Carriers shift focus to faster delivery, lower costs
By Craig Matsumoto
EE Times
(10/05/01, 8:38 p.m. EST)
SAN JOSE, Calif. — The economic drought in communications is going to force some changes in design philosophy, including a shift to a "just-in-time" methodology for systems delivery, according to the Thursday (Oct. 4) keynote speaker at the Communications Design Conference.
Carriers are ordering network equipment only after a customer has been signed, noted Rusty Cumpston, chief operating officer of ONI Systems Corp. (San Jose, Calif.). That strategy stands in stark contrast to the late 1990s, when carriers overbuilt their networks in anticipation of new customers. It's also a change equipment makers haven't adjusted to, Cumpston said.
"Companies aren't building networks in advance the way they used to," he said.
Cumpston recalled one carrier's rush order late in September: six OC-48 (2.5-Gbit/second) connections had to be installed and activated in 48 hours. That kind of request is going to become commonplace, he warned.
"The whole industry needs to move to a different model which is just-in-time based," Cumpston said. "The carriers aren't likely to change their expectations of what a reasonable lead time is," which means operational efficiency has become "a key battlefield in this industry."
For now, the situation is cushioned by the fact that equipment makers themselves have leftover inventories of components, and it could take up to eight months to work down those inventories, he said. But in the long run, systems may have to be designed to be built and shipped more quickly.
"Engineers should pause to think about the supply-chain implications of what they're doing," Cumpston said. In fact, a product delivered at low cost with fast turnaround times "will win out over superior technology," he said.
Cumpston's talk contrasted sharply with the perspective offered by fellow keynoter David House, chief executive of Allegro Networks, who called for "disruptive" ideas to rekindle the industry. Cumpston stressed a need for innovation as well, but aimed at cost rather than technology.
He cited figures that showed capital expenditures ran at 38 percent of carrier revenues during 1998 to 2000, but revenues during that time grew only 9 percent — an appallingly low return on investment. As a result, carriers have stopped overbuilding their networks and are taking a more critical eye toward the costs and potential returns of their equipment. <?b>
"Capex and op-ex [capital and operational expenditures] are where you have to translate your innovations to," Cumpston said.
Technological innovation can help pull the industry out of its slump, but Cumpston said not enough effort has gone into improving back-office functions, or simplifying the software to track and bill the fancy services equipment providers are trying to make possible. "The human side of the operation is where innovative companies make some difference in [carriers'] adopting these kinds of technologies more quickly," he said.
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