Software: an untapped revenue source for network element vendors

Publication Date	June 2009
Publisher	Ovum
Product Type	Report
Pages	19
ISBN Number	not applicable
Product Code	OVM00804

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Summary

Ovum surveyed major telecom equipment vendors to gauge their views on how they package, market, and sell network equipment software. Vendors are still struggling to move software development from an overhead to a profit center model.

Content

EXECUTIVE SUMMARY
- In a nutshell
- Ovum view
- Key findings
- No one has figured out a software business model for network telecom equipment
- Software is a critical element of network telecom equipment sales
- Element layer software is treated differently than management layer software
- Software maintenance is most often provided as part of an annual maintenance contract or subscription
- Market analysis
- Software products survey overview
- Software is key, but it remains a cost, not a revenue center
- Breadth of software provided
- Importance of telecom equipment software
- Software as a profit center
- Software is homegrown
- Software packaging and pricing strategies
- Approaches depend on type of software
- Remote activation of software functionality
- How vendors charge for software varies significantly
- Element layer software is rarely bundled with management software
- Most vendors consider control plane software to be part of the element layer software
- Most vendors charge per network element for software licensing
- New element layer software is provided once or twice per year
- Software revenues as a percentage of system sales
- How vendors organize software development groups
- The management layer software opportunity
- Additional revenues possible for value-added features
- Management layer pricing models
- Multivendor interoperability is limited
- Software maintenance contracts increase margins
- Competitive perspective: nobody has worked out their software business model
List of Figures
- Figure 1: What types of software do you provide for your telecom network equipment?
- Figure 2: How important is software to your overall product line strategy?
- Figure 3: Do you view telecom equipment software as a profit center or as overhead for your NE P&L center?
- Figure 4: Are software sales allocated to a separate profit/loss center from the NE P&L?
- Figure 5: Is element layer software (NE operating system and control plane software) treated differently than management layer software?
- Figure 6: On what do you base your charging model?
- Figure 7: Is element layer software provided on a stand-alone basis or is it bundled together with management layer software?
- Figure 8: Do you consider control plane software (if you offer it) to be part of element layer software or a separate product?
- Figure 9: How vendors charge for element layer software
- Figure 10: How often do you provide major software releases?
- Figure 11: Percentage of total systems sales typically related to software
- Figure 12: How vendors charge for management layer software
- Figure 13: Vendor strategies for multivendor element management
- Figure 14: How vendors sell software maintenance
- Figure 15: If you charge annual RTU fees, is software maintenance included?
- Figure 16: Frequency of software upgrades
- Figure 17: How telecom equipment software is delivered
- Figure 18: What percentage of total systems sales is related to software maintenance?