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Recession Puts These Network Vendors to the Test

Sat, 08/01/2009 - 8:25am
Maisie Ramsay

Despite the economic odds, network testing companies manage to hold their own.

Carriers have withstood the worst of the recession, managing to squeak out growth despite the raging tides of the worldwide economy. The ripple effect of their successes helped keep telecommunications’ peripheral industries healthy: Consumers are buying sleek new handsets; developers are creating superfluous quantities of new applications; and networks are expanding and growing stronger.

Thanks to this growth, the network testing industry, too, has benefited. Though they’ve had to make adjustments, their business has withstood the worst that the recession has thrown at them.

NEED FOR SPEED
Carriers’ push to beef up 3G networks and deploy 4G networks has forced them to increase testing. Everything from base stations to femtocells must work seamlessly to ensure the flawless performance expected by customers, and all that means good business for testing companies.

Although carriers are being cautious with their cash, they still need to bulwark the network against massive loads of data. The number of mobile data users is estimated to increase four-fold from 2004 to 2011, according to research firm Frost & Sullivan. The need for testing grows with the load on the network, says Frost & Sullivan analyst Olga Yashkova.

Olga Yashkova
Yashkova: Loading networks creates the need for more testing.
“Initially, when 3G systems are installed, they are installed with a rather small subscriber base, which makes testing more straightforward,” Yashkova says. “Once service providers begin loading networks with a greater number of subscribers, the networks tend to experience more self-interference, gaps in coverage and overlapping, which leads to the need for more testing.”

In addition, Yashkova says, the increasing use of wireless technology by enterprises has made quality of service a higher priority for carriers. “Once a technology spreads to the enterprise market, a best-effort approach is no longer sufficient,” she says.

The result: more vigorous testing.

INTEGRAL ROLE
Ovum network infrastructure analyst Dana Cooperson says her recent research into network testing found that the industry had a firmer foothold than she had previously imagined. Instead of finding that network testing was merely a one-time cost-savings tool to carriers, she found that it played an “integral part” of carriers’ research and development strategy because third-party testing helps make the R&D process more efficient, putting the industry in a favorable position for long-term growth.

“Economic conditions, per our research, don’t directly hinder the industry and they could actually help as prospects look to increase time-to-market efficiency,” Cooperson says. “As the ecosystem gets more complex, particularly on the mobile side, with all the different devices and related applications, the opportunity grows.”

That is not to say that the industry is completely untouched by the recession. Yashkova warns that service providers remain “extremely cautious investing in network infrastructure or test equipment” and are carefully evaluating how to maximize returns from their existing equipment and test and measurement budget. To that end, she predicts that test equipment will become increasingly targeted at core functions versus niche areas as carriers limit spending.

Dana Cooperson
Cooperson: Economic conditions could actually help as businesses look to increase time-to-market efficiency.
Indeed, Frost & Sullivan predicts that no extra cash will be flowing toward network performance monitoring and management in 2009, and some companies will actually cut back on their information technology expenditures.

CAUTIOUS CHANGES
Perhaps that’s why some network testing companies find themselves trying to do more, for less. They are making cautious changes to their business strategy and keeping a watchful eye on the competition. “The economy has forced [testing companies] to prioritize on those projects that will have a better return,” says Aart Konynenberg, senior product marketing manager with Anritsu.

Konynenberg says one effect of the recession is the withdrawal and scaling-back of niche players that had been trying to expand into more lucrative, competitive markets. He cites 4G as an example. “It could be that companies that are trying to make inroads into LTE are pulling back,” he says. “In general, companies are refocusing their efforts.”

Aside from reconsidering ventures into highly competitive markets, network testing companies are also keeping a wary eye on their customers’ own testing solutions, which are developed in-house and seen as a competitive threat by some firms.

“Our biggest competitor is in-house tools that [companies] customize and build,” says Brunson James, who heads wireless sales and product strategy at Spirent. “The vendors have test schedules driven by customer engagements. As a test tool supplier, we have to be very cognizant of that in terms of delivering software ahead of time … The risk to us is that if we don’t deliver it on time, [carriers] will develop in-house tools to develop the testing they need – even more so than for the infrastructure vendors.”

There are also widespread attempts to make networks self-optimizing with the goal of largely circumventing the need for outside testing, but so far those networks have failed to be entirely independent from the likes of Anritsu and Spirent.

Zach Lovell
Lovell: Overall, telecom is being least impacted.

BIRD’S-EYE VIEW
Agilent, a massive company whose operations run the gamut from bioanalytics to network testing, has a unique perspective on the state of the wireless network testing industry. “We’re seeing telecom being the least impacted overall right now,” says Zach Lovell, Agilent’s LTE product manager for its network solutions division.

“Certainly there is some softness, but what we’re seeing right now is that most of the impact is in the more mature technology area, and that has more than been uplifted by emerging technologies… Early on in the wave, a lot of network equipment vendors spend money.”

Like the rest of the testing industry, Agilent depends on the capital spending of communications companies and has had to cope with volatile order growth.

Fortunately, the company has been insulated by the business coming in from carriers’ network upgrades, and its communications testing segment is expected to have above-average market growth over the next few quarters.

Although it is a smaller company that has historically specialized in IP infrastructure testing, Ixia shares Agilent’s positive outlook: It recently acquired Catapult to get into the network testing business with the goal of capitalizing on IP-based LTE.

“The business pressures will push them, the time-to-market pressures will press them,” says Ixia President and CEO Atul Bhatnagar. “Economic realities will force them to use the best plan for their spending dollars.”

Despite the threat from in-house testing and carriers’ flat-lined spending, it appears that the network testing industry is going to pull through the recession just fine.

LTE HOGS THE LIMELIGHT

Citing the company’s worldwide presence, Aart Konynenberg with Anritsu calls LTE network testing a “global exercise.” At Agilent, the company views LTE as one of its key growth areas, although it’s not the only place where the company sees development. Over at Spirent, the company has worked to toward getting “a significant market share in the LTE business.”

Although they all dabble in WiMAX, none of them cites it as an area of focus. For network testing companies, it’s all LTE.

WiMAX is ahead of LTE in terms of deployment, thanks to its presence in U.S. and emerging markets. However, while LTE has attracted a critical mass of large-scale infrastructure vendors and Tier 1 operators, WiMAX has found itself largely relegated to niche markets, with the notable exception of Clearwire. As a result, LTE has influenced the market far more than WiMAX despite the rival technology’s head start.

“In general, LTE is affecting test equipment companies far more so than WiMAX… On the WiMAX side, I haven’t seen as much interest on the part of the operators when it comes to some of these solutions,” says Michael Thelander at Signals Research Group.

He attributes his observation to a combination of economic and technological factors. WiMAX networks are often both fixed and mobile, which Thelander says reduces the imperative to test. Also, smaller carriers deploying WiMAX in niche markets may simply not be able to afford the lavish testing conducted by the likes of AT&T or Verizon Wireless.

“If you’re not deploying a fully mobile network, optimization becomes less important,” he says. “And if you’re dealing with a very small operator, they’re going to spend their money elsewhere. The guys who care more about optimization have deeper pockets.”

Still, WiMAX and LTE are very similar technologies and testing for WiMAX is just as demanding as it is for LTE, even if WiMAX’s future market is projected to be smaller.

Ed Agis, senior chair of the certification working group for the WiMAX Forum, says that while WiMAX’s profile may be lower, the industry does a lot of testing. The forum has helped conduct WiMAX network interoperability testing for the past two and a half years and is working closely with testing companies, including Agilent, AeroFlex, Rohde & Schwarz and Tektronix.

They are currently conducting end-to-end networking and network interoperability testing based on their WiMAX standards and are working to build out their testing capabilities, Agis says. -MR

 

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