A move away from traditional equipment vendors such as Ericsson and Huawei by telecom operators could open up a multi-billion dollar market for the likes of Tech Mahindra, Wipro, HCL Technologies, TCS and Infosys.
Traditionally, telecom operators like Bharti Airtel and Vodafone Idea have almost completely outsourced the construction and management of their networks to equipment vendors such as Nokia and Ericsson.
However, with the emergence of 5G and rising cost pressures, telecom operators are trying to break free from traditional vendors and starting to look for other, cheaper options.
In particular, they are exploring the idea of building their wireless networks using off-the-shelf components purchased from the open market.
Two such networks have already been built — by AT&T in the US, and by e-commerce giant Rakuten in Japan.
Pressured by rising costs, the others are also eyeing the possibility.
HIDDEN OPPORTUNITY
Even though this is being done to reduce costs for the telecom operators, it will also open up a huge market for India-based IT consultants and system integrators like TCS and Infosys.
In particular, it will be a big opportunity for players like Wipro and Tech Mahindra which have traditionally had strong telecom consulting practices.
“Five or six vendors used to control this entire market for base-band units,” said Manish Gangey, senior vice president for networks at Bharti Airtel, one of the world’s top telecommunications companies. “They used to do their own designs.
“Now, all of that volume can get clubbed and become available for a common set of designs. Hardware becomes common across all deployments, all operators.”
Like rivals Vodafone Idea and Reliance Jio, Airtel is seriously evaluating the possibility of creating its 5G network using off-the-shelf components, instead of relying on boxes from traditional vendors like Ericsson and Nokia.
However, said Gangey, such a move will most likely require the help of an external player — a system integrator with experience.
This is because companies like Bharti Airtel and Vodafone likely lack the employee strength to do so themselves as they have traditionally outsourced most of their network planning, construction and management functions to equipment vendors like Nokia and Ericsson.
Given that the idea is to stop relying on the equipment from traditional vendors and use off-the-shelf electronics, operators also seem to be in the mood to look for new partners to help run these networks.
In the traditional set up, external consultants like Infosys and TechM were always at a disadvantage compared to equipment vendors like Nokia and Huawei, as only these equipment makers knew what lay inside their boxes.
But, now that networks are being sought to be built using equipment and software purchased from the open market, they are now almost at an equal footing as far as providing services are concerned. In addition, they are known for their low-cost approach.
Gangey pointed out that even the telecom operators’ employees will have to pull up their socks if they are to move away from ready-made networks to creating their own using off-the-shelf components.
“For too long, we have been dependent on our D-RAN vendor partners to do the bulk of the work: Design, planning, deployment..all aspects of network operations were taken care of with the help of these vendor partners. That has to change, because in an Open RAN scenario, operator employees have to do more than what they have been doing. There is re-skilling needed, and there is a change in mindset that is needed.”
What is more interesting from the perspective of Indian IT consulting companies such as TCS, Infosys, Tech Mahindra and Wipro is the service opportunity that this opens up not just in India, but across the world.
The cellular equipment and services market — estimated to reach $40 billion soon and until now practically the sole prerogative of players like Ericsson, Huawei, ZTE, Samsung and Nokia — will be opened up to competition from outside.
“Open RAN [radio access network] has really opened up the doors for a whole ecosystem to come up,” Gangey pointed out, participating in a discussion at the 2020 edition of India Mobile Congress.
On the other hand, he pointed out, only a handful of telecom operators in the world currently have the required in-house expertise and ability to construct and manage such a network.
“Somebody [from outside] used to do all these activities that goes into the life-cycle of a network, and operators were never worried about it. Now, we have an opportunity to bring in a new set of players into this. They need to learn the art of running the operator’s networks, and then start to offer those services, because not all operators will have the capability to build this in-house.
“Depending on the size of the operations, either you will do it in-house, or you will depend on a system integrator to do it,” he said.
For now, Tech Mahindra seems to be among the most aggressive in courting this opportunity, at least going by their presence at this year’s India Mobile Congress.
The company was the only Tier 1 IT services provider that pitched its services to telecom operators at the event, and sent its CEO and MD CP Gurnani to present its case.