Telecommunication service providers will start to spend money on more advanced packet-based services, pushing the market to recovery and double-digit growth perhaps as soon as the end of this year, a Siemens AG executive said after a Munich press briefing.
Capital expenditure and operating expenses seem to dominate the service provider market these days, and the briefing by Siemens' Information and Communication Networks (ICN) division was no exception. Thomas Ganswindt, a Siemens board member in charge of the ICN division, elaborated on those issues and the likely recovery in an interview afterward.
While users of telecommunication services may be glad to hear that service providers are cleaning up their act after burning billions on pricey fiber networks and wireless licenses, he acknowledged that they can't be excited to see carriers shrink budgets for developing and delivering innovative services or retaining skilled people to provide maintenance and support.
"Yes, capex (capital expenditure) is an issue," said Thomas Ganswindt, a Siemens board member in charge of the ICN division, in an interview. "But at some point, operators will need to start investing again, particularly in new services that generate revenue."
Like virtually every equipment manufacturer, Siemens has been hard hit by the dramatic drop in sales to network operators. But Ganswindt sees the industry bouncing back to double-digit growth, with the first signs of recovery possibly toward the end of this year.
Carriers that are able to provide advanced voice, data and video services over packet-based networks, will benefit in the coming years from companies seeking to outsource certain areas of their businesses, such as CRM (customer relationship management) and SCM (supply change management), he said.
"Service providers with advanced IP (Internet Protocol) networks will have an edge," Ganswindt said. "We see opportunities in providing carriers with that technology."
Unlike rival French equipment manufacturer Alcatel SA, which has dropped hints of unloading its optics division, Siemens has no intention of abandoning this business, according to Ganswindt. On the contrary, the German company will continue to invest substantially in next-generation optical networking technology, which will serve as the foundation for new broadband services, he said.
Software will continue to be a growth area. "We definitely see ourselves becoming more of a software company than a hardware company," Ganswindt said. "This is a transition in the industry as a whole, as is the move to provide more services involving software."