Survival in “Tiny Times”: Telecommunications Equipment Manufacturers Transitioning to ICT Services Providers

Under the background of information age, telecom equipment manufacturers have experienced periods of rapid growth, stable development, and struggle for survival. These periods are known as the Golden Age, Silver Age, and Iron Age. 

Golden Age: Services Supplement Equipment 

Since the beginning of information society in the 1980s, communication technologies have been developing rapidly. Beepers were introduced to Shanghai in 1983 and began an era of instant messaging in China. Beepers were popular in China more than two decades. The Guangdong Postal Administration signed a mobile equipment contract with Ericsson in March 1987 and launched the first commercial analog mobile network in November 1987. In October 1994, the first provincial digital mobile communications network was deployed in Guangdong. It had a capacity of 50,000 subscribers. In May 1998, Beijing Telecom CDMA trial networks into use in Beijing, Shanghai, Guangzhou, and Xi’an. By the end of 2000, the number of mobile phone users in China was 75 million, which increased tenfold in five years.

Ericsson, ZTE, Huawei, Alcatel-Lucent, and Nokia Siemens all experienced a glorious Golden Age in which customers placed orders even before equipment had been manufactured. Manufacturers put all efforts into production and did not need to worry so much about sales.

Silver Age: Transitioning to Services, Creating Additional Value

The Golden Age ended when the IT bubble burst in 2000, and telecom equipment manufacturers suffered. To get through the hard times, manufacturers started to transition to services. Ericsson announced its transition to services in 2000, and now believes it was one of the company’s most important strategic decisions. Hou Weigui, president of ZTE Corporation, proposed obtaining profits by providing services to operators. Huawei also placed great importance on providing services; in fact, they placed the same level of importance on services as they did on equipment and software.

Because of this transition to services, telecom equipment providers recovered and developed rapidly within six to seven years. This was the period of the Silver Age. In 2007, Ericsson’s stock rose to US$20 on the NASDAQ, and net sales revenue reached SEK187.8 billion. In the professional services sector, Ericsson’s annual growth reached 16%. Meanwhile, ZTE’s revenue reached RMB34.777 billion in 2007, an increase of 50% year-on-year. In 2006, Nokia Siemens Networks and Alcatel-Lucent were established to get through the hard times while Motorola and Nortel Networks lagged. 

Iron Age: Breaking Border Between IT and CT

The U.S. subprime mortgage crisis in 2008 pushed telecom equipment providers into the Iron Age. The key theme in this age is cross-border convergence. With increasingly intense market competition, industries penetrated each other, and it was difficult to clearly define the attribute of an enterprise. Cross-border business became the trend. An unexpected competitor is the most formidable, and Apple Inc., founded as a PC company, broke onto the mobile phone market. With its flagship iPhone, Apple got on top of other leading mobile phone manufacturers within five years.

Convergence in the Iron Age means ICT convergence. Mobile internet is a product of ICT convergence. Relations between internet enterprises and operators changed gradually. When telecom operators dominated the industrial chain, the internet was considered a value-added telecom service. In the initial stage, the ICT industry placed greater importance on CT than IT. At present, incremental introduction of services is failing to generate profit for operators, and this is also limiting telecom equipment manufacturers.

Over the past several years, annual investment in global telecom industries has been steady at around US$130 billion. The market has become saturated, and equipment providers have not been able to significantly increase their market share. Although investment has remained relatively stable, the scale of the global information industry has grown exponentially. The number of mobile phone users worldwide has increased to 5 billion, and the number of internet users has increased to 2 billion. The telecom industry had been more like a traditional manufacturing industry than a high-tech industry.

Telecom equipment manufacturers thus changed face again to survive: They transitioned to IT services. Equipment manufacturers have intrinsic advantages in this area: Their experience in large-scale integration projects can be transferred to other industries. Long-term cooperative relationships between equipment manufacturers and operators enable both to explore enterprise and consumer markets together. The experience of equipment manufacturers in the CT field also lays a solid foundation for providing ICT and IT services. With the advancement of cloud computing, traditional IT industries are facing the pressure of market reshuffle, and traditional IT service providers are also seeking development in the ICT and CT fields. Cross-border competition is emerging.

Alloy Age: Convergence of IT and CT, Services and Equipment

The Iron Age will be followed by the Alloy Age, which involves the convergence of IT and CT and the convergence of industries. Equipment, terminals, and services will drive operators, enterprises, and consumers and this will have a flow-on effect for telecom equipment manufacturers.

Towards Alloy Age, CT Equipment Manufacturers Are in Action

ZTE has established a specialized IT service team to explore IT services. ZTE’s IT service solution revolves around data centers, that is, providing services that cover the whole lifecycle of a data center. The solution also involves smart city management services and enterprise information mobility services. ZTE has extensive experience in CT services and has a global service platform for providing customers with high-quality IT services.

Whole Lifecycle Data Center Services

ZTE’s whole lifecycle data center services involve consulting and planning, construction and deployment, and operation and management for physical and IT infrastructure. 

●    Consulting and Planning

ZTE analyzes a customer’s strategic objectives in terms of service development as well as the customer’s existing business environment and formulates a three-to-five-year plan. ZTE designs the data center architecture so that the data center can support new and existing service systems.

●    Construction and Deployment

ZTE can take full charge of all civil engineering, electric engineering, cooling engineering, weak current engineering, and fire protection engineering in the construction of a data center. ZTE has an excellent data center project management team. ZTE also has standard flows and methodologies for construction, quality control, security, civil construction, and environmental protection. 

●    Operation and Management

ZTE has many years experience in data center O&M and project management. ZTE has well-developed, verified methodologies for controlling and improving services. ZTE’s data center O&M service objects includes physical infrastructure, IT infrastructure, and basic software. System monitoring tools and O&M management tools are used to

Smart City Managed Service

Smart city is the trend for future cities and the focus of city planning in China. A smart city is a comprehensive solution that includes smart park, smart traffic, safe city, and other solutions. A smart city makes use of cloud computing and M2M technologies. Large-scale smart city construction is currently underway worldwide. However, little attention is being paid to the stable operation of smart city information systems. Therefore, ZTE proposes smart city service solutions to guarantee stable information systems. ZTE proposes using intelligent tools and platforms to provide high-quality services for urban enterprises and residents. 

Enterprise Information Mobilization

ZTE’s enterprise information mobilization solution is a mobile application development platform guided by BYOD policies that are based on a customer’s strategic IT planning. In addition, ZTE provides a comprehensive solution for deploying and integrating mobile applications, releasing enterprise application stores, and managing mobile platforms and mobile tariffs. With this solution, ZTE helps customers quickly build a mobile enterprise information platform that is secure and provides excellent user experience.