPU Ratio
6.8%9.9%
14.6% 15.5%
19.5%
0
2000
4000
6000
8000
FY 001H
FY 002H
FY 011H
FY 012H
FY 021H
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
ARPU
Data as % ofRevenue
Expected Decline in Voice Revenue Partially Offset by Growth of Data
Source: Japan Telecom, 2002
Yen
# 2 Operator in Japan13 million subscribers7 million Sha-Mail subs
TIM —Value-added Services & ARPUTIM —Value-added Services & ARPU
1.82.1 2.1
2.3 2.3
2.72.5
16
2328
31
2529
35
Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02
VAS ARPUSMS Per Line
•SMS growth is the driver•MMS user cases evolving — P2P, A2P
# 1 operator in Italy25 million subscribers2.1 bil SMS in Q3 0235% Y-O-Y SMS increase
Source: TIM, 2002
7.1%8.5% 8.7% 9.1%
FY 01 H1 02 9 M 02 FY 02
VAS as % ARPU
# 6.2 million M-services enabled TIM customers
# 4 million MMS on TIM in 2002
# 10 content agreements# Dec 2002
– 500,000 MMS charged– 75,000 active users– Usage
• 5 P2P MMS• 10 A2P MMS
Opportunities in a Changing MarketOpportunities in a Changing Market
Solution Power# Revenue-ready solutions build success now# Establish the value of integrated solutions # Prove that products are not solutions
Commercial Flexibility# Outsourcing — launch new services on an
infrastructure that doesn’t cost capital# Shared revenue/shared risk service# Small scale R&D trials — proof-of-concept
What and How Do You Sell to Carriers?
Modular Building Blocks# Support a wider range of integration
possibilities# Enable supplier choices# Quick deployment of new services
SummarySummary
#Carriers continue to reduce spending, but are re-allocating capital toward– Growth– Retention– Productivity
#To do this, carriers need:– Pre-integrated end-to-end solutions– Tools for customization and rapid innovation– Suppliers who support revenue growth,
not just technology
The New OEM RelationshipSM
Winning Strategies for Equipment ProvidersBrough TurnerSenior VP & CTO
Value Added ServicesThe Future for Wireless Operators
! Wireless operators must provide new, advanced services to stay ahead of the curve0Voice, data, video, and multimodal services such as:
! Mobile instant messaging, FriendsFinder! Mobile chat, enterprise field staff services! MyCaller custom ringback tones! SportsMania, photos and rich video
! Equipment suppliers must provide! Pre-integrated end-to-end solutions! Tools for customization and rapid innovation! Support for revenue growth, not just technology
www.nmscommunications.com
Time-to-Market & FlexibilityKey to Competitive Advantage
! Leverage IT and Internet technologies0Large markets with rapidly evolving technology
! Volumes drive cost! Diverse applications drive flexibility
0 IETF decomposed architectures! Standard protocols connect platform elements
(e.g. XML, SIP, RTP on redundant Ethernet)
! Build scalable, highly available telecom services0New flexibility reduces time-to-market for diverse
wireless applications
www.nmscommunications.com
Equipment Perspective Reduced Platform Cost
! Basic components0 PCs, servers and web farm components0 Ethernet and IP components, switches and routers,0 Wide area IP network elements0 Firewall and NAT technology
! Software infrastructure0 Standard operating systems, databases, and tools0 Rich set of open Internet protocols0 Scalable web architectures0 Security and authentication technology
! Responsive working communities! IETF, W3C, …
www.nmscommunications.com
Application Perspective Reduced Development Cost
! Next-generation service creation! User interaction via scripting environments
(VoiceXML, SALT, X+V)! Parley/OSA interfaces for access to Intelligent
Network (IN) services! Web paradigm for distributed applications,
based on HTTP and XML derivatives! Web services allow sharing of distributed
resources
www.nmscommunications.com
Technologies of TomorrowNext Generation Service Creation
! Multimodal applications0Mobile users get the access they want, when they
want it: voice, data, graphics, messaging, video, …
! Presence and location-based services0Key to a wide variety of new value-added services
! Web services for mobile users0Convergence of voice and data compelling for
today’s subscriber landscape
! Wireless video0Advanced messaging, viewing, calling and
conferencing with news and entertainment
www.nmscommunications.com
Application Landscape
www.nmscommunications.com
Location-Based Services# Location & availability alerts
# Cell Broadcast# Directory services# Community LBS
Multimodal Voice and Data Services
# Directory Services# Map Finder
VOICEVOICE DATADATALBSLBS
Voice Services# Voice mail# UM# UC
Data Services# Mobile IM
# SMS, EMS, MMS # Chat, email
# PIM
Web Services for Mobile Users From The Web To Mobile
www.nmscommunications.com
VoiceXML
SOAP
UDDI
SALT
X+V
Web Approach: Content Access
!Access to information!Games, voting!Personal communications
0Presence: IM0Managed communications:
Email, UM
!E-commerce!Configurable interface!Notifications: IM & email
Mobile Approach: Content Access & Delivery!Delivery of information
via text or voice!SMS, MMS alerts!Chat!Presence services:
Mobile IM, Cell Broadcast!Unified messaging!PIM!M-commerce!Multimodal services
Wireless Video
! 3G324M video deployed in Japan today0DoCoMo FOMA service; early handsets; ...
! Viewing video0News, sports, weather, movie clips0Broadcast TV, webcams
! Live handset to handset calls0Video conferencing
! Messaging applications0Video mail, instant messaging, camcorder
www.nmscommunications.com
3G324M Gatewaysand Servers
www.nmscommunications.com
Video mailsystem Desktop
video
Videostreaming
mediaserver
Website
Broadcastvideofeed
H.320 videoconferencing
system
Videophone
3G & partial
legacy 2G
PSTNor
PLMN
PSTN
IP
3G324Mhandsets(64kbps)
PSTN-PSTNvideo
gateway
PSTN-IPvideo
gateway
Videoconferencing
server
PCPC
cPC
IcP
CI
II
Partnering to Deliver Value
! Operators need end-to-end service solutions! Equipment providers have downsized
0Focused on core businesses0Using integration skills to deliver complete service
solutions
! OEM partnerships are key0Leading technology0Broad network experience0Strong supply chain capabilities
www.nmscommunications.com
Doing More with LessConcurrent Collaboration
! The New OEM Relationship0Focus on core competencies; partner in other areas 0Faster time-to-market and lower lifecycle costs
! Separate design teams work on the same project simultaneously0Trusted OEM partner handling outsourced design
and engineering work
! Systems integration model applied to telecom0Concurrent collaboration leads to greater innovation
and more efficient business models for equipment suppliers of all sizes
www.nmscommunications.com
Supply Chain Partnershipsfor Competitive Advantage! Dell & Walmart are touted in business press
0Telecom industry remains relatively backward
! Immense opportunity for equipment vendors0Reduce cash conversion cycles0 Increase profitability0 Improve customer satisfaction0Gain market share
! Requires substantial reengineering0Global partnerships from the components supplier to
the customer’s customer0 Integrated IT systems across vendor partners
www.nmscommunications.com
New Telecom Supply Chain
! Compress cycle times, everywhere! Plan to forecasts — but execute to orders! Optimize information flow through multiple
echelons of supply! Select partners for supply chain capability! Design for supply chain performance! Product quality critical to performance! Measure performance from customers’
perspective
www.nmscommunications.com
Summary
! Keys to competitive advantage0Time-to-market and flexibility0Reducing platform and development costs0Technologies of tomorrow drive next generation
service creation
! The New OEM RelationshipSM
0Partnering delivers value0Concurrent collaboration0Telecom supply chain
www.nmscommunications.com
www.nmscommunications.com
The New OEM Relationship
Web SeminarTo Learn More… Request The OEM Resource Book
! Valuable market strategy and technology resource for equipment providers and telecom operators with featured industry insight by IDC
! Provides critical information on making the best decisions in key strategic areas such as product design, market and business development, outsourcing, alliances and partnerships
! Request your complimentary copy at www.nmscommunications.com
www.nmscommunications.com
The New OEM Relationship
Web Seminar
Please take a moment now to complete our short survey,
while we start the Q & A
www.nmscommunications.com
The New OEM Relationship
Web Seminar
Q&A
www.nmscommunications.com
The New OEM Relationship
Web SeminarFor more information……
! Contact" NMS – Norman Tyrrell [email protected]" NMS – Brough Turner [email protected]" IDC – Mark Winther [email protected]
! Request a copy of The OEM Resource Book" From concept to deployment…a complete roadmap for
communications equipment providers" Available at www.nmscommunications.com