Telecom: The Next Generation

Grab the chips. Some salsa is coming to the telecom world in 2005.

Why’s that? Well there are several reasons – but the primary one is that after years of belt tightening, sevice providers appear ready to spend again.

As the December issue of Light Reading Insider reports, capital spending has stabilized (see Insider Sees 'Calm' Capex Growth). Better yet, within today's depressed capital spending budgets, large dollars are being committed to exciting new projects such as broadband and IP video.

But beyond simply crunching numbers for the next year, there are larger, more important forces that will lead service providers to launch a sustained technology investment campaign over the next several years (more on that below). Keep in mind, telecom investment binges tend to be big – and last long periods of time. What we've seen the last four years has simply been a lull in the technology investment cycle.

It’s fun to watch the future unfold. Back in November of 2001, when Light Reading Insider was a mere pup (and referred to by another name), we published our first capital spending outlook. In it, we predicted many years of rough sledding and a steady decline that would persist until 2005, when things would start to get better (see Optical Oracle: More Carrier Cutbacks and Carriers at Risk).

Four years later, I’m happy to report that’s exactly what’s happened – and 2005 indeed looks like the “fulcrum year.” The decline in capital spending has stopped, carrier balance sheets have improved, and grass-roots interest in new technology is driving services such as VOIP, wireless Internet, and IP video and audio.

Which brings me to the second reason telecom spending will rebound: competition. Service providers and MSOs are gearing up for the battle of the century to provide new broadband applications. And they have no choice but to bet the farm on new consumer applications.

There are reasons to believe that service providers will boost capital spending significantly. Why? Well, besides the fact that they must do so, in order to compete, they are now in a position where they can do so. It goes back to the changes since 2001. In 2001, carrier balance sheets were degrading and cash flows were declining. Now it's the opposite. For example, take a look at the chart below.

Leading service providers have actually built up the largest cash-flow surplus in 12 years. If that doesn't give them the power to spend, I don't know what does.

This comes at a convenient time, with a new wave of technology being developed in the telecom services and equipment market.

The excitement about some of these new technologies is growing, as demonstrated by a wide range of research projects in the Light Reading universe.

Case in point: Our Leading Lights Awards program generated hundreds of pages of awards entries, many of which included detailed financial and customer information of startups and public companies alike. A general theme among these entries was that next-generation products based on carrier-class Ethernet and IP technology are generating an incredible amount of interest. Most important, these new products are now generating revenue and customers.

I'd go as far as to say that the startup survivors of the Great Telecom Shakeout are emerging with a stealthy strength not seen since the late 90s. In some cases, they are stronger because they're focused on profitablity and stability, rather than a flash-in-the-pan IPO. Frankly, it was refreshing and surprising to find that once the homework was done, we had too many candidates for the Best IPO Potential category – so we named seven finalists (see LR Tags Top IPO Candidates).

I urge you to read the entire list of Leading Lights finalists to get a glimpse of the resurgent technology developments in the world of telecom:

Furthermore, recent research reports issued by the Heavy Reading analyst crew describe growing demand for new IP technology. Ethernet services, next-generation routing technology, VOIP/softswitching, and media gateways are just a few of the markets that are on the verge of exploding (see LR Dives Into the Ether(net), Report: Ethernet Exploding in China, Heavy Reading: Cable Cos Race for VOIP, Heavy Reading Reports on VOIP, and The Softswitch Name Game).

This confluence of elements – more cash flow, more products, more reason to compete, and more leading-edge technology – leave the industry moving in only one direction: up and to the right.

Details of this exciting resurgence will be presented at Light Reading's Telecom Investment Conference in New York City on December 15. On that day, we plan to discuss all the stuff above. I've also ordered my tuxedo for later that evening, when we’ll be holding a gala dinner to announce and celebrate the winners of the Leading Lights Awards – honoring the most exciting people, companies, and products of 2004.

It's clear that the theme for both events is that everybody's ready for the next wave in telecom.

— R. Scott Raynovich, US Editor, Light Reading

  • For more information on the Leading Lights Awards, click here.

  • For more information on Light Reading's Telecom Investment Conference, click here.

  • particle_man 12/5/2012 | 1:00:39 AM
    re: Telecom: The Next Generation Reuters reports today:

    "The telecommunications industry has suffered the most job cuts, with the loss of 48,804 positions -- 50 percent of the sector's total job cuts for the year -- occurring in the past three months."

    We still have quite a hole to dig ourselves out of.
    fiber_r_us 12/5/2012 | 1:00:38 AM
    re: Telecom: The Next Generation Is that just counting Nortel? seems a little low.
    Middle Finger Productions 12/5/2012 | 1:00:27 AM
    re: Telecom: The Next Generation Although this survey is applicable to Canada, it seems that people in the Telco/Tech industry (provided they've been able to hang on during the downturn) are still doing well on the salary front. I've heard that in Alcatel, Nortel, and other big companies, they're still rolling out the 6-figures for senior software types (UNIX/embedded, C/C++, etc...) here in canada (Ottawa/Toronto).

    Although I'm still shaking my head at people commanding large increases during such a terrible period for the industry...maybe all is well for those "select few"...anyone else care to share any observations?

    Here's the article:

    Software skills overtake hardware on top salary list

    12/7/2004 5:00:00 PM - Canadian hiring practices are creating a super-breed of well-paid senior tech workers, according to a report. But is there room for the next generation? CATA and the SHRC weigh in

    by Neil Sutton

    Senior software and hardware engineers have seen their salaries grow in leaps and bounds, far outpacing the rest of Canada's workforce, according to research released Tuesday.

    A report from Toronto-based Mercer Human Resource Consulting says that senior-level high-tech workers have enjoyed raises of more than 25 per cent over the last four years. The national average for wage increases is on the order of three to four per cent.

    There is pressure to retain the top workers with the most sought-after skills and cash is one way to do it, said Danielle Bushen, principal at Mercer.

    "There is still a human resources war going on for the best talent," said Barry Gander, vice-president at the Canadian Advanced Technology Alliance. "The war . . . for any talent -- anybody who was living and breathing and could do coding -- is over. But the fact is that the best people are still in great demand."

    The rounds of layoffs that plagued the high-tech industry in recent years has resulted in a sort of super-breed of employee, said Paul Swinwood, president of the Software Human Resource Council. Companies keep the people they need the most.

    Those people are "the core strategic group that will be responsible for the next generation of technologies. While a company may have downsized from 100 to 15, keeping those 15 is now a major focus."

    "They're the techies who can communicate, they're the techies who have presentation skills, they're the techies who have a vision of where they're going," he said, adding that some of the salary bumps are due to shift towards pure cash and away from incentives like stock options.

    "There's an increasingly a cadre of employees that are highly specialized -- they might get called experts or even gurus -- who don't take on management responsibilities, but may in fact be making more than the managers they report to," said Bushen.

    The Mercer report defines a senior software engineer as someone that "analyzes functional business applications and design specifications for functional activities . . . translates detailed design into computer software."

    A senior hardware engineer is: "responsible for the overall design and development of nominated products including the establishment of product specifications, selection of materials, the technical architecture as well as the production and performance of the finished product."

    According to the report, software engineers are earning an average of $101,000 per year up from $80,000 in 2001. Hardware engineers earn an average of $97,000 compared to $81,000 in 2001.

    The slight discrepancy in salaries could be due to the commoditization of hardware in recent years, said Bushen. Also, that more hardware-related development is being moved offshore than software development.

    Software skills are in the highest demand, she added, resulting in a higher pay ceiling for those that possess those skills.

    "What people are looking for varies widely: In one firm, it may be that Java's the key thing, for somebody else it might be WebSphere. . . . For a while we heard a lot about Oracle. It's constantly changing," she said. Most employers, however, are looking for software professionals that can place their skills within a business context, she added.

    The problem with retaining a rarified group of professionals and outsourcing lower-level functions is that you're not developing a talent pool for the future, said Swinwood.

    The number of jobs leaving Canada due to offshoring is being offset by the number of jobs moving north due to nearshoring opportunities from the U.S., he said. However, he added, entry-level technology jobs still aren't easy to come by.

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