The evolving supply chain and its implications for the CTO

Written by on January 25, 2016 in Features with 0 Comments

Group of chrome chains with a red linkThe supply chain into CSPs is constantly evolving and CTOs have to adapt accordingly.

For decades the telecommunications industry was anything but dynamic. It had a long history of very stable and predictable growth that was largely dependent on the plans of the incumbent network operator to expand its embedded infrastructure.

Early network deployments were based on strict standards regulated locally or by the International Telecommunication Union (ITU). R&D and new technology was ostensibly developed inside in-house labs and remained so for many years. Today’s network equipment providers (NEPs) emerged for PTTs firstly on a national basis, e.g. Siemens in Germany; Ericsson in Sweden; Alcatel in France; Lucent in the USA; Huawei in China – that only later became giant international players.

In today’s market place the number of NEPs may have decreased but demand is still high. In the USA alone, total LTE network build and operating costs are forecast to rise over the next five years with spend to reach $212 billion

That’s good news for NEPs but unit prices are continuously being squeezed and margins are under threat. Some are coming up with innovative ways to maintain supply contracts by offering ‘pay-as-you-grow’ OPEX models that somewhat resemble NEP financing deals of the nineties.

CSPs are having to acquire innovative technology, cloud services or software developers but do they have the ability to manage them? And what happens when they attempt to bring those players in-house? Results to date have not been terribly promising.

Managing the supply chain is key, and people capable of doing this will be prime targets for CSPs that lack the skills internally. They will need to work closely with people at the coalface of building, delivering and billing for new services so any existing silos will need to be removed if CSPs hope to be successful in the ‘digital economy.’

However, with the move to all IP networks and open standards it becomes, at least theoretically, easier to acquire and integrate network elements, akin to ’plug and play.’ This, in turn, means less control of things on the network. The supply chain that was once so tightly controlled also starts to look as if it has few controls.

This is exacerbated when it comes to the provision of third-party services like cloud offerings and virtualization that can be managed directly by the supplier. Here the dependence on, and viability of the supplier, becomes critical as the services appear to the customer, for all intents and purposes, to be operated by the CSP itself.

For mobile networks, the emphasis has always been on spectrum, bandwidth management and network speed, but the services running on those networks, and the devices running on them are being supplied by third parties.

The swing is from having internal experts managing the network directly to expert partner managers working directly with the extended supply chain. Key performance indicators (KPIs) and service level agreements (SLAs) monitoring systems and their management take the place of engineers and technicians, fundamentally changing the manning requirements of the CSP.

Where the CTO was once firmly in control of the CSPs greatest asset, the network, he now has to manage the convergence of computing and software infrastructures that may not be resident in-house, e.g. cloud services and virtualized platforms. It is easy to see why the CTO role is being extended or challenged well beyond traditional boundaries and that the role of CIO is become increasingly more evident, sometimes being merged with that of the CTO, sometimes replacing it.

There is also increasing pressure to utilize and monetize ‘big data.’ For the CSP it is focused on using massive data stores for marketing and detailed customer analysis under the broad umbrella of improving the customer experience.

Concurrently, the computing industry is not just embarking into the era of virtualization and commoditization but something else – ‘things’ or the so-called Internet of Things (IoT) – that third parties can manage.

This is another area that is seeing radical change in the way the supply chain needs to be managed. A myriad of often complex negotiations, contracts and SLAs need to be put in place to meet the customer’s expectations and give them confidence to move their core operations to the cloud.

CSPs are finding themselves at different parts of the new digital supply chain, often in the middle, requiring not just new sourcing strategies and but new strategies on managing the new types of suppliers that are actually partners. This is where a Chief Partner Officer role might arise.

CTOs are having to adjust to these new sourcing strategies to acknowledge and embrace the new ecosystem with more and more lower layers being outsourced. Their major role will be to leverage the new supply chain and not stifle it.

For suppliers that are new, who have little market traction or who have no means of addressing enterprise and consumer customers, the CSP route will be a welcome one – assuming they pass the risk criteria testing the CSPs put them through.

Find out more in this whitepaper: “The evolving supply chain and its implications for the CTO

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About the Author

About the Author: Tony is a freelance writer, regular speaker, MC and chairman for the telecoms and digital services industries worldwide. He has founded and managed software and services companies, acts a market strategist and is now Editor of DisruptiveViews. In June 2011, Tony was recognized as one of the 25 most influential people in telecom software worldwide. .


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