Summary
Existing vendors that are not selected as prime for their domain may have to sign reseller agreement with the domain primes and that would impact the bottom line and profitability. New vendors will be completely left out if not able to forge partnerships with the domain primes. Innovation can seriously be hampered.
Analysis
AT&T is apparently looking at doing a massive vendor consolidation in order to reduce its overall cost of supply chain management and technology development. There are several domains that are identified and there will be key vendors (2 vendors) that will be assigned as domain primes. This approach seriously strengthens the position of the strong vendors such as Ericsson, Cisco, and Alcatel-Lucent and can negatively impact existing vendors that do not become prime for their categories and the likelihood of them having to sell through the large OEMs. That model will negatively impact the bottom line of the existing vendors as they would have to sign reseller deals and sacrifice margin.
The main challenge will be for smaller vendors that are not currently a supplier to AT&T. Their access to AT&T will be highly limited and they would have to work two paths in parallel. First, they have to convince AT&T and second, they have to convince a domain prime to represent them. Many domain primes have or claim to have competing solutions and that could kill the competitive nature of the industry and hamper innovation.
AT&T has to allow for innovation or else new technology development will be reduced since the major equipment vendors have little incentives to change their models and will continue to push their agenda.
