Is telecom innovation at risk?

Is telecom innovation at risk?

Telecom systems vendors’ R&D spending remains in the range of 13-14% of their revenues (on average), but venture capital funding of telecom start-ups has fallen steadily in recent quarters. Telecom-related patent filings are still rising at a strong rate, but there’s a growing consensus that telecom vendors’ differentiation must come from software, applications, and services. We agree, but believe current VC and vendor R&D trends threaten innovation.

Table of Contents :

Executive summary
In a nutshell
Ovum view
Innovation is threatened by fewer VC commitments and big vendors’ cost pressures
What is the cost of lower levels of investment?
How can vendors use their increasingly scarce resources?
How can vendors get VCs interested and engaged in telecom again?
What role do the Chinese vendors have to play?
What does the power shift to the mobile world imply for innovation?
What does the shift in growth to emerging markets imply for innovation?
Tight budgets for telecom vendors, big and small, create challenges and opportunities
VC support of telecom dropped starkly after the 1999–2001 bubble and weakened further in 2008–9
Industry increasingly relies on the big vendors for advances in technology
US still leads in telecom innovation and patent filings across industries
Will tight budgets and the rise of Chinese vendors push along the process of hardware commoditization?
Software versus hardware is wrong focus: need for innovation-driven specialist vendors will remain

List of Figures
Figure 1: VC investments in telecom and software start-ups in the US since 1995
Figure 2: Telecom vendors’ R&D versus VC investments in telecom, 2009
Figure 3: Country share of filings under the Patent Cooperation Treaty
Figure 4: Telecom vendor corporate revenues and R&D spending as a share of revenues (2009)


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