Wednesday, February 1, 2012

Consolidation within the Telco Space to Impact OEMs in Public Safety Space

Correction on the ALU layoffs: Seems that it may be a rumor that happened to get national press coverage. Time will tell.

As I predicted in earlier writings the consolidation is starting to take affect now within the OEMs. Why does this matter; mainly because the tradition has been for clients within the Public Safety space, i.e. States, Utilities and Public Safety entities, to ask the OEMs to bid on their projects and then build their solutions. As I stated earlier this is the wrong model to move forward with. There exist only a few "real hands on" LTE and telecom integrators in the United States and the OEMs do not consider themselves the "Integrators". The OEMs want to focus on their product lines. Why because the product lines are the main source of revenue for these organizations, thus they will cut nonessential services that support that cause, i.e. delivery organizations that are being asked to design, build, operate and maintain these Public Safety projects. There is an answer though! Should not be the OEMs though.

Another interesting topic is the funding sources for such DBOM projects. The clients should search for a venture capitalist type model of a public-private ownership rather than trying to get an OEM to fund it. We have to take away the link of the equipment driving the business model. We need to focus on the business model of the entire network and what it can generate when it comes to revenue. By driving these solutions from the vendor standpoint there is only one aspect of that business model being met .... that being the Vendors business model. Did you know that any given large-scale project such as the LTE deployments for Public Safety is more than 70% project management, construction management and design and is less than 15% related to vendor equipment? And out of the 15% (which is multi-vendor) less than 3% is related to only one vendor? That means that if a client, such as BayRICS, uses the Motorola solution as the prime for its project, then Motorola really only has about a 3% stake in their equipment within that program. More than 70% of the entire program will relate to other contractor entities who will only share their piece of the risk. In the end I don't know who is worse off...the vendor or the client in this case? In the end when Motorola needs to cut people and focus on product sales who will be left holding the project bag on this one?

Just my 2-cents.

Dr. Michael Myers

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