Describe the technological features of and the role of standards in the telecommunications network equipment industry? How does technology add value for customers in this industry?
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CISCO Systems and Telecom Network Equipment Industry Describe the technological features of and the role of standards in the telecommunications network equipment industry? How does technology add value for customers in this industry? Industry Background: The networking industry started in late 1970's with the widespread use of IBM proprietary computer architectures which used "dumb" terminals connected to the mainframe computer. As the trend towards the "distributed processing increased, the companies felt a strong need to integrate their desktop so that information can be shared. Further, the movement towards open standards in data processing and transmission gave impetus to the industry. As industry became more mature, the equipment providers which formed the core of the industry focused on two areas: 1. Increasing the efficiency of transmission through packaging data within various protocols. 2. Compression technologies and increasing absolute bandwidth which increases the amount of data, or the size of the data packet that can be transmitted in a given amount of time. Network Components: A typical data network consists of the following products: Network Interface Card (NIC): Usually installed on desk top PCs allowing these PCs to send and receive data across corporate networks. Hub: Central collection point for a corporate network which breaks up and recombines data signals from individual desktop machines for efficient transmission. Switch: directs traffic between corporate hubs as well as to outside links through the router. Router: usually the core of the corporate network: it sends packets of data between far flung corporate sites as well as outside connections via the internet Frame Relay and Asynchronous transfer mode (ATM) Switch: Recently develop types of switches that direct data traffic across network while effectively enhancing bandwidth and transmission speed. Remote Access Device: Handles data to/from remote or mobile sites typically over common telephones lines, using modem technology. Modem: Most often found in homes or remote desktops; allows users access to networks through a common telephone line.
Reduced costs, increased market share and accelerated deployment, increased flexibility are some of the advantages: 1. Open standard created positive network effects for Cisco. It increased the customer base. 2. New telecom companies followed the open standards set by Cisco. Later, it became easy for Cisco to acquire these companies and integrate them with Cisco. 3. A strong movement away from proprietary standards to a greater acceptance of open standard in data processing and transmission assisted Cisco to garner market share. 4. One-stop-shopping helped Cisco to become a preferable suppler for big enterprises. 5. Strategic alliances with technological leaders like Microsoft and Intel helped Cisco to develop products which became industry standards. Principal components of Cisco' Business strategy: 1. Growth through Acquisition 2. Strategic partnership 3. Innovation 4. Branding 5. Unwavering customer attention Cisco has primarily used acquisition as its growth strategy. 1995 onwards Cisco has acquired 95 companies. Following are the key components of its acquisition strategy: Acquisition Criteria 1. Importance to company's products and people and net market share 2. Corporate culture should be in agreement with Cisco's corporate culture 3. Clear short term benefits for both the companies 4. Clear long term prospects of the combined company should be attractive 5. Target should be within close geographic proximity to Cisco's centers. Acquisition Approach * Nearly all of acquisitions have been purchased using Cisco stock as a primary form of consideration * Cisco rarely participates in competitive bids/auctions, instead it chooses to undertake a process based on relationship and negotiation that allows it to build a significant expertise in acquisition game. * The process of identifying , assessing and executing acquisition is managed through Business Development Group ("BD") which is divided into 3 functional teams: o Mergers & Acquisitions and Investment o Business Partnership o New Markets 1) Developing an Acquisition Strategy: Step 1: BD works closely with senior management to jointly develop the company's long term strategic vision and to identify the technologies which are consistent with the vision and key to achieving these objectives.
Converged Network Infrastructure (CNI): Shown below is Cisco's product representation in the CNI model, which puts optical transport at the core, wrapped in turn by switching and then layers of edge services, applications, and access technologies. Many incumbent carriers are wary about the shift of profitable legacy services such as voice circuits and leased lines onto a converged IP/MPLS network. Most of them will run these services directly over their optical transport networks for the time being. There is no easy way to migrate their exceedingly complex networks to a lower-cost, converged packet-switched core. In fact, they may take divergent approaches to preserve investments in legacy "stovepipe" networks. The challenge is migrating to IP technology without killing the legacy business models. There'll clearly be a merging of organizations - the transmission guys with the router guys. Implications for the network equipment industry: That's where equipment supplier market positioning becomes important. For example, Nortel is in a good position to benefit from the carrier's dependence on optical transport because it has a strong set of optical transport products. At the same time, Nortel is continuing the development of ATM products, which are likely to remain part of the mix for some time, while talking about continuing developments in MPLS. Lucent's decision to halt ATM developments after acquiring Ascend for $20 billion "beggars belief." Lucent's strategy on the IP routing front is now largely dependent on its newly formed OEM relationship with Juniper. Equipment suppliers may soon fire back with new marketing messages and/or strategies for convergence. Existing barriers: 1. Access to users. 2. Regulatory restrictions on use of infrastructure. 3. Prices for telecommunications services. 4. Availability of content. 5. Fragmentation of EU market. 6. Insufficient IPR protection. Potential barriers: 1. Regulatory uncertainty. 2. Multiple regulatory bodies. 3. Market entry and licensing. 4. Access to networks, conditional access systems and content. 5. Allocation of radio frequency and other resources. 6. Varying approaches to the achievement of public interest objectives. 7. Public confidence in new environment. 8. Lack of standards supporting interoperability and interconnection of converging networks. SAIT Project Group C4 Page 1 of 15
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