Enterprise RFPs Are Up – Contracts Not So Much
The explanations for this vary, from political uncertainty to the complexity of making a major transition, such as moving to the cloud.
And those carriers that sell both wholesale services to other network operators and enterprise offerings see their network business as more stable right now.
"Our carrier business is right on target," says John Hoffman, Ethernet product manager with Tata Communications Ltd. , in an interview conducted via Tata's Chicago telepresence suite. "But on the enterprise side, we are seeing softness in general. It's not for lack of interest -- we're getting lots of RFPs, but they are signing only about 5 percent of the quotes."
Hoffman believes general economic uncertainty is the major factor -- not only from the presidential election but from the financial cuts that loom if the U.S. Congress can't agree on a debt ceiling increase, as well as from European financial woes and a perceived economic slowdown in China.
As a result, enterprises are trying to get by where they can, and only spend on what is "a guaranteed home run in terms of cost reduction or increased revenues," he says.
FiberMedia Group LLC , which is selling high-speed connections in the New York-New Jersey corridor and to data centers in Cleveland, is also seeing a longer sales cycle with enterprises, but John Panzica, senior vice president of sales and marketing, is attributing that to the higher complexity of sales, more so than economic uncertainty.
"These are complex enterprise solutions, particularly when you are talking about moving the IT spend into the cloud," he says. "The amount of scrutiny and the process behind these large complex solutions is more involved, particularly because they also involve decisions about staffing and budgets."
Beyond the network, these deals have many moving parts including the convergence of mobility, the cloud and hosted software, Panzica says, and that's prolonging the decision cycle.
tw telecom inc. (Nasdaq: TWTC) isn't seeing any market softness, but CEO Larissa Herda admits it could be around the corner if Washington doesn't resolve the budget crisis.
"Last summer, when the financial cliff was ridiculously upon us, because of the debt ceiling debate, customers did delay their buying and they may go into the same mode if it happens again," she says.
For some markets – content providers are a big one -- the wholesale traffic volume just continues to rise.
"Quoting volume is through the roof," acknowledges Greg Spraetz, senior vice president of wholesale services for Level 3 Communications Inc. (NYSE: LVLT), which is also seeing major growth for its services into Latin America from every other part of the globe. Sometimes the sales cycle is more prolonged, he adds, but that's often in situations where a carrier is trying to determine how to optimize its operations.
"A lot of larger carriers are looking to consolidate the number of preferred vendors," he says. "We think it helps us because we have a lot to offer as a single vendor, after the merger [with Global Crossing]. We can go in and help them do network optimizations that help a carrier with a couple of thousand enterprise circuits operate more efficiently."
Financial services has also been a growth market, particularly for those with low-latency offerings, but there is some caution in the market about future government regulation of high-frequency trading, says Joe Cumello, vice president of marketing for Sidera Networks Inc. .
"They know the government is looking at the high-frequency trading market and whether it needs to be regulated, but for now, financial services are buying, and we are finding strong growth also in wholesale and content markets," he says.
— Carol Wilson, Chief Editor, Events, Light Reading