1、11CONTACTSMCKINSEY & COMPANYJ.R. Lowryjames_McKinsey & Company, Boston: 1-617-753-2110Jeff Kosowskyjeff_McKinsey & Company, Boston: 1-617-753-2263Kushe Bahlkushe_McKinsey & Company, New Jersey: 1-973-549-6462GOLDMAN, SACHS & CO.Debra Katz, Communications SGoldman Sachs, New York: 1-212-357-1377Natar
2、ajan Subu Subrahmanyan, US Communications Technology:Data Networking and Optical Components and SGoldman Sachs, Menlo Park: 1-650-234-3313Brantley W. Thompson, US Communications Technology:Wireline/Wireless EGoldman Sachs, New York: 1-212-902-9823Luanne Zurlo, US Telecommunications SGoldman Sachs, N
3、ew York: 1-212-902-6702CONTRIBUTORS/ACKNOWLEDGEMENTSMany people at Goldman Sachs and McKinsey participated in the creation ofthis report. In particular, we acknowledge the following individuals:MCKINSEY & COMPANY GOLDMAN, SACHS & CO.Core TeamKushe BahlChris GilbertJeff KosowskyMoshiko LevharJ.R. Low
4、rySarah PohlenDai VuBob HuManish SinhaGilad SokolovAbhinav TanejaShing YinSteering CommitteeGreg BesioPeter BissonBrad BrownTom FrenchVivek MohindraMike NevensStagg NewmanJim SeabergOther Advisors / ContributorsSimon BlackburnCurtis CopelandPerry CuiFeroze DewanChip HardtJames KaplanAndrew Kincheloe
5、Simon LandlessDana MaorGreg MooreJudith StopardCore TeamHerb BeatsonSara DawesChristopher FineLisa FontenelliJames SimmonsErnest Kwarteng (part time)Research AnalystsDebra KatzNatarajan Subu SubrahmanyanBrantley W. ThompsonLuanne ZurloOther Contributors / ReviewersJeff AdamsLawrence CalcanoFrank Con
6、norFrank GovernaliChuck HarrisMary HenryJim HimesTim IngrassiaBrad KoenigGregory LeeRyan LimayeWe would also like to thank all the individuals outside McKinsey and GoldmanSachs who spent time on this project. These include representatives from thecompanies we interviewed, including service providers
7、, equipment andcomponent manufacturers, operational support systems (OSS) providers, andsystems integrators. We would like to thank the following individuals inparticular: Bruno Codispoti, Jim Frey, Joe Gleeson, George Kawand, VivekKhuller, Randy Korn, Tony Marson, Andrew Odlyzko, Debanjan Saha, and
8、 AnnVon Lehmen._This summary is an abstract of a larger report published jointly by GoldmanSachs & Co. and McKinsey & Company in August 2001. For a copy of the fullreport, please contact your Goldman Sachs & Co. or McKinsey & Co.representative.This report is the result of a joint research effort bet
9、ween McKinsey & Companyand Goldman Sachs. This industry-level study owes its genesis to a series ofongoing conversations among the authors and the mutual decision that poolingresources would prove a productive means to gain insight into key markettrends. McKinsey & Company was not retained by Goldma
10、n Sachs to work onthis effort. Goldman Sachs may subsequently draw on information andconclusions contained in this report to develop investment recommendations.McKinsey & Company does not make investment recommendations, in thisreport or otherwise, and nothing in this report should be interpreted as
11、 anopinion by McKinsey & Company on the prospects of specific companies._Important disclosures appear at the back of this report.11RESEARCH HIGHLIGHTSOPPORTUNITIES AMID THE GLOOMThe Wall Street Journal, on July 25, 2001, stated that “The impact of theTelecom bust reverberates far beyond telecom carr
12、iers and their equipmentsuppliers, down through a food chain that reaches into almost every corner ofthe economy.” Certainly, the last year has seen a serious contraction in stockvaluations throughout the telecom universe, from service providers toequipment and component vendors. Each of the past th
13、ree quarters hasproduced a flood of negative earnings announcements, write-offs, and layoffs.Like all rapid and wide-ranging industry and economic shifts, the “TelecomCrash” gives rise to more questions than answers. How did it happen? Where isthe industry now? How wide are the effects? When will it
14、 be over? Whichcompanies and technologies will emerge and who will come out ahead?Over the past several months, a joint team of analysts from McKinsey andGoldman Sachs have examined these questions to gain context and perspectiveon the current communications infrastructure slowdown and life beyond f
15、orequipment, component, and Operational Support Systems (OSS) vendors. Thisteam arrived at the following conclusions and strategies for success.Key Conclusions1. The current equipment industry slowdown has not been caused by afalloff in actual bandwidth demand (versus ebullient demand forecasts)from
16、 enterprises and other end-users, but rather by supply-side factorssuch as over-building by carriers, over-manufacturing by vendors, andover-capitalization by financial markets, coupled with unrealisticmarket expectations.2. We expect sales of equipment to be impacted for one to two years inlong-hau
17、l and less than six months in metro transport markets, drivenprimarily by the time it will take to absorb installed overcapacity. Inthat time, excess inventories should be consumed and distressed assetsredeployed. Component vendors should see a pickup approximatelythree months earlier because of the
18、 ordering lead times typicallyinvolved, partially offset by excess inventories at systems vendors.3. The time necessary to absorb excess bandwidth capacity depends onactual demand growth and on the network overhead that is required tomeet demand. According to our conversations with network engineers
19、,the total overhead factor designed into networks could range from 32 to50 times average bandwidth demand today, given existing network2architectures, Internet protocol (IP) traffic characteristics, and carrierbuild strategies. As data traffic becomes a greater portion of the overallmix, overhead re
20、quirements should increase slightly, to 33-55 timesaverage bandwidth demand.4. Beyond the current slowdown, equipment, component, and OSSvendors will need to help carriers satisfy demand growth whilemaintaining profitability by delivering solutions that reduce per-bitcosts by 25%-30% per year. Capit
21、al expenditure (capex) reductionsalone will not suffice, so new solutions must reduce operating expense(opex) and enable new revenue-generating IP services.5. Successful equipment and component vendors can help carriers meetthese profitability challenges by delivering transitional products thatsuppo
22、rt legacy services and architectures, and deliver most of thereduced cost and complexity benefits of full next-generation products.According to our network model, these transitional networkimplementations should result in savings of 40%-45% in capex per bitand about 6% in opex per bit over current l
23、egacy networkimplementations.6. OSS software providers will play a critical and complementary role bydelivering products that reduce operating costs, support next-generation network architectures, and enable new value-added IPservices. Based on our conversations with large carriers and systemsintegr
24、ators, near-term software fixes alone could reduce per-bit opexby up to 10% and increase revenues by up to 6%.7. Given that many non-incumbent carriers have exited the business orare struggling, vendors will need to alter their product designs andsales approaches to accommodate the longer sales cycl
25、es and morerigorous certification processes of incumbents and their focus on totalcost of ownership.8. Technology vendors will need to work together and with standardsbodies to promote interoperability, given the emerging need for end-to-end service provisioning, signaling, convergent billing, and i
26、ntegratednetwork management. This will prove to be a difficult challenge for theindustry and may well not happen, given competitive forces as well asthe overall difficulty and complexity of standards definition andcompliance.9. Industry consolidation appears inevitable. The demise of carriers thatfa
27、il to reach profitability, and lack of funding for new serviceproviders, will likely lead to fewer, larger leading equipment providers,supported by a handful of key component players. OSS vendor3consolidation will likely be driven by service providers desire to dealwith fewer vendors that offer broa
28、der solutions, rather than manyvendors with point solutions that address individual OSS areas.10. Additional downside riskssuch as a prolonged economic downturn ordestructive competitor behaviorpose the greatest risk to ourperspectives. Missed upside opportunities are less likely.Strategies for Succ
29、essWith the above conclusions in mind, we came up with the following strategiesfor success for equipment vendors, component vendors, and OSS companies.We believe these key success factors will form the basis of competition over thenext three to five years and will require significant changes in mind
30、set andcompetitive strategy.System Vendors1. Focus on providing hybrid systems that reduce total cost of ownership forcarriers and enable new, value-added services, rather than purely innovativeproducts that have a low up-front cost.2. Push for early trial and successful deployment with leading serv
31、iceproviders that will survive the current shakeout.3. Support development of industry standards and ensure that products can beeasily integrated.4. Develop systems that further reduce the demand-to-capacity overheadfactors.5. Forge (multiple) partnerships with OSS vendors and systems integrators.6.
32、 Facilitate value-added and integration services for customers (e.g., networkdesign and planning).Component Vendors1. Focus R&D investment on specialty components and disruptivetechnologies that can improve price/performance by 5-10 times.2. Improve manufacturing yields, throughput, and packaging to
33、 reduce costs15%-20% per year.3. Focus on product innovations that (directly or indirectly) help reduce totalcost of ownership for service providers.4. Develop more integrated modules and sub-systems.4OSS Vendors1. Support the development and adoption of industry standards and truly openapplication
34、programming interfaces (API).2. Expand product portfolios horizontally across network managementfunctions and selectively “northbound” into the service management layer.3. Create integrated suites of IP OSS products.4. Take advantage of selected legacy system opportunities.5. Partner with multiple e
35、quipment vendors to create integrated andinteroperable network management platforms.6. Ally closely with multiple systems integrators (SIs).51. INTRODUCTION AND OVERVIEWEven after the dotcom crash, telecom markets, companies, and commentatorscontinued to ride a wave of mutually reinforcing euphoria.
36、 Valuationsskyrocketed, participants across the value chain prospered, and commentatorstalked excitedly about the New Economy and the insatiable demand forbandwidth. The deep and sudden decline in the telecom markets after thesummer of 2000 caught many industry participants by surprise. Both carrier
37、sand infrastructure companies have been hit hard by the slowdown. Thecommentators have rapidly adapted, now predicting gloom.Capital markets fueled growth, then abruptly declinedIn August 2000, telecom equipment and service provider stocks were near theirall-time highs. JDS Uniphases market cap was
38、still greater than $100 billion.Nortel, fresh from several multibillion-dollar acquisitions, had a market cap of$280 billion and a full order book. New entrants like Corvis and Sycamorewere valued in the tens of billions of dollars, despite having only a handful ofcustomers. Acquisitions were occurr
39、ing at a feverish pace and at highvaluations, such as Lucents $5-billion acquisition of Chromatis in 2000 andCiscos $7-billion acquisition of Cerent in 1999. Start-ups were valued at highmultiples of future revenues, even in the absence of customers or completedproducts. An unprecedented flow of ven
40、ture capital poured into start-upcompanies in all areas of communications technology, particularly opticalnetworking, packet voice, and wireless. Metro technology became the new hotgrowth area, introducing companies such as Yipes, Looking Glass, andTelseon. Even the incumbent local exchange carriers
41、 (ILECs) were valued atall-time highs, on the promise of broadband access and potential deregulatedentry into long distance service. InvestorsGbenew and experiencedalikeGbefollowed the momentum, pouring money into telecom stocks and funds,for fear of being left behind in the eager stampede to each n
42、ew technology orbusiness idea. The euphoria was pervasive, even after the dotcom crash beganto affect the broader technology markets.Since the summer of 2000, optimism has turned to gloom. Service provider andcommunications technology company valuations are uniformly andsignificantly below their 200
43、0 highs, with the top ten showing a loss of about$2 trillion of equity value. Cisco alone has seen its market capitalization declineby more than $300 billion. The stocks of large systems vendors, like Lucent andNortel, and major component companies, like Corning and JDS Uniphase, aredown 90%. IPO su
44、ccesses like Corvis and Avanex have seen their marketcapitalizations decline more than 95%. Several former telecom service providerhighfliers such as Northpoint, PSINet, 360networks, Winstar, and Aerie have6recently declared bankruptcy, with others potentially following the samecourse. Debt and equi
45、ty markets have effectively shut down, with the numberof offerings in the first quarter of 2001 down 80% and 90%, respectively, fromlast year. The face amount of outstanding telecom debt exceeds $500 billion,with much of it valued at pennies on the dollar. In less than a year, the telecombubble has
46、burst in an unprecedented fashion.Telecom Companies Followed a Land Rush MentalityLast years activity by service providers, systems houses, and componentmanufacturers was driven by a “land rush” mentality. Carriers were layingconduit and fiber to meet what seemed like unlimited demand. Each new buil
47、dattempted to leapfrog the competition by laying more miles, installing fatterconduits and more fibers, and rushing to adapt the fastest, densest, and mostinnovative optical transport and switching technology available.Service providers worried about bottlenecks everywherein the backbone, inthe metr
48、o, and in last-mile access. Carrier capex (for our index of 13 serviceproviders) grew at a 34% compounded annual growth rate (CAGR) between1998 and 2000. Every carrier appeared to be simultaneously evaluating dozensof new competing technologies from large and small vendors. Systems vendorsannounced innovations at breakneck speed, moving for example from8-channel dense wave division multiplexing (DWDM) at 2.5 gigabits persecond (Gbps) in the latter half of the 1990s to newly announced systems with320 channels at 10 GbpsGbean improvement of almost a thousa
