Services more important than hardware
Telco services market topped $65 billion in 2007
Ovum today published 2007 service business results for network infrastructure vendors. The telco services market hit $65 billion in 2007, including product, network, and IT-related service spending. Network equipment providers accounted for approximately 60% of that total.
“The importance of services to telecom equipment vendors is hard to overstate,” said John Lively, Vice President, Network Infrastructure, at Ovum. “The telco services market is larger, and growing faster than optical networking, switching and routing, and broadband access equipment combined, and it’s generating profits. Simply put, services are key to infrastructure vendors’ financial success.”
Key findings of the study include:
- Worldwide telco services revenues were $65 billion in 2007, up 17% versus 2006
- Services revenues were more than 20% of total company revenues for top tier network infrastructure vendors as a group
- Average operating margin on services was 13%, versus 5% for hardware
Lively says the capacity glut of the past several years, combined with the rise of Chinese vendors, with their lower labor costs and relationships with well-funded development banks, have made it difficult for large incumbent NEPs to make money on products. “Meanwhile, service providers are increasingly pulling NEPs into network-related services.”
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