4 November 2015Tweet
By Colin Sempill, managing director at SSE Enterprise Telecoms
Modern life continues to accelerate and telecoms is no exception. What was once an impressive 1Gb/s connection, now needs to be a minimum of 10Gb/s, with capacity to grow to 100Gb/s. This increase in demand has been driven – in part – by both the sheer volume of connected devices and increasingly collaborative business practices, which increase the amount of data crossing the network. Cloud systems, for example, now make up to €12 billion of the UK IT market.
But while the level of network capacity expected by businesses has sky rocketed, the service delivered by network providers is being hampered by equipment supplier contracts and service level agreements of a time gone by. In complete contrast to the faster pace of just about everything else in business and telecoms, enterprises are typically expected to wait 90 days when they order a new connection. Would you wait three months to sign up to Netflix? This may be oversimplifying the problem, but it does highlight the disconnect between customer expectations and market reality.
A mismatch in supply and demand
Dense wavelength division multiplexing (DWDM) suppliers play one of the most crucial roles in the UK’s network infrastructure. Without them we wouldn’t have wavelengths – this is the technology that can take the raw capacity of fibre-optic connections and slice it up into sell-able portions. This gives suppliers great power over how wavelengths are sold to the end user, in terms of both capacity, lead times and pricing.
In practice, for network providers, working with DWDM vendors also means purchasing network cards that allow customers to connect to the network services. These cards don’t vary much – a typical card would come with four 10Gb/s ports (there are many other options too), giving the network provider access to four 10Gb/s customer wavelengths.
Although having four 10Gb/s wavelengths to sell on provides opportunities for further sales, it can make the network provider game a costly one to be in. An outlay of many thousands of pounds for a card with more wavelength capacity than you actually need, not to mention the cost of the chassis which also typically run into the tens of thousands of pounds, shows the huge investment being made by network providers due to the mismatch in supply and demand.
Ultimately card inflexibility causes the telecoms industry to be more inflexible; which is no good thing. There is a pressure on the finance team to manage cash flow, the sales team to sell more and, most worryingly, the overhead associated with a single wavelength means that projects are delayed and connectivity is more difficult to create.
The mismatch of wavelength supply and demand isn’t the only issue that needs a rethink. Although, as consumers, we expect to connect to the Internet instantly, a 10Gb/s wavelength service typically takes 90 days to get up and running. In a world where speed is important and project delays cost money, getting this lead time under 90 days could become a real competitive advantage.
Why does it take 90 days? Largely because the manufacturer lead time for the cards needed to provide the wavelengths is usually – you guessed it – 90 days! The majority are built to order using ‘just in time’ processes. When demand and volumes are low and prices are high, such practice works tolerably well for customers. When demand increases and prices drop, ‘just in time’ continues to serve the supplier well, but it works to the absolute disadvantage of service providers and their customers.
Three years ago 90-day lead times were fine. Optical wavelengths were expensive and could only be used for high-value projects, which were often planned a long time in advance. Thanks to innovation and investment, however, the price of those 1Gb/s and 10Gb/s wavelengths has come down significantly, making them much more affordable and viable for shorter-term projects. The issue is that lead times have stuck adamantly to the 90 days of yesteryear.
Understandably, historically cards were complex, component lead times were long, and it took time to assemble and check the parts. Equally, optical networking suppliers want to operate an efficient supply chain, where their cash flow isn’t weighed down by a costly backlog of unsold cards. The current 90 days, however, is simply not in line with modern day expectations. With high-capacity connections being demanded at an increasing rate, the industry needs to deploy wavelengths in days not months.
This could represent a lucrative gap in the market for systems manufacturers. The question is whether the cost of manufacturing the cards ahead of orders is outweighed by the business generated from being able to provide connectivity so fast? Anything that optical equipment manufacturers can do to help service providers more readily meet end-customer demand with immediate and affordable supply will create real competitive advantage.
Opening up the market potential
Times are a-changing. As we turn to tablets rather than desktop computers to satisfy our immediate need for fulfilment, enterprises and service providers are in search of a faster way to offer connectivity. Their hands are tied by these 90-day lead times and card pricing that has not kept pace with price falls for wavelength services, in a world where their business needs to operate in real time.
Optical networking hasn’t kept pace with the commodity market it has now become and, consequently, the industry is calling out for a service that better aligns with modern expectations. I, for one, predict that adaptability and flexibility to future customer needs will be the key to survival in the optical networking industry. As the saying goes, the customer is always right.