Wednesday, March 23, 2005

Nortel and Lucent talking with Huawei

Light Reading is reporting that Huawei has had discussions with LU and NT to form some sort of partnership with suppliers in North America. I have argued for a while that sooner or later the traditional equipment suppliers in the Western world will procure equipment from lower cost suppliers in China (some like Tejas Networks in India are also upcoming) and themselves become only service oriented. The Chinese suppliers will need the LU, NT, ERICY, ALA, SI for their relationships with the carriers. The "old guard" companies will become service oriented and the new "box suppliers" will be low cost producers from China. I believe this will change the structure of these old guards dramatically and basically lead them to butt heads with likes of IBM Global Services, EDS, and ACN. This should also lead to lower margins, lower R&D spend and much smaller operations. This transformation will take time (as with anything in Telco land) but I believe the management's of the "old guard" are still not ready for it and for the most part neither are the investors.

The early part of this transformation has already started with JNPRs partnership with LU, SI, ERICY. SONS partnership with MOT, ADC and Samsung and CSCOs heavy reliance on IBM Global Services and evolving partnership with LU.


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