I read a very interesting story in the FT recently about the telco AT&T and their plans to reduce capital costs by buying cheaper network hardware from smaller suppliers.
The plan is for a complete overhaul of their mobile network, but instead of going to the traditional equipments suppliers, such as Huawei, Cisco, or Nokia, they will source cheaper alternatives.
And there is a bigger change in strategy than just dropping the brand name kit. They are aiming to create an enormous virtual network that can be controlled by software, rather than having dedicated physical switches and routers.
This move to a cloud type service will allow AT&T the ability to offer more flexible services faster – especially to corporate customers.
But all this is probably bad news if you are involved in the network hardware business. These companies providing the actual network hardware are going to start losing revenue as their margins are squeezed, or they will need to find ways to make the same products for less, or they will just need to lower their prices to compete.
And in a new world of network computing where there are fewer dedicated systems, the management start becoming more detached from the actual systems and therefore less concerned about which brand – if any – is on the boxes.
This should all be good news for consumers though. A bigger and better network that is designed from the ground up to focus on data can only be a good thing as consumers can expect a higher level of service and lower prices.
What do you think about this change in strategy? Will all the telcos follow this approach? Leave a comment on the blog here or tweet me on @simondillsworth.
Photo by Chassy Cleland licensed under Creative Commons