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Red Hat can save CSPs from themselves

TBR perspective

Red Hat (NYSE: RHT) is inarguably the leading open source company, with revenues far outpacing those of open source-centric competitors, such as Canonical, which only recently began taking monetization seriously. Red Hat’s solutions are pervasive in the market, with the company counting over 90% of the Fortune 500 as customers. Red Hat executives have been assured the pending acquisition by IBM (NYSE: IBM), if approved, would not disrupt Red Hat’s ways of working and stressed to the analysts gathered that the additional large enterprise relationships IBM would bring to the table would expand Red Hat’s addressable market. Maintaining Red Hat’s open, innovative culture would be imperative for IBM, as a passive imposition of IBM’s culture on Red Hat would severely diminish the value of the acquisition.

While Red Hat Analyst Day focused on the company’s total addressable market, communication service providers (CSPs) is a key customer segment for Red Hat, particularly with respect to virtualization via the Red Hat OpenStack Platform. Red Hat can capture greater wallet share from CSP customers with its open source-centric business model and highly capable, expanding Red Hat Global Services organization as these customers embark on their digital transformation journeys.

 

Red Hat hosted a few dozen industry analysts at its facility in Boston, which opened in June 2017. The space houses an Open Innovation Lab and Executive Briefing Center equipped with interactive touch-screen walls, providing the company an ideal area to bring prospects to demonstrate how Red Hat harnesses the power of open source. A slate of Red Hat executives expounded on Red Hat’s position as the leading open source company globally, divulging customer wins, new products and product road maps, and growth strategies. Little new information was given on Red Hat’s looming acquisition by IBM, though that was expected. Several customer presentations rounded out the day, with each articulating how Red Hat was the ideal partner to shepherd an open source, cloud-first future.

5G will be an evolution, not a revolution

Insights from TBR’s 2019 Telecom Predictions

Communication service providers (CSPs) are focusing on network transformation, which is a key component of their broader digital transformations. CSPs will leverage 5G and other next-generation technologies, such as virtualization, artificial intelligence and automation, as part of their network transformations to reduce costs and build a foundation that can enable and support new business models.

Join Chris Antlitz as he provides TBR’s leading-edge thinking on where the telecom industry is heading and how the digital era will impact stakeholders in the telecom ecosystem.

Don’t miss:

  • 5G will be an evolution, not a revolution.
  • CSP spend on NFV/SDN will ramp up.
  • Wireless will begin to disrupt the traditional fixed broadband business model.

 

TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed at anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].

NFV/SDN prepares operators to support 5G-era use cases

Infographic explaining how nfv and sdnwill prepare operators to support 5G-era use casesOperators are under pressure to invest in these technologies

Operators will further adoption of virtualized network solutions by capitalizing on 5G use cases and strengthening security capabilities. Integrating NFV and SDN technologies will enable operators to more effectively support network technologies that will become prevalent in the 5G era, including network slicing and edge computing, which will play a pivotal role in supporting 5G use cases such as advanced Internet of Things (IoT). The flexibility and agility of network slicing will enable operators to remove unnecessary functionality (e.g., sunsetting a noncore service) while launching services on command. Edge computing will allow operators to support 5G use cases that require ultra-low latency, such as augmented reality (AR)/virtual reality (VR).

Operators are under pressure to invest in NFV and SDN to reduce total capex and opex spend as well as introduce new services and stay competitive as they prepare to offer 5G services and search for new network use cases. The flexibility and scalability offered by NFV and SDN is particularly appealing to operator enterprise customers, which are expanding their operations and are undergoing digital transformation initiatives such as utilizing multicloud environments, incorporating IoT solutions, and integrating digital customer service and sales portals. Software-mediated network services are enabling businesses to deploy applications and provide connectivity to new branches more quickly, which is particularly important to customers in verticals that frequently add new locations, such as retail.

The shift to software-defined network architectures is extremely disruptive to the vendor community. Incumbent network vendors are under increasing pressure to move up the network value chain, from hardware to software and software-related services. They are increasingly disrupted by the adoption of white-box hardware and the utilization of ODMs as operators search for avenues to reduce network costs. Deploying white boxes provides significant cost savings for operators as well as greater flexibility by allowing carriers to deploy the most appropriate virtual network functions for their environments without being limited by the constraints of propriety hardware. Though the ODM threat has not manifested in the telecom operator customer segment to the extent it has in the webscale segment, incumbent vendors must remain on alert and attempt to mitigate this threat. TBR believes the best course of action is for vendors to embrace the movement of value in the network from the hardware layer to the software layer. This could include embracing open-source code and layering in proprietary software to differentiate. For most incumbents, scaling quickly through acquisition is preferable.

For more information, contact Senior Analyst Michael Soper at [email protected].

5G drives network transformation

The shift from connecting people (pre-5G era) to connecting everything (5G era) will require an architectural overhaul of telecom networks. A true 5G network will not only leverage new radios but also be inherently cloud-native, virtualized, programmable and automated and provide near-limitless capacity at ultra-low latency. This will require transformation across the entire network, not just at the access layer.

Network transformation moves from industry buzz phrase to reality

The telecom industry has discussed network transformation for years, though its amorphous meaning is beginning to take shape and materialize. TBR is seeing communication service providers (CSPs) transform into digital service providers (DSPs) propelled by ICT convergence, NFV/SDN, cloud, 5G, big data and analytics, and artificial intelligence (AI) and machine learning. These trends and technologies are helping operators evolve their networks from being rigid, slow, static, reactive and closed to being flexible, fast, dynamic and open.

Some of the trends contributing to this shift include moving from on-premises/physical networks leveraging black boxes to cloudified/virtualized networks leveraging white boxes. Hardware-defined networks were capex-driven, whereas the future of the network is software-defined and opex-driven. This evolution allows operators to more quickly and easily launch offerings for new revenue streams and reduce network costs over time.

Though NFV and SDN adoption has been slow, some Tier 1 operators are progressing with their plans and reaping benefits. Integrating NFV and SDN capabilities will enable operators to more effectively support network technologies that will become prevalent in the 5G era, such as network slicing and edge computing, which will play a pivotal role in supporting 5G use cases such as advanced Internet of Things (IoT). Operators are under pressure to invest in NFV and SDN to reduce total capex and opex spend as well as introduce new services and stay competitive in the data-driven digital economy, which is increasingly dominated by webscale and over-the-top players.

5G is taking up greater mindshare as commercial deployments begin

Operator networks must ultimately be overhauled to fully realize the potential 5G has to offer, though it will take operators many years to evolve their networks end-to-end. In the meantime, the current focus, and 5G-related capex spend, will be on 5G radios. The potential cost savings offered by 5G is spurring operators to accelerate their deployment timelines, pulling them forward by as much as two years. Efficiency gains remain the main driver to deploy 5G, as a viable business case for operators to grow revenue from 5G has yet to materialize (with the exception of fixed wireless broadband). 5G, which is expected to provide between four- and 10-times greater efficiency on a cost-per-gigabyte basis compared to LTE, will enable operators to more cost-effectively add network capacity to support the prevalence of unlimited data plans as well as continued connected device additions.

There are myriad ideas for new network use cases that 5G could enable, but ROI remains suspect. The most economically viable use case thus far for net-new revenue generation from 5G is fixed wireless broadband. In 2020-2025, which TBR believes will represent the “renaissance” phase of 5G, there will be a plethora of new use cases for the network, particularly in the areas of augmented reality (AR)/virtual reality (VR), smart city, IoT and robotics.

Realizing the full benefits of 5G requires significant investment across the network, not just in the access layer. Operators will invest in fiber, spectrum, massive MIMO (multiple input and multiple output), carrier aggregation, NFV/SDN and cloud RAN (C-RAN), which will provide opportunity for vendors. Though positioned well in key early 5G markets, incumbent vendors are threatened with disruption from NFV/SDN-centric firms, particularly firms in the areas of virtual RAN and mobile core. TBR estimates over 85% of 5G capex spend through 2020 will be driven by operators in four countries: U.S., China, Japan and South Korea. Most Tier 1 operators in these countries have aggressive 5G rollout timetables and intend to leverage the technology for fixed wireless broadband and/or to support their mobile broadband densification initiatives.

TBR covers these topics in depth in its operator, vendor, 5G, NFV/SDN and webscale research streams.

Telecom vendor revenues trend upward as operators pull forward 5G investment

According to Technology Business Research, Inc.’s (TBR) 2Q18 Telecom Vendor Benchmark, revenue growth improved for the largest vendors as they capitalized on early 5G investment but saw reduced spend in China. Operators, particularly those in the United States, are pulling forward investment in 5G and deploying small cells to densify networks. However, the RAN market will decline in 2018 as operators in China reduce spend significantly following the conclusion of LTE coverage deployments.

TBR believes Ericsson has staked an early lead in 5G, but Nokia (NYSE: NOK) and Huawei can leverage their end-to-end portfolios to regain share. In 4Q17 and 1Q18 Ericsson (Nasdaq: ERIC) aggressively priced its Ericsson Radio System (ERS), which is software-upgradeable to 5G, undercutting competitors to gain market share ahead of commercial 5G build-outs. Nokia and Huawei remain well positioned in 5G due to their ability to leverage end-to-end portfolios as a one-stop shop for network transformation in the 5G era.

ZTE was banned from sourcing components from the U.S. for part of 2Q18, which drove the company to essentially cease operating, leading to drastically lower revenue and a deep operating loss. The company is once again operating, but its reputation was tarnished, particularly in Western markets.

Graph showing 2Q18 revenue, operating margin and year-to-year revenue growth

 

TBR’s Telecom Vendor Benchmark details and compares the initiatives and tracks the revenue and performance of the largest telecom vendors in segments including infrastructure, services and applications and in geographies including the Americas, EMEA and APAC. The report includes information on market leaders, vendor positioning, vendor market share, key deals, acquisitions, alliances, go-to-market strategies and personnel developments.

Digital transformation, which encompasses new business models and network architectures, drives demand for TIS

According to Technology Business Research, Inc.’s (TBR) 2Q18 Telecom Infrastructure Services (TIS) Benchmark, the TIS market grew as digital transformation continued to fuel demand for services that accompany business model evolutions and the implementation of new network technologies, including 5G and NFV/SDN.

The complexity of new network architectures and the interoperability challenges they create have been a boon for professional services revenues, particularly those of IT services firms. A broad range of professional services are required to help operators transform into digital service providers, including consulting, network planning, design, optimization, systems integration, training services, security services and interoperability testing, among other services, all of which are in high demand. TBR estimates the TIS professional services market grew 6% in 2Q18.

TBR’s Telecom Infrastructure Services Benchmark provides quarterly analysis of the deployment, maintenance, professional services and managed services markets for network and IT suppliers. Suppliers covered include Accenture, Amdocs, Atos, Capgemini, CGI, China Communications Services, Ciena, Cisco, CommScope, CSG International, Ericsson, Fujitsu, Hewlett Packard Enterprise, Huawei, IBM, Infosys, Juniper Networks, NEC, Nokia, Oracle, Samsung, SAP, Tata Consultancy Services, Tech Mahindra, Wipro and ZTE.

NFV/SDN prepares operators to support 5G era use cases and helps drive network efficiencies

According to TBR’s 3Q18 NFV/SDN Telecom Market Landscape, operators will further adoption of virtualized network solutions by capitalizing on 5G use cases and strengthening security capabilities. Integrating NFV and SDN technologies will enable operators to more effectively support network technologies that will become prevalent in the 5G era, including network slicing and edge computing, which will play a pivotal role in supporting 5G use cases such as advanced Internet of Things (IoT).

Operators are under pressure to invest in NFV and SDN to reduce total capex and opex spend as well as introduce new services and stay competitive as they prepare to offer 5G services and search for new network use cases. The shift to software-defined network architectures is extremely disruptive to the vendor community.

Graph showing total NFV/SDN spend by capex and external opex for 2017 through 2022

Incumbent network vendors are under increasing pressure to move up the network value chain, from hardware to software and software-related services. They are increasingly disrupted by the adoption of white-box hardware and the utilization of ODMs as operators search for avenues to reduce network costs. Deploying white boxes provides significant cost savings for operators as well as greater flexibility by allowing carriers to deploy the most appropriate virtual network functions for their environments without being limited by the constraints of propriety hardware. Though the ODM threat has not manifested in the telecom operator customer segment to the extent it has in the webscale segment, incumbent vendors must remain on alert and attempt to mitigate this threat.

The NFV/SDN Telecom Market Landscape includes key findings, market size, customer adoption, operator positioning and strategies, geographic adoption, vendor positioning and strategies, and acquisition and alliance strategies and opportunities.

For additional information about this research or to arrange a one-on-one analyst briefing, please contact Dan Demers at +1 603.929.1166 or [email protected].

 

Crossing the chasm: Transforming from a CSP to a DSP

Communication service providers (CSPs) are embarking on transformation journeys to evolve into digital service providers (DSPs), leveraging nascent technologies such as software-mediated networking (NFV/SDN), cloud, 5G, analytics, automation and artificial intelligence. During the webinar, TBR will provide its definition of a DSP and characterize how a CSP can evolve into a DSP. Join Telecom Senior Analysts Chris Antlitz and Michael Soper for an in-depth review of service provider digital transformation.

Don’t miss:

  • The definition of a DSP
  • The attributes and characteristics of CSPs versus DSPs
  • The steps CSPs must take — and the technologies they must leverage — to transform into DSPs
  • Which operators are leading
  • Which vendors are successfully enabling transformation

 

TBR webinars are held typically on Wednesdays at 1 p.m. ET and include a 15-minute Q&A session following the main presentation. Previous webinars can be viewed anytime on TBR’s Webinar Portal.

For additional information or to arrange a briefing with our analysts, please contact TBR at [email protected].

Comcast Business fuels digital transformation with its ‘Beyond Fast’ message, strategy and execution

TBR perspective

The 2018 Comcast (Nasdaq: CMCSA) Business Analyst Conference explored how Comcast Business is helping its customers go “Beyond Fast.” The story arc over the day-and-a-half gathering highlighted Comcast Business’ emphasis on how it not only equips companies with connectivity but also helps them realize the business innovation and customer experience capabilities they truly desire to grow their own businesses.

Offering the best last-mile gigabit broadband coverage in the U.S. is the foundation of Comcast Business’ strategy; however, the unit and its leadership are focused not merely on promoting accelerated data speeds but also on leveraging Comcast Business’ growing network capabilities and business-enabling portfolio to underpin and advance its customers’ digital transformation initiatives. Customer testimonials were a focal point of the event as technology executives within the sporting venue and quick-service restaurant (QSR) industries shared and extolled how Comcast Business’ solutions have helped to enhance customer experiences, improve operational efficiency and reduce costs.

Though Comcast Business’ portfolio is maturing, Comcast Business continues to innovate with significant opportunities ahead, as the unit seeks to gain market share and increase revenue from its existing solutions. Unlike its largest competitors — AT&T (NYSE: T), Verizon (NYSE: VZ) and CenturyLink (NYSE: CTL) — Comcast Business is not encumbered by legacy assets, which has enabled the company to sustain double-digit year-to-year revenue growth over the past 30 consecutive quarters. Comcast Business has the potential to take up to $60 billion in market share from its main rivals as the company targets continued growth through its broadband services and adjacent solutions in areas including managed services, SD-WAN, unified communications, security and video.

Mainstream adoption of NFV/SDN now set for early 2020s as operators face migration issues, says TBR

Despite challenges, operators will push forward with NFV/SDN and will scale their investments in these technologies. Operators must transform to stay relevant and competitive in the digital era, and NFV/SDN is a critical component of that transformation. — Senior Analyst Chris Antlitz

 

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