Due to the continued softness of the North American carrier market, today's vendors, particularly the startups, must look elsewhere for additional revenue opportunities, and right now the most promising "elsewhere" is Asia. But since they cannot afford to invest heavily in sales and marketing activities overseas, vendors are relying more and more on outside sales channels to make inroads with Asian OEMs and carriers. Such moves are representative of a much greater trend: the virtual consolidation taking place in the industry.
The Asia-Pacific region is the healthiest of the world's big three telecommunications regions, claims a recent report from market researcher RHK (San Francisco), but it remains a tricky market to navigate. "Smaller western suppliers and startups have reason to approach the region with trepidation," writes Matt Walker, RHK program director of Optical Networks: Asia Pacific and author of the report "Start-Up's Slow Boat to Asia." "Markets are highly fragmented, product demands differ across the region, regional vendors appear stronger every year, political barriers to success linger, and the global telecom downturn has increased reliance on channel partners for customer sales and support," he notes.
"There are other factors that drive the decisions of service providers in China or in Russia, for example, to select the OEMs they are going to work with," explains Yves Le Maitre, vice president of marketing at Lightconnect (Newark, CA). "And that's not necessarily to have the latest and coolest technologies. It's a combination of political factors, economic factors, relationships that have been built or synergies with other projects, and local sales and support. That's why it's more important than ever to have a great relationship with the large Asian and even European OEMs."
And the key to developing that great relationship is to employ a top-notch distributor. "Particularly over in Asia," says Ben Gibson, director of corporate marketing at Atrica (Santa Clara, CA), "it is important to have channel partners that are familiar with the company and its products. When we embark on these partnerships, a big part of what we have to do up-front is educate our partners on the products and how to sell them."
Continual support is critical. All the vendors interviewed here admit they treat channel partners as they would treat inside sales personnel, providing them with technical information about the company, its products, and pricing, as well as competitive analysis of the competition and where products fit into that competitive landscape. "The commitment should be viewed as strategic and long-term rather than as a tactical opportunity driven by near-term sales," says the RHK report.
Despite the hurdles, there is plenty of incentive. New research from Strategies Unlimited (Mountain View, CA) reveals that the Chinese market in particular will offer substantial opportunity in the near future. While global optical equipment and component revenues declined 34% in 2001, the Chinese market grew 70%, topping out at $1.9 billion. Non-Asian vendors accounted for a full 50% of this revenue.