Expert View

March 4, 2003
More enterprises outsourcing networks

Prem Behl and Pradeep Chakraborty

MUNICH -- Siemens ICN is currently offering two scenarios for setting up NGNs. One is the replacement scenario, that involves a step-by-step process and the other is the overlay scenario. Convergence Plus met up with Joachim Doring, president, Information and Communications Networks, Group Strategy, Siemens AG to find out which approach was suitable for carriers and why. Excerpts from an interview.

Convergence Plus: You have a new revenue model, that is, managing customers' networks and ensuring that their networks are 99.99999 percent up. Are you going to push forward this model in other areas as well?

Joachim Doring: That is our strategic agenda. We have created a whole new carrier services business unit. This is the second organisation besides Christof Wahl's organisation -- carrier networks. The second organisation's name is carrier services, which is headed by Daniel-Rui Felicio. Revenue wise, it is still a relatively small unit.

The idea is to evaluate models for outsourcing and out-tasking, and taking the ones where we believe we can really add additional value. We can maintain and operate the networks cheaper than our customers. We can bundle certain activities; perhaps, complete networks.

CP: You already have an ongoing discussion with Bharti in India. Taking into account the fact that you are an equipment supplier, would you also be in a position to talk to them that there is another area you can support them? So, if you are a service provider for uptime of networks, then will you automatically get the first call as far as equipment supplies are concerned?

JD: We do see a link there. If you are delivering high quality services, not only in installing the networks, but also maintaining them, even at a certain percentage, a great opportunity can become larger, besides building on the customer relationship. We can imagine all such scenarios that link us closer with our network operators or carrier customers. It also accounts for enterprises. More and more enterprises are outsourcing their networks. There are considerable types of virtual private networks (VPNs) and IP centric solutions. This is the next step -- to provide all of that -- and having a business model that is closer to the carrier business model. It is definitely the next and an important step, that is, to partner with the existing operators. However, what we really don't want to do is to get into competition with our carrier customers.

CP: How do you see something like this can be transmitted into new product offerings of intelligent networks for a country like India? What is the social objective in that as well?

JD: We do have the example of Malaysia. It is a comparable country. For example, we have done applications in the agricultural area. We have set up agricultural portals connecting network devices, which help farmers when they are out in the fields. For example, they will know how to maintain their fields. This is the main job. With the help of satellites, they can find out about the fertilizers that they would need to put on the plants.

At the same time, having these devices interconnected with other devices, means that everybody in this farming organisation can have direct contacts and communicate. We have done such projects in Malaysia. We have had a very good interaction with the Malaysian government under the multimedia super-corridor. Some of these applications have high potential to be commercially leveraged and some of them are pure investment.

CP: In India, majority of the orders go to the government-owned incumbents like the BSNL and the MTNL. They have a peculiar tendering process where the lowest quote gets the order. What sort of offerings would you have for such operators?

JD: The tendering process is probably right in keeping the lowest possible costs. We can offer network components in the NGN area where you start even with a lower capex. We are winning some of these tenders. The additional offerings, for example, taking over network operations or so, are going on a case-by-case basis. Telemar is a good example, where we worked out the case. Starting by the lower tender alone, we can also win orders in the normal and standard process as well.

CP: Are you providing vendor finance to service providers?

JD: Yes, but it is very, very selective. The past has shown us that risk wise, this is a dangerous field. It is a kind of field, where, even if you do it extensively, and even if you are at the end of the whole ecosystem -- the customer and you yourself are ending up adding debts and sitting on a network. The service is very much linked to network utilisation, business relation, etc.

CP: What sort of scenarios are you offering in NGNs?

JD: We are offering two scenarios in NGNs. One is the replacement scenario, i.e., a step by step, replacement process, and the another is the overlay scenario. In the replacement scenario, we are offering a combination of trunk gateways, access gateways and softswitches. That scenario helps carriers to migrate step-by-step from the existing TDM base into an IP converged base. This is the recommended approach. We are using softswitches for network control.

The other scenario is having an overlay network. It involves installing a broadband access equipment and putting in voice capability. That scenario is interesting for those who still want to maintain their TDM base and have an over-capacity in the TDM base. Besides, they may have needs for their broadband users. They can link the broadband users, put the voice users away from the TDM network on to the broadband equipment.

CP: What sort of approach would you recommend for state-owned incumbents such as BSNL/MTNL in India? If a revenue-generating application is used, won't the voice revenue go down?

JD: It is quite possible, if you were to take the first approach. By having softswitches combined with application server, you have the chance to use the ReSurpass program to bring in additional revenue services such as IP multimedia messaging, unified messaging, and even putting SMS on fixed networks. This is the revenue generation application, so yes, voice revenue will go down.