In a major shift for the industry, the creation of procurement zones by telecom network operators is driving change in telecom procurement strategies in order to respond to changes in the relationship of the network to services and revenue.
Most current network infrastructure deployments support a "convergence" mission, creating a single transport/connection architecture onto which services are overlaid. The overlay services are created by a hybrid of network equipment and information systems technology (software and servers or Service Delivery Platforms). The goal of this structure is to contain service-specific capital and operations expense while maximizing the flexibility to deal with evolving service opportunities.
Another major change is that these evolving services are increasingly consumer driven rather than enterprise, and come and go very quickly. This change in the mission of networks has created a basic tension for operators: Standards can't evolve fast enough to guarantee the interworking of vendor equipment at the device level, and the number of devices in the network is exploding.
Divided market creates telecom standards issues
Standards, in particular, have seen major shifts. Standards bodies make progress slowly. In some cases, standards evolution can't support the pace of development in a network services market where over-the-top players (OTT) like Google can launch services without being constrained by the traditional telecom standards cycle. In addition, the number of standards needed is multiplying, making them less effective in assuring equipment interworking, especially for peer interconnection of devices within networks.
To address the changes, a strategy gaining broad acceptance among network operators, especially the larger ones, is the notion of "procurement zones." Most networks are organized into technology areas or zones where the equipment used within that area operates as a subsystem of the whole, and where the connection with adjacent zones is managed in a very structured way.
Look at the example of a metro aggregation network and a core network, where an internetwork interface forms the boundary, or at a mobile network and a metro network where mobile backhaul connections form the boundary. By dividing a network into zones and treating zones as 'virtual devices," the operator can utilize multiple vendors while controlling the extent to which low-level device interactions and standards might impact their network's operation.
Vendor and technology issues in the procurement zone
Another issue in zone procurement is whether to allow the same vendor to be selected in multiple zones, and if so, how many and under what conditions. Most operators believe the issue should be decided on a case-by-case basis. The fact that a vendor is key in another zone is simply a data point in picking vendors for other zones.
A few service providers propose to limit the number of zones a vendor can be in to prevent their networks from tilting too far in favor of one vendor, which could mean they lose active engagement with other vendors.
The knottiest issue in network zone procurement is the extent to which pre-standard or non-standard technology should be allowed, particularly if the decision to allow it effectively makes a zone a single-vendor dominion. Most Tier One operators say standards are effective in creating competitive pricing, but they are less than perfect in addressing new opportunities.
Many operators see the procurement zone system as a way of using a responsible or integrating vendor as a substitute for a standards-based framework where vendors are totally interchangeable. This would allow carriers to address new opportunities without full standardization but manage the risks by making a vendor responsible for the integration and evolution of the zone.
Procurement zones are a logical response to the changes in service provider networking, and are likely to become the rule in the industry. As many as a third of all Tier One and Tier Two providers may adopt procurement zones within 18 months, according to the operators themselves. Because it's likely to be difficult to change zone boundaries quickly, operators should start looking at the concept now so their plans can accommodate changes in technology, vendors and business factors as effectively and quickly as possible.
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About the author: Tom Nolle is president of CIMI Corporation, a strategic consulting firm specializing in telecommunications and data communications since 1982. He is the publisher of Netwatcher, a journal addressing advanced telecommunications strategy issues. Check out his SearchTelecom.com networking blog Uncommon Wisdom.
This was first published in September 2009