Continually refining standards and the development of a healthy supplier ecosystem have steadily moved the telecom industry from proprietary to standards-based designs. As a result, network equipment providers (NEPs) are now in a position to avoid hardware design altogether and focus development efforts on software-based value-added features. An evaluation of the make-versus-buy decision that considers the entire product lifecycle shows significant advantages on the 'buy' side for everything from modules to entire systems.

The telecommunications market has experienced enormous changes in the last few decades, and the pace of its evolution is increasing. Twenty years ago vendors could reasonably expect that their system design would have an extended market lifetime. Now, however, demands for new communications capabilities are continually arising. Moore's Law of computer technology advances seems to apply equally well to other areas of innovation: new capabilities seem to be appearing at an exponentially growing rate.

This increasing pace of innovation has altered the traditional telecommunications market model. Rigorous market research, once the foundation of new product definition, is unable to keep up with changing market demands or predict new ones. No market research could have predicted the billion-dollar market for cell phone ring tones, for example, because the concept had no precedent. The new model for telecommunications mirrors what has proven successful in the Internet domain: "try it and see what sells."

A second factor altering the telecommunications market is a steady erosion of the distinction between enterprise-level and carrier-class systems. Private branch exchange (PBX) systems and central office systems once had very different functional requirements. Now they differ more in scale than in behavior. As a result, more competitors are selling the same type of product. This has increased both competition among vendors as well as accelerating the pace of innovation and market change.

Performance Not the Driver
A byproduct of rapid market change has been a shift away from performance as the prime-driving factor in market success. The ability to offer new capabilities and pursue new revenue opportunities quickly has become more important to telecommunications equipment customers than modest increases in bandwidth or call volume. Experience is showing that performance improvements need to exceed 20% just to get any notice. The first to offer a new feature, however, can gain market share and set the benchmark that all other competitors must then exceed (by at least 20%!) in order to recapture market share. Simply replicating a feature is not enough; the market perceives later introductions as imitative, not innovative.

As the market has changed, the requirement for proprietary system design has diminished. Numerous standards have arisen that address the design of telecommunications hardware components and platforms, hardware and software interfaces, and middleware. Subsequently, many standards-based telecommunications system elements became available from multiple suppliers, shifting such elements from proprietary design opportunities more into commodity items.

What has evolved is a robust standards-based supplier ecosystem. The foundation is composed of organizations working both to address telecommunications system design needs as well as to ensure interoperability among standards-based building blocks. On the hardware front, for example, the PCI Industrial Computer Manufacturer's Group (PICMG) has developed hardware standards covering a range of form factors for individual boards and modules.

Along with the standards groups, other industry organizations have arisen to provide coordination and guidance for areas such as platform profiles, high availability middleware, carrier-grade operating systems, and the like. One is dedicated to ensuring that these various standards bodies target the real-world needs of telecommunications service providers. Another, the CP-TA (Communications Platforms Trade Association), is working to ensure multi-vendor interoperability among standards-based components.

Full Platform Purchasing
Under the guidance of these various organizations, a host of suppliers have developed a full range of standards-based products that network equipment providers can use as the basis of their product designs. Developers can choose to utilize individual modules, populate a standard chassis with a full array of modules, or even acquire a full NEBS-certified system platform upon which to deploy their software applications. The interoperability of these standards-based system elements fosters competition among suppliers, ensuring both low cost and rapid innovation.

The presence of this ecosystem and its product offerings has been driving the telecommunications industry away from proprietary design toward systems based on the purchase of standards-based equipment. According to a recent study from market researcher Venture Development Corporation (VDC), more than half of the Tier I equipment vendors and nearly three-quarters of Tier II and Tier III vendors are basing their next product design on PICMG's xTCA (Telecommunications Computing Architecture platforms (See Figure 1). VDC also expects that by 2010, as much as 85% of Tier I system designs will follow this path.

Figure 1. Market research firm VDC says that the majority of new telecommunications systems now use a standard-based design approach.

There are many reasons why the old make-versus-buy decision is becoming "buy" for telecommunications equipment vendors. One is that the strategic validity of proprietary design has declined: purpose-built equipment is no longer essential for competitiveness. Instead, functional flexibility has become a key requirement, helping reduce the effort needed to keep pace with feature innovation. Software, not hardware, is the avenue to new features and applications.