Report Disses Metro Core Marketing
Despite the sluggish economy, the report asserts, the metro core market is still growing, and there are still plenty of opportunities out there for vendors that know how to position themselves.
The report forecasts that the metro core market -- which it defines as embracing Sonet, WDM, Ethernet, and routing gear -- will reach $5.7 billion worldwide by 2006. That's up from the $5 billion vendors are expected to cash in on sales in the space this year. The U.S. will account for 40 percent of the market in 2006, the report states, with about $2.3 billion in revenues.
But while there are still plenty of lucrative deals to be had in the metro core, the CIR report insists that many vendors just don’t seem to understand how to land them. “There is insufficient introspection at vendors about the long-term impact of disingenuously hyping gear functionality or promoting purely theoretical advantages of their solutions,” the report mellifluously states.
Many vendors do themselves a great disservice when they tote futuristic capabilities that the market is not looking for, or when they boast of unrealistic cost savings and benefits from using their product, according to the authors of the report, who include: Mark Lutkowitz, CIR's vice president of optical networking research; and Sam Greenholtz and David Gross, senior analysts.
“It’s long past time for more of a shift to honesty,” Lutkowitz says. “It’s long past time that we get rid of meaningless rhetoric… A lot of startups especially are still sounding like it's 2001.”
Lutkowitz says that many companies are still hyping technology that no one wants or needs -- and the service providers just aren’t buying into the hype. “Companies shouldn’t use the market conditions as a total scapegoat,” he says. “In fact, even during the optical euphoria days those solutions weren’t selling.”
DWDM rings, for instance, may never take off, according to the CIR report. “There’s been six years of hype,” Lutkowitz says. “Certainly, in the U.S., it’s not around the corner.”
Even less compelling for service providers are vendors’ constant references to huge savings on operational expenses. Carriers, according to Gross, know that no box out there is going to dramatically change what they have to pay to keep their operations running. “No vendor is going to come in and have a significant impact on opex as a percentage,” Gross says. “It may be easy to do on a spreadsheet, but in reality, it’s just not going to happen… You simply have to have a compelling capex case.”
So which companies are likely to survive in the metro core market? After considering more than 40 different vendors, the CIR analysts are most upbeat about established players like Cisco Systems Inc. (Nasdaq: CSCO), Fujitsu Ltd. (KLS: FUJI.KL), Lucent Technologies Inc. (NYSE: LU), Nortel Networks Corp. (NYSE/Toronto: NT), and Tellabs Inc. (Nasdaq: TLAB; Frankfurt: BTLA). “They didn’t try to go with the products that were being hyped too much,” Greenholtz says. “They let the market direct their energies.”
— Eugénie Larson, Reporter, Light Reading