Infrastructural revamp drives telecom IT investments

Key IT opportunities and issues for telecommunications
services providers between 2003 and2006

Our recommendations for key constituents include:

1. Vendors that serve telecommunications services providers must
keep the above three imperatives in mind
and demonstrate how their products and services provide superior value in
helping providersachieve these
objectives. Investors should prioritize their related investments accordingly.

2. Services providers’ budgets, though comparatively large,
are not infinite, and should use the above criteria
to winnow IT spending, with particular emphasis on the second and third
imperatives (No. 3consists of
the systems, procedures and expertise to provide enhanced levels of service and
support).

These will result in long-term benefits, including superior
competitive positioning.

3. Enterprises know from experience that telecommunications
services providers often enact short-term, service-affecting
activities by focusing on making Wall Street happy, by improving margins by
cuttingstaff (in inappropriate
amounts or positions), and implementing new IT systems before they are truly
ready for production environments. This
is an especially great temptation for providers the closer theyget
to the end of the fiscal year. Enterprises should favor providers that focus
their IT spending oninfrastructure
and improved customer service/support.

Our expectation is that major incumbent providers (ILEC, IXC,
cable providers) will continue to dominate the
telecommunications services landscape, but that intra-incumbent competitive
pressures to win marketshare and
control costs will force them to modernize network infrastructure (and
associated OSS/BSSsystems) to
create new, flexible service offers they perceive to be those customers desire.
At select providers,some of
these efforts are well under way. For instance, Giga has provided clients with
information onAT&T’s
and MCI’s
systems overhaul work.



On the product side, evidence of such activities includes:

• Many providers are
  introducing capabilities to support customer requirements for storage area
  networks (SANs).

• Every landline
  provider is gearing up to introduce voice over IP (VoIP) on broadband next
  year (DSL, cable), and many are touting the enhanced edge network
  flexibility of new Multiprotocol Label
  Switching (MPLS) architectures.

• Wireless providers are examining the benefits brought by
  location and presence-detection/awarenes technologies.

• During the next 18 to 24 months, wireless and wireline
  providers are planning to work together to trial
  and introduce services and associated support systems that support
  seamless intermodalroaming
  and handoffs.

• Impending
  regulatory requirements, such as wireless local number portability (WLNP)
  and Do NotCall/Fax
  (DNC/F) also require new infrastructure/systems support.

Additionally, competitive pressures will drive providers to
implement increasingly flexible, automated customer-facing
service support systems via portals. The emphasis on flexibility requires that
providersexamine implementing
architectures capable of supporting workflow (known as
"flow-through" in thetelecom
service management world) and Web Services throughout great swaths of their
supply chains.

Since 2000, providers have suffered great pressure on both
their top and bottom lines, and this year offers no relief.
As the fiscal year draws to a close, it is rational to anticipate at least
half of the majortelecommunications
services incumbents will announce a new round of significant layoffs, and the
subsequent unemployment rate in the
telecom sector will hit a new record high.



Although long-termstructural
overhauls can provide great benefits to all telecommunications services users,
the compoundingeffect of
infrastructure, systems and personnel changes has the potential to be
disruptive for customers in thenear
term. They should consider it both prudent and necessary to closely monitor
telecommunications services provider'sprocesses
and output associated with key functions, such as provisioning,ongoing
network/service quality, trouble resolution and billing.