© 2011 Sixhills Consulting LtdThe telecoms market dynamics are driven by both demand and intensity of investment. Demand for bandwidth drives over capacity and so lowers unit cost leading to opportunities for cost reduction by clients. Aggressive sourcing can reap substantial savings (i.e., reduction in revenue), often 15-25% of spend though higher is quite common (>29% of savings achieved)Riding the Technology-Price Curve1. Telecoms Market DynamicsUser Applications Require Greater BandwidthDemand for Overall Bandwidth is IncreasingGreater Investment Leads to Lower PricesIncreasing Demand Drives InvestmentApplication Bandwidth RequirementsSource: MCI, marchFIRST AnalysisSource:Nortel Corporate Voice and Data TrafficBillions of PacketsCost of International Voice Minute$ DollarsUS Emerging Services and Technology $ billions0.00.40.81.21.62.019651970197519801985199019950102030405019951996199719981999200020012002200320042005ATMFrame RelayISDNLeased Lines (T1/T3)020406080Data TrafficVoice Traffic54 bps19751980198519901995200064 Kbps1.34 Mbps44.73 Mbps51.34 Mbps135.52 600 MbpsTelekVoice GradeDassTI Voice DataVideo TeleconferencingLAN BridgingWANsSuper ComputingCAD CAMLAN interconnectionFDDIImage ProcessingDistributed ProcessingParallel ProcessingHDTVBISON ApplicationsNeural NetworkVirtual RealityHolographic ImagingGreater Investment Leads to Lower PricesIncreasing Demand Drives InvestmentApplication Bandwidth RequirementsSource:Telegeography1997Source: 1998 Multimedia Telecom Market ReviewNortel Corporate Voice and Data TrafficBillions of PacketsUS Emerging Services and Technology Spending0.0.0.81.1.2.1961971971981981991990.00.41.21.62.019651970197519801985199019950102030405001020304050199519971999200120032005ATMFrame RelayISDNLeased Lines (T1/T3)1991991991991991991991199219931994199519961975 19801985199019952000MbpsTelekVoice GradeDassTI Voice DataVideo TeleconferencingLAN BridgingWANsSuper ComputingCAD CAMLAN interconnectionFDDIImage ProcessingDistributed ProcessingParallel ProcessingHDTVBISON ApplicationsNeural NetworkVirtual RealityHolographic ImagingCAGR1975-200576%CAGR1975-200576%2. Savings from Aggressive SourcingDistribution of Total Savings Achieved0%5%10%15%20%25%30%<5%5-10%10-15%15-20%20-25%25-30%30-35%35-40%>40%Proportion of Savings Achieved% SavingsTypical range of savings percentages15-25%Over 29% savings>25%ExamplePerspectives on Business to Business RelationshipsP3
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