Incumbency Will Be Major Factor For Niche Suppliers in Troubled Market

Implications: Incumbency will be critical in whether vendors win or lose during the downturn in the US telecom market. R&D and service programs will suffer the most. If layoffs occur at one of these suppliers, instead of getting rid of the most experienced employees, the company should try as much as possible to retain its in-house expertise. 

Analysis:  During times of free spending and really good income, many service providers may be a little more willing to take a chance on new suppliers.  When times are tough, the carriers invariably turn to their most trusted partners – the incumbents.  These buyers have greater expectations with established manufacturers to get the best product for the cost.  They can also anticipate the most help when problems occur.  Smaller and less-known companies cannot be counted on to survive a market slowdown.  In addition, it is becoming extremely difficult for less significant companies to borrow money that is needed to keep pace with the development of new products and feature/functionality being demanded by the carriers -- and by the enterprise space as well.  

The interesting twist this time, in comparison to the past, is that the situation does not look very promising for the traditionally largest systems integrators – Alcatel-Lucent and Nortel – both of which have been struggling financially for quite a while.  Vendors that target particular portions of the network including ADC, Adtran, Ciena, Cisco Systems, Corning, Fujitsu, and Juniper – and perhaps even Tellabs – will be in the best position to find opportunities available to them.  However, these suppliers will need to be ready when the market comes back to full health.  They must do whatever they can to keep their finest people – particularly in the areas of R&D and maintenance.