It is an exciting but uncertain time in the networking market. Voice and data - telecoms and IT - are converging, but not as fast as everyone would like them to.
IP is being universally adopted, but there are still many legacy systems and a lot of work to do before the market runs IP everywhere.
Intense competition is driving consolidation and pushing prices down, while the pursuit of the SME and consumer markets is adding to the pressure.
At the same time, there are high-speed technologies such as Gigabit Ethernet, ATM, and Frame Relay competing for the high-end, high-bandwidth markets.
The centre of the networking market is being squeezed and vendors are being forced to ask themselves the now familiar questions - is it time to go for value or volume; get niche or get out?
George Zervos, European managing director of SMC, says that, to some extent, vendors have got to be positive, decisive and customer focused.
'The only way to get a handle on what is happening in the market and to see where the next quarter's revenue is coming from is to grab hold of the ball and run. You have got to figure out exactly who your customers are and, more importantly, why they became your customers in the first place. You've got to encourage everyone in the supply chain to work together and foster a real atmosphere of trust. That's the way forward,' Zervos says.
Convergence may be the big issue of the day, but the internet and IP are also a significant influence. E-commerce's growing momentum and the implications that has for security, power protection, and network and storage management present a range of opportunities for vendors and the channel as a whole.
But these technologies may not become a part of everyday working life as quickly as some would have you believe. Vendors have a long, hard struggle ahead, especially in the area of convergence. 'Until now, the technological convergence taking place in the market has been seen as a panacea.
Few of these organisations have demonstrated any degree of success in satisfying consumer needs and improving loyalty,' asserts Stewart Guy, business unit manager at Bull Information Systems.
Paul Trowbridge, European product marketing manager at Nortel Networks, says the market may now have less to do with convergence than it has to do with the various angles the competing vendors have adopted to tackle the issue. 'The convergence between voice and data is gathering pace, but it's not necessarily as simple as just waiting for the technology to arrive and adopting it. The question that resellers need to ask themselves is what are they doing to meet their customers' business needs? Does the client really need a combined voice and data solution right now? Is the voice and data network for the benefit of your customer or for your margins?'
Zervos also believes that widespread acceptance and adoption of next-generation networking technologies will take time in the UK and western Europe. 'Unlike many of the Nordic countries, for instance, it is still a conservative market here. Users take a lot of convincing where implementing up-dated technologies is concerned. No one wants to stick their neck out and take a risk. There's also a lot of protectionism going on. As a result, there is going to be a longer term resistance to emerging technologies than many people think.'
Trowbridge doesn't doubt that voice and data will eventually come together in earnest and that the combined technology will be of immense importance to business - he just doesn't think that it is going to happen any time soon. 'Most companies, even in the corporate sector, are still buying their voice and data networks and services separately, even though they may be doing so with a view to integrating the two should the need and the technology arise. Voice running across a data network, especially over IP, is still really in the 'hype' phase - that's the phase where everyone is excited about the technology without really being aware of its shortcomings.'
Shortcomings will remain, says Trowbridge, until the industry sits down and irons them out in the cold light of day. 'It is so easy to overlook a technology's downside when everyone is raving about it, but it is there,' he adds. 'For instance, when you pick up your telephone you get an electronic dialling tone. The phone gets the electrical power to generate that electronic tone from the PBX. However, if you are dialling using IP, where does the power come from to run the phone itself? You will have to plug it into the power supply.'
Suddenly, there is a need for plug sockets and uninterruptible power supplies (UPS) to guarantee availability, because anything less than a reliable PBX-managed line is simply not acceptable in a business context. In turn, that will have an impact on the total cost of ownership (TCO) because of the additional electricity overhead.
Trowbridge thinks it is going to be two or three years at least before there is any significant shift towards IP-based telephony largely because it will take that long to smooth over the rough spots. 'In the real world, businesses won't go out on a limb for the sheer hell of it - they need proven, benchmarked systems.
Wholesale replacement of PBX-based systems is not going to happen for a long time.'
Indeed, many companies are still trying to get their internet and intranet systems sorted out before they even begin to consider converged packages.
To some extent, they are having to revisit their entire networking strategy and build it again from the ground up. This is why, says Faye Holland, channel marketing manager for UUNet, the internet will create some exciting network-related opportunities for the channel over the next few months.
'The internet is becoming the logical way forward to fulfil the growing demands being placed on corporate Wans. The same logic, plus growing confidence within the market as regards the robustness and security of conducting business across the internet, should also see business applications such as enterprise resource planning (ERP) provided online across a Web interface.'
But the way these services will be delivered is by no means settled.
Neil Fairbrother, EMEA channel marketing manager for Motorola's internet and networking group, notes that, beyond a vague forecast that everything is converging on IP, there is very little certainty about the future of networking technologies.
And the future is far from settled on pure IP.
'Voice over frame relay continues to be the most used packet voice technology, although voice over IP is growing steadily. The increase in the complexity of the market means that the multi-service networking sector is a difficult one in which to operate for resellers, especially those that have chosen to specialise in a single vertical specialisation.
'To keep abreast of developments, good communication channels are required all the way through the supply chain and back to the manufacturer. In the meantime, a keenly fought quality-of-service battle will continue to rage within the manufacturing community itself,' says Fairbrother.
Network convergence is a competitive market that is becoming more crowded still. Samsung is one of its most recent entrants. Nigel Russell, managing director of Samsung Networks, says the company is coming in now because the market presents such a big opportunity. There is also a threat from traditional IT resellers. 'We are expecting just as much interest from the telecoms channel guys as the network resellers,' he says. 'After all, it won't be long before organisations of all sizes will buy their telephone and network systems from one supplier because the terminals for both will be one unit.'
According to Guy, however, some vendors may be missing the point if they simply assume there is a very big market out there that needs to be addressed by whichever route is possible. It's not about products, he says - customers and resellers will need the right skills in place to address this market properly.
'The underlying basis for customer loyalty is satisfaction, not the provision of multiple services. We need to be managing the customer, not the products.
Convergence is just another step towards the focus of maximising revenue from your customer rather than attempting to gain market share. Telcos become so focused on providing the customer with a multitude of revenue streams that they forget the real reason why a customer stays loyal - satisfaction.'
In the eyes of the customer at least, says Zervos, satisfaction means high-quality service. 'Users in this country and across Europe are still largely uneducated where networking technologies are concerned. In the end, understanding the technology and becoming more knowledgeable can only stem from a well-informed, well-intentioned, skilled channel of dealerships,' he says. 'That's why the reseller market is having to transform from a fulfilment channel to a much more rounded, service management-driven entity.
The message finally seems to be getting through to dealers that they have to become more service oriented if they are to succeed in the long run.'
Fairbrother contends that there are certain areas being neglected and too often left to chance by the industry: 'The business case for convergence is just as applicable to SMEs as it is to the corporate market. Lifestyle is clearly an important factor in the Soho market with the rise of the home PC, increasing internet access and Web-based interactive TV services becoming more commonplace.
'Sadly, the growing complexity of the technology and the market is making it difficult for the vast majority of SMEs to take real advantage of these technological developments. Product packaging and supply-chain accreditation schemes will become increasingly important as time goes on.'
Jamie Kelley, marketing manager for UK, Eire and Benelux at D-Link, says the advance of technologies and the subsequent lowering of prices of network technologies, combined with the push into the SME market is polarising vendors. High-speed systems such as Gigabit Ethernet are becoming more widely available and accessible. 'The big vendors are getting bigger and this is resulting in market divergence between the acquired/acquiring conglomerate and the independent networking organisations. Therefore, the middle market is disappearing.'
There are two key reasons for this, says Kelley: 'By buying into smaller, more specialist companies, the larger enterprise-class networking manufacturers gain the ability to design and construct high-end technologies much more effectively. This allows the price points to come down to levels more affordable to smaller companies, encouraging entry into the technology from companies for whom Gigabit Ethernet has previously been out of reach.
Not only will the price points attract them, but the need to deploy will also be driven by their business requirements.'
According to Kelley, this pricing structure won't damage resellers' margins.
All the service value - where resellers can make extra margin - that is normally added around the product will be factored into and packaged as part of the whole systems.
The consumer market for networking products and services is now growing rapidly and even the smallest offices may come to have a requirement for networking - particularly in light of the massive increase in teleworking and hot-desking over the past two years. Kelley expects this trend to continue: 'Networking devices are already in the home. With the cabling and phone infrastructure being upgraded in the UK by BT and others such as AT&T, there will soon be network support capability to underpin those using home devices that simply plug into the wall. As a result of this overspill, niche players will find opportunities both here and in the emerging retail networking sector.'
What we are seeing is a fragmentation of the market and it is becoming increasingly difficult to address the whole market. It is not easy to bet on the future and which markets will really take off. The temptation for vendors is to keep a finger in all the pies.
As a relatively new entrant, Samsung is faced with just such a dilemma.
'The home market is not quite ready, but again it is a door into which Samsung already has a foot,' says Russell. 'We're concentrating on the SMEs for now, but in the future I am sure there will be even more offices in the home if current trends continue. At some point, we will build a new, or extend the existing network, to family members for personal and educational purposes.'
Zervos believes vendors will have to look at niche markets more closely: 'To assume the market is a whole, single entity with a definite beginning, middle and end is a big mistake - these days there really is no single market where networking is concerned. The networking industry is a microcosm of several niche, specialist and often disparate segments. Once we all recognise that fact, it is easy to see that it is futile for networking companies, no matter how large or skilled they may be, to try to be all things to all people.'
The arrival of new networking technologies and convergence is also presenting opportunities for the channel, says Trowbridge. 'The greater the complexity of the market, the greater the number of opportunities the market will offer to the channel. There are going to be some excellent chances for resellers to leverage their businesses through specialisation.'
A recent Nortel study found that the majority of businesses in the UK still deal with the channel for their IT requirements, and Holland agrees there is still plenty of potential out there for resellers who make the effort. 'To take advantage of the market, resellers will definitely have to immerse and educate themselves thoroughly in e-commerce and internet technologies, and learn how to educate their customer bases, and their SME customers, in particular. The most effective training quickstart may be to deploy the very technologies you are trying to sell across your own organisation.'
Holland thinks there are going to be significant opportunities in terms of how core business applications can be provided via secure, virtual data centres. Vars need to bring together skills in tailoring value-added business applications with systems integration and expertise in networking to create internet-based business packages, she says. 'This can be a tall order unless dealers go about it collectively by joining up with the partnership programmes offered by the emerging forces in the channel. For instance, there are ISP backbone providers that see the local Var as the most effective route to getting smaller businesses online.'
There are other measures that resellers can employ to exploit these opportunities, according to Matthew Nunney, managing director for EMEA of Foundry Networks.
'Dealers have to align their product ranges to give flexible and scalable systems. They have to understand their customers and why those customers have made the decision to invest in the technology in the first place.
Then, they have got to match and sell the system to meet the customers' specific needs, not just supply boxes. The true value of a reseller is found in the range of skills that it has at its disposal, not in the specific products it sells.'
It's important, Nunney adds, for resellers to acquire and hone the skill sets particular to their areas of specialisation if they are to recognise and then make the most of the opportunities that come their way. 'You've got to understand the customer's needs - they often don't know the answers to the questions they are facing. That means ongoing skills and technology training is essential for both customers and resellers' employees. It is also essential to demonstrate the tangible benefits of a product to the customer. In particular, it is crucial to point out to the customer the cost savings that will result in terms of bandwidth, cost of ownership and manpower requirements.'
In the end, it all comes down to service, says Zervos. 'Networking is now a technology that is entering the mainstream of the IT market whereas it was previously a cliquey and very specialist area. Unlike many technologies, however, networking is not ultimately about the nuts and bolts of the system being bought. Whichever way you look at it, networking comes down to the dynamics of the relationships between vendors and distributors, distributors and resellers, resellers and users - and whether that long chain of relationships provides the customer with a system that really works well.
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