Major network equipment vendors are in the economic doldrums. The two network sectors that managed to create boom time for the likes of Lucent, Nortel and Cisco in 2000, remain moribund and show little sign of recovery.
In the first of those sectors, that serving the telecommunications carrier, the demise of the whole market has all but put a stop to spending, not only by the carriers themselves, but also by other peripheral service providers, such as co-location centres. After all, this is not a good time to be in the data centre business. The effect of the sector downturn has created havoc amongst equipment vendors, so much so that we have witnessed the dramatic restructuring of Lucent and even whisperings from some financial analysts that question whether Nortel can survive in its current form.
In the second primary network sector, that of enterprise networks, things are better, but not by much. Even bellweather Cisco has seen a severe downturn.
Part of the problem is that much of the sizzle has gone out of the market, with few network technologies that have been “must haves” for the average enterprise. In the core market of network hubs and switches, the industry continues to commodities, and a plethora of vendors have entered the market, driving down price in a competitive effort to win market share. The market for higher end switch routers, so called layer-three switches, is hardly faring any better.
However, vendors are pinning their hopes on several new technologies whose adoption will help drive an upturn in the enterprise market. The most talked about is the rise and rise of IP telephony. The view is that as the trickle of enterprises that are using their data networks to transmit packetised voice becomes a flood, so will the drive to replace switches and routers that are not yet equipped to carry delay sensitive traffic.
The drive towards IP telephony has not been as rapid as many predicted, largely because of a lack of urgency amongst customers in the major markets to change from legacy PBX systems that are still under long-term leases. Where the pace of take up is strongest tends to be in new locations, where the expense of networking an office with separate voice and data cabling can be dramatically reduced by the use of a single wire for both voice and data.
The advantages of migrating to IP telephony are well known, and in a greenfield site it is pretty much a given, especially considering that IP telephony also offers direct cost savings for companies that operate wide area networks linking their branch offices.
The ability to consolidate previously separate voice and data networks by re-engineering a single network for voice and data, offers compelling cost savings. Voice that previously went over a public carrier network, or even over a separate private circuit, can now happily coexist on a data network that was previously dedicated to application use. Studies have shown that adopting such strategies can generate direct cost savings of as much as 50 percent giving extremely rapid return on investment.
It’s ironic that in The Bahamas, many businesses are by happenstance finding themselves in a position that their overseas counterparts would envy. They often have old telephone wiring that would be very costly to replace or augment, but comparatively new data wiring. They have an old PBX that has often been rented from the phone company for a great many years, where a change to a replacement system will not only save real cash on a month by month basis, but also allow an increase in functionality, and a lowering of cost of ownership by becoming independent from the phone company for minor moves, adds or changes. And they have these circumstances at the very time that the regulator in The Bahamas openly permits private ownership of telephone systems.
For all intents and purposes, many Bahamian companies might be considered a greenfield site, even though they have no intention of relocating to a new location. Installing IP telephony in these circumstances is something of a no brainer.
In our own backyard at least, the knock on effect on the enterprise network business might provide for a rosy outlook.
Paul Hutton-Ashkenny is the president of Systems Resource Group Limited and Bahamas On-Line. Views and opinions expressed do not necessarily reflect those of SRG or BOL. Questions/comments to: P.O. Box N3920 Nassau, Bahamas or e-mailed to: info@srg.com.bs.
