In a time of coy spending, infrastructure vendors are warming to professional services as the surprise boon of the sector.
In their last quarterly reports, all the vendors glowed over the new revenue stream, which has raked in billions of dollars in a cash-challenged market.
None of the major players, including Motorola Inc., Nortel Networks Ltd., Nokia Corp. and Lucent Technologies Inc., is out of the loop. L.M Ericsson said professional services account for about 25 percent of its business, and it is growing. In its last earnings report, professional services accounted for about $498 million, which could bring its annual revenue this year to billions of dollars. Nokia said professional services account for less than 30 percent of its annual business. Although the company does not offer quarterly guidance for that sector, last year it accounted for more than a quarter of its $6.54 billion net sales.
Motorola Inc. said services account for $1 billion of its business-24 percent of its business-while Lucent puts its figure at about $2.7 billion. Nortel Networks said professional services, which it describes as network services, covers about 20 percent of its business.
Because this is a new area of emphasis, vendors’ figures are not as clearly defined as in other business areas, so the vendors have not clearly distinguished net sales from gross sales and use the word “business” to cover all their activities. In some of the companies, the figures include some wireline services. But they all said wireless accounts for the lion’s share of the figures they provided.
“As networks slowed down, we have grown the services,” said Dan Bigbie, vice president of professional services at Lucent.
“In line with industry trends, the share of operator services in Nokia Networks sales has been increasing over the years,” said Laurie Armstrong, media relations manager at Nokia.
The revenue stream emanating from this space has triggered a new scramble for market share among the players, and operators have encouraged multi-networks services in which vendors provide professional services for networks they did not install and deploy. All the major vendors said they have such contracts.
Professional services cover areas such as hardware integration, software integration, planning and design, security services and, in some instances, government integration services. Most of the companies distinguish installation and deployment from professional services.
“More and more, the network is becoming a product,” explained Jay Whitehurst, vice president, wireless global operations at Nortel, showing the new concept of the network.
Part of the need for professional services arises from the increasing demand for optimization of the networks, remarked Arun Bhikshevaran, director of strategic planning at Ericsson.
“We have expanded our portfolio to offer new services domains, including multi-vendor networks and network operations, and new services that climb the value chain to manage even higher-level functions,” said Nortel spokesman Jay Barta. Nortel leverages its “core competencies in RF planning and engineering, network integration, installation, commissioning.”
Motorola said professional services enhance a suite of applications, which has driven operators to bring more revenues to the area, according to Paula McCarty, senior manager of services marketing at Motorola.
Armstrong said Nokia has been active in this field for many years, although the relative uptick in this market started only a couple of years ago. She said Nokia has launched a set of solutions, such as combining its Nokia NetAct with expert operator services, to support operators.
Bigbie said Lucent over time has created the professionals with the tool set to meet the operators’ demands. He explained that a few years ago, vendors like Lucent merely responded to operators’ requests for such services, but with the increasing need for such services, the company has become proactive.
He explained that the rounds of layoffs in the company did not dilute the resources of the professional services pool, adding that the company was careful to retain the staff that would enhance the services business.
Armstrong said Nokia does not dilute its research and development unit. “Nokia’s development of new services goes hand in hand with its R&D,” she noted. “Our aim is to closely link our operator services with our products and systems based on a strategy to create solution business, where the products and services are built to support each other.”
