The plans of Siemens Information and Communications Networks to take a leading position in end-to-end IP solutions received a boost in May when the company revealed its next-generation optics "product roadmap".
By Peggy Anne Salz, Munich
'It will be several years before capital expenditure in the fibre communications industries regains the level it held in 2000," announced Thomas Ganswindt, Group President of Siemens ICN. But he added that there is an upside of this cash-flow restriction - the boost it gives to the business case for next-generation networks. Sensing this business opportunity, Siemens ICN has undertaken a "strategic reorientation of its portfolio" and is now more focused on developing and providing technologies, solution and services, which it will market through its Surpass product family.
Ganswindt plans to revamp the group's annual R&D expenditure to support a stronger focus on next-generation optics. To date R&D spending is running at some EUR2bn. In this fiscal year alone, some EUR260m will be invested in developing Surpass technology for next-generation networks. Over the coming years the group will "plough an additional nine-figure euro sum" into R&D to consolidate its position in next-generation optics, Ganswindt said.
Key in this reorientation is the partnership deal with US-based Juniper Networks, a supplier of Internet routers. Siemens recently sold its subsidiary, Unisphere Networks, to Juniper (LWE June 2002, p14) so that it could gain access to both core and edge IP routing technologies that are necessary to complete Siemens' product portfolio.
"To be a key supplier ICN needs to play in a market environment where it has access to best-in-class components for an end-to-end solution. Key components are routers in the core and edge of the network." Rather than float Unisphere, an idea that wouldn't work "now or in the mid-term since the since the climate for IPO has turned", Siemens ICN decided to "combine companies so that this company could become a real competitor to Cisco", Ganswindt explained. "This brings prices down for Siemens ICN, but also its customer. To do this we need competition."
As a systems integrator with next-generation networks know-how, Siemens ICN can now offer carriers complete solutions with softswitches, gateway, and IP routers. Other partners include Adva, Infineon, and Texas Instruments.
By bringing the companies and their components together in one solution Siemens ICN aims to lead developments in next-generation convergence solutions, Ganswindt said. "This will keep the strategically vital value creation chain for developing next-gen fully in Siemens' hands." The group will continue to provide base technologies for next-generation networks product portfolio through in-house R&D activities. The product portfolio for carriers and service providers comprises NextGen Switching with Surpass, NextGen Optics, NextGen Access and NextGen Applications and HiPath for enterprises.
Migrating the carriers
The strategy moving forward is now to migrate carriers to next-generation, a move Ganswindt believes can improve their chances of surviving the next round of market consolidation and restore profitability. "By reducing the number of network elements, the carrier can reduce opex by up to two-thirds." Analysis based on Gartner Group research shows that a switch to next-generation IP infrastructure allows the typical carrier to lift revenues by 20% and improve net cash.
The investment involved in the migration from traditional switching to Siemens' NextGen Trunking with SURPASS can be amortised within two years, according to the research. It calculates a 20% increase in sales is possible if Surpass softswitches, gateways and next-generation applications such as messaging, directory services and IP call control are introduced into traditional voice networks.
Cost savings of 70% can be achieved if TDM technology is replaced with Surpass next-generation switching. On the broadband access front, next-gen access solutions such as VDSL and SDSL with multimedia applications can double cashflow over 10 years.
Finally, upgrading an existing SDH network for the integration of Ethernet WAN services can integrate different traffic streams into a single backbone and thus provide a return on investment in as little as three months.
Against this backdrop "the business case for next-generation is becoming stronger and it is a key factor in unlocking investments among carriers," Ganswindt said.
"Next-generation development is the right answer at the right time - and now we believe we're on the right track."
Peggy Anne Salz
Peggy Salz is a new contributing editor to Lightwave Europe. Contact her at: PO Box 1909 53709 Siegburg, Germany. Tel. +49 2241 52441.