Give up the dream of being a one-stop shop. Telecommunication vendors who are aiming to supply all the equipment needed by their carrier clients will need to transform into suppliers with significantly narrower focus.
This is a marked departure from the verticalized business models that most vendors were trying to adopt until recently.
These are the findings of Gartner Inc.'s latest study of eight leading global telecommunication equipment vendors.
"Of the world's eight leading telecom equipment vendors, all of which until this year were aiming to become suppliers of almost all the gear needed by their carrier clients, none will be able to realize this dream," said Bhawani Shankar, principal analyst for Gartner's Dataquest unit.
"Although the leading players will remain, their product portfolios, their market focus and the nature of their relationships with their clients is destined to change radically."
As vendors play out their "refocusing strategy", they will beat a retreat to their largest clients.
Gartner believes that this time, it is not just the size of the vendors that is important but also the size of the clients.
Equipment vendors with a major share of the top 20 carrier accounts will be more likely to remain among the top vendors in 2005, added the report. Companies in this category include Alcatel and Ericsson, which, despite a range of challenges, are judged to be safer long-term bets for carriers than other players, the report said.
Meanwhile, on the Singapore front, the market is looking bleak as the economic recession leads carriers to reduce their capital expenditure.
Said Foong King Yew, industry analyst at Gartner Asia-Pacific, "Even in the best of times, the Singapore market is small and already well developed. The telecom liberalization thrust by the authorities in 2000 was supposed to create a more vibrant and viable sector in Singapore. However, the severity of the current recession has caused many service-based operators to wind up and the existing facilities-based operators to be more prudent in their capital expenditure."
For the vendors, all these have adversely impacted the telecom market. "Today, with the mounting pressure on the bottom line, many vendors are looking at growth opportunities in China," said Foong.
"But, it is expected that the market will remain a test bed for some leading edge services such as wireless local area network (LAN)," said Bertrand Bidaud, director of Telecommunications, Asia-Pacific at Gartner.