Third-Party Telecom Repair Shift From Legacy to SDN & Market Implications
The third-party telecom repair industry is currently in a significant and accelerating shift: Legacy products are being phased out in favor of software-based products that operate within software defined, virtual or cloud-based networks. In simple terms, traditional network elements are being programmed into code on opensource software. Carriers may find that while their legacy equipment faces declining utilization and an increase in regulatory requirements, it is still highly profitable, and the replacement of those systems would be extremely costly.
Telecom OEMs are often quick to mark equipment as being end-of-life, indicating that they will no longer support or dedicate time to upkeep these products. The motivation for this has sound business reasons -- both for profit margins and the competitiveness of the OEM market, however, this does not mean that legacy equipment marked as end-of-life has outlived its usefulness or capacity. It simply means the OEM is no longer going to invest in that product's upkeep.
This is where third-party repair comes into play. The newest workers coming into the telecom industry are trained on the latest technology and as legacy equipment ages, so does the workforce that has the knowledge to support this equipment. A third-party company specializing in these efforts provides a valuable resource as their focus is on how to support it in perpetuity.
As telecommunication and network technologies transition from a physically-based realm of architecture and equipment to a software-based economy, two immediate impacts can be noted:
- More physical equipment is being removed as services are being migrated from the old to the new -- increasing the amount of legacy parts with which to use as repair items.
- Telecom companies are merging to find growth and capitalize on a smaller number of vendors offering services.
Competition with over-the-top (OTT) service providers, such as Apple, Facebook, Google, Microsoft, and Amazon have forced network operators to merge and acquire content, rework their networks to better resemble those of the OTTs, and look for other sources of revenue outside of their older line items that OTTS can offer for free or next to no cost. This, in turn, has forced telecom giants, such as Verizon, to look for other cost savings by divesting themselves of legacy networks, equipment, support staff and outsourcing service and support programs. This shift is in great benefit to third-party repair and service companies specializing in supporting and repairing legacy equipment.
Projections, based on a recent Exact Ventures report -- North American Telecommunications Equipment Repair Market, estimate that third-party telecommunication equipment repair for plug-in cards (PICS) will grow by 5% annually through 2023, reaching a $180 million-dollar market by that time. In totality, telecom equipment repair services are just one pieces of the total market pie for secondary services on telecom equipment that is valued at $5 billion dollars per year.
Stated in the report, the top five vendors for telecom repair accounts for 70% of repair market revenues in 2018, up 9% from 2015. Fortress Solutions is noted as the new top vendor in terms of both revenue and in number of repairs in the third-party repair and return market, displacing CTDI, who held that spot for many years. In 2018, it is estimated that Fortress accounted for one-quarter of the market, up from 21% in 205. New programs and acquisitions have proven to be a driver in this growth.
For more information on telecom repair price fluctuations and expected telecom repair trends through 2023, a deeper dive into the key players, and detailed charts, please view the Exact Ventures source report here.
Where to next?
The next question -- how do third-party repair companies find new growth opportunities? One avenue could be by investing in Customer Technical Assistance Center (CTAC) services. Much like the repair market, as OEMs discontinue support for legacy equipment, third-party vendors can also manage these services to help extend the life of customer’s legacy telecommunication platforms.
"By focusing our CTAC services on critical legacy products that our customers still heavily rely on, we allow our customers to save time, resources and energy that can be re-focused on bettering their business. Many customers have seen even bigger success when bundling their third-party repair and CTAC services with Fortress," stated Dan Walsh, COO of Fortress Solutions.
In totality, despite newer technologies coming into the field and forcing the exit of legacy equipment, newer optical physical equipment and cost-minded businesses are still creating a growing market for repair and CTAC services. There seems to be a perfect mixture of pressure from tech and internet giants on larger network companies to create additional opportunities in the third-party repair and CTAC markets.
Learn how Fortress Solutions is leading the third-party repair market plus other services offered by visiting the Fortress website, where you can find videos, reports, articles and many other resources.