Uneven Competitive Landscape
When network equipment vendors offer management applications that are less than perfect, network providers could end up with operational inefficiencies. In general, this should provide an excellent business opportunity for other companies to step in. In most cases, network equipment vendors welcome third-party management vendors who offer network management applications for the equipment vendor's products, and even encourage them to do so: Network management is not the equipment vendor's core product offering, so a competing network management offering is considered less threatening. On the contrary, a third-party offering can help the equipment vendor's customers better leverage their investment and thus buy more equipment. Network providers, on the other hand, gain additional advantages that an independent network management offering might provide, such as support for network equipment from multiple vendors that equipment vendors themselves might not provide. The result can be a win-win situation for everybody.
One business challenge for the management vendor arises from the fact that, in many cases, the equipment vendor will still be pressed to have its own network management offering, for several reasons: to avoid being too dependent on third-party vendors, to avoid having to disclose information on planned products when they are still confidential, or to ensure that a management offering will be available in time when the network equipment is brought to market instead of six months later. As a result, the business proposition for an independent management vendor is often not as attractive as it might otherwise be, for several reasons. Those reasons have to do with the fact that the competitive landscape can be a bit uneven:
■ Timing—Ideally, a management application should be ready to go to market at the same time as the network equipment that it manages. However, a third-party management vendor tends to lag behind the equipment vendor in offering device support. The equipment vendor often cannot share development plans with an outside company until those plans mature, unlike an internal division developing management applications, which might be cued in from the very beginning. This makes it less likely that the management vendor will be ready when the equipment vendor is ready to deploy. Also, the management vendor might want to wait until it is reasonably sure that the equipment vendor's product will indeed be successful in the marketplace to justify the investment that is required to develop management support for it.
The management vendor cannot afford to chase every lead; it has to use development resources economically, at the risk of coming somewhat late to market. Of course, this means that the first customers of network equipment have to select the equipment vendor's management offering because of a lack of alternatives. As a consequence, they will get accustomed to it even if it has shortcomings and will invest in aspects such as training and even systems integration. By the time a management vendor's product finally goes to market, it might already be too late because network providers will not be willing to switch easily from the system they already have. When an application is deployed in the field, even if it has weaknesses, it becomes very hard to replace it. This results in a high business hurdle for a third-party management vendor to overcome.
■ Economics—As discussed previously, to the equipment vendor, management software in many cases constitutes a feature of an overall system that also includes the networking equipment. From that perspective, as long as the system as a whole makes a profit, things are fine. The situation is different for a management vendor that considers management software not a part of a larger system, but an independent (and perhaps only) product. The management vendor therefore must generate a profit from the network management application alone to stay in business. Of course, to be competitive, the management vendor's product should provide additional value that sometimes can be more difficult for the equipment vendor to provide, such as support for multiple vendors.
■ Customer expectation—Customers of network equipment rightfully expect economies of scale. As far as network management is concerned, this means that the incremental cost of management support for the 10,000th network element should be less than the incremental cost for the first. The equipment vendor, on the other hand, will still be able to charge substantially for the 10,000th piece of equipment. Hence, the equipment vendor that views network management as an extended equipment feature can amortize the network management development cost over a substantial volume of networking equipment—a possibility that the third-party management vendor does not enjoy.
All said, the result is a business environment in which it can be fairly hard to make money, particularly when management applications are closely tied to the actual network equipment. This is somewhat paradoxical because management is such an important factor in decreasing cost and increasing revenue, as discussed earlier.
However, the situation is different for management software that is more removed from and less dependent on the network equipment itself. This includes management software that ties together business processes or, for example, billing software. Those are the areas where the playing field shifts more in favor of the management vendor.
Continue reading here: Pat A Network Operator for a Global Service Provider
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