The telecommunications market, which has been in the doldrums for a number of years, is slowly seeing an increase in research and development and general spending - something that should result in the embattled telco market starting to rebound later this year.
So said Douglas Reed, MD of premier Internet service provider and network integrator, DataPro. Reed said that while the general mood remains one of concern, there are growing indications that research and development will play an important part in the industry`s recovery.
"Industry pundits and market players are getting more convinced that the market is about to turn the corner. What they see as the driving force behind this expected recovery is what appears to be a concerted investment in research and development to produce the next generation of high performance small form factor optical components that will drive bandwidth - something that is increasingly required.
"The downturn in the telco industry resulted in many companies slashing their R&D budgets, with the focus turning to pure survival in a market that became dotted with failures. In fact, many companies couldn`t even survive and what we have witnessed during the last two years are balance sheets bathed in red ink.
"But in recent months the market seems to have gained in stature and is beginning to seek new drivers for the industry - as well as refocusing on the requirements of new broadband networks. This is causing an increase in optimism, both inside and outside the industry.
"There has been an increase in R&D spending lately, as well as an increase in budgets. The increases might not yet be large, but at least they are there. Perhaps the only difference this time is that a lot of companies are not doing their own in-house research and are, instead, outsourcing this exercise. This is part of companies` attempts - especially some of the larger ones - to increase efficiencies but, at the same time, reduce or keep a handle on overheads while increasing turnover.
"The boom during the 1990s was crazy with companies buying and selling as if there would never be a tomorrow.
"Last year`s Optical Fibre Communication exhibition and convention, however, pointed to the possibility that demand can be stimulated by the development of new technology through next-generation fibres and components which will offer increased access to new services."
Reed said that by developing new system architectures built on high performance components and fibres, the telecoms industry is starting to fight for its own destiny and is starting to provide business cases founded on cost, performance and demand.
"What is happening is that telecoms operators and systems developers are looking for products they can sell now. They are looking for products and solutions where there are good profit margins - and where margins will remain a constant. These fundamentals seemed to be disregarded in the heady boom of the 1990s when everyone seemed to have the silly idea that the boom would never stop. The marketplace appears to have learnt from this lesson; it is far wiser now - and perhaps more resilient going forward.
"One thing that the players should realise is that there are a number of important market requirements - low cost, small form factor, and speed to market. There is no need to innovate from scratch. All the market really has to do - as do many other markets - is simply refine and redevelop existing components using new fibre developments to pioneer what is most needed: performance and bandwidth. The world is crying out for more bandwidth - and faster bandwidth - and one of the fastest growing segments of the telecoms market is likely to be the development of better fibres."
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