May 2000

BY VENKATARAMAN PRASANNAN

The convergence of telecom/datacom/Internet/wireless markets is dramatically forcing equipment manufacturers to alter the way they do business. The costs of sales are sky rocketing. The price of go-to-market strategies is escalating with decreasing effect. Establishing brand identity, building channels, managing press, and gaining customer mind share is getting more expensive and difficult to execute.

Long gone are the days where each of the major telecom original equipment manufacturers (OEMs) knew its place in the industry. Previously, each of the big OEMs -- not to name any names -- had a specific market and a specific market strategy. Now, as the battle lines get more and more blurred (thanks to voice, video, and data "over everything" including IP, ATM, frame relay, wireless, etc.), the industry watches as OEMs that previously specialized in voice solutions are now adopting data product strategies and vice versa.

As the markets come together in the giant telecom melting pot, many of the larger OEMs are forced to buy their way into markets that were foreign to them as little as 10 years ago. Pick up any trade publication and the trend is evident. Company X (usually a large player in the voice equipment market) is buying company Y (usually a small to large player in the data or Internet market). This buying trend, paradigm shift, or whatever you want to call it, not only changes the way OEMs do business, but also changes the way their equipment suppliers do business.

COMPONENTS TO SUBSYSTEMS
OEMs are demanding more and more from their vendors. Most design wins in today's telephony (telecom, Internet, datacom) market are based on multiple components from a single supplier integrated into a specific OEM system. No longer can a vendor specialize in just one single solution and expect to beat out multiple vendors for the business. The converging market is requiring multiple solutions (single board computers, chassis, DSP resources, WAN connectivity, perfect-fit solutions, etc.) available in various form factors (PCI, cPCI, motherboards, VME), from a single vendor integrated into one application-ready subsystem. The quicker the OEM can bring a product to market, the more competitive it is. This is where the reliance on the equipment supplier comes into play, forcing them to change the way they do business. A "building block" strategy is currently being adopted by many of the vendors in today's telephony OEM market, and for good reason. With building blocks, vendors put together the needed components for an OEM system, thus decrease time to market and development costs while enhancing reliability, performance, and functionality in their products. Here are some examples:

• First and foremost, the building block strategy offers OEMs a time-to-market advantage. By providing OEMs a complete system-ready, out-of-the-box (minus the installation of the application software) solution, vendors can offer the OEMs a product they can bring to the market much quicker.
• Secondly, OEMs have to deal with the burden of legacy products. Large OEMs have an installed base of legacy products draining some of their vital resources. This makes focusing on the integration of new products slow and time consuming. As more and more startups find their way into the competitive marketplace, OEMs are scrambling to stay ahead of the learning curve and be the first to bring their Internet telephony or other solutions to market.

By going with the "building block" approach, OEMs can also realize economies of scale in dealing with a single manufacturer instead of multiple manufacturers. Why should the OEM shop around when looking for DSP technology, when it can get this from the same manufacturer that supplies it with chassis, algorithms, WAN technologies, and Intel-based CPUs? Instead of going through a variety of manufacturers for hardware, algorithms, protocol stacks, Intel CPUs, and more, OEMs can stick with a single company which manufactures all of the needed components into an integrated system. Simply put: This saves time and money.

FROM VENDOR TO PARTNER
Until recently, OEMs integrated their own equipment internally. They were able to get some, but not all of the components for their embedded solutions from outside manufacturers. What they couldn't get externally, they had to design and develop internally. This situation led to problems with proprietary equipment, slow development times, system compatibility issues, and long-term maintenance and support of custom systems. All of which meant time and money to both the OEMs and their customers.

However, the convergence of technology, time-to-market and other factors have pressured OEMs to seek better, more integrated design solutions. As a result, OEMs turned to outsourcing as a means of coping with growth and time-to-market considerations.

Today, OEMs are looking to their equipment manufacturers to do more than just develop and manufacture. They are also looking to the manufacturer to: Integrate the system, provide quality assurance testing, provide project management, and offer pilot manufacturing.

In doing this, OEMs can realize a quicker time to market since the integration, agency, and environmental certification process is being done at the manufacturing level.

The OEM has now turned the vendor into a partner or a virtual division of
the company.

WHERE CHANNELS FIT INTO THE MIX OF THINGS
The same factors driving vendors to modify their product strategy are forcing channels to alter their approach to services. In the past there were several channel segments that brought value to the OEM. Sales channels such as manufacturer representatives supplied information on vendor components. Fulfillment channels in the form of distributors supplied immediate access to these components. Value-added channels provided various levels of system integration with these components. Today, as OEMs increasingly look for total system solutions, their needs are exceeding the capabilities of component channels. These changing needs are dictating the channel to focus on providing an array of services.

"In order to meet the needs of today's OEM, channels must augment the subsystem product offering of vendors with services targeted at three areas -- design, manufacturing, and support," says David Paul, president, Trilogic Systems. "Vendors who are moving from a component to a subsystem approach make the design stage of an OEM program easier, but there are very few OEM systems comprised from the offerings of a single vendor. This is where the channel partner fits into the vendor-OEM mix."

In today's market, a good channel partner will leverage their design services experience in selecting and integrating products from a number of relevant vendors. This includes CPU, I/O, packaging, and operating systems expertise in open system architectures based on PCI, cPCI, and VMEbus.

"Design services are only the initial area of focus," adds Paul. "Manufacturing services related to getting OEMs to volume are becoming the more important responsibility of the channel."

Handling material management, assembling, and testing at the system level is paramount to a channel's role for the new generation of OEMs. Support services are the final component of a channel's service equation. Support includes offering safety agency approval assistance, 7x24 technical support (phone and onsite), and other professional services related to the OEM's deployed system. Working with the vendor-OEM partnership, the channel plays a critical role in bringing today's OEM to market as quickly as possible.

Venkataraman Prasannan is the director of marketing for the Telecommunications Division of RadiSys Corp. He has over 11 years telecom and datacom experience and is a frequent lecturer and author on computer hardware for the telecommunications industry. RadiSys designs and manufactures computer-based building blocks that are used in a wide variety of electronics systems, from telecommunications equipment to medical devices to robotics applications. For more information, visit the company's Web site at www.radisys.com.

I recently had the opportunity to talk to Dwight Justice, sales manager for Trenton Technology, Inc., in the cozy exhibitor lounge at a recent trade show. We discussed the new trend toward bundled solutions in industrial computing, and why Trenton has chosen to avoid extending its product line into this realm. Instead, the company will stick with the basic offerings it is best at delivering: Rugged, reliable hardware with a focus on durability and superior service.
� Laura Guevin

Q. Some industrial computer manufacturers have recently decided to bundle development platforms on top of their hardware in an effort to attract VARs and VADs. What do you think about this new trend, and will it have an impact on your market strategy?

A. As one of Intel's seven original Applied Computing partners, our focus is on engineering and manufacturing capabilities. For us, it's really a matter of what we can supply on our boards to help customers build their platforms. As a single-board computer vendor, we want to supply components. We're not geared toward the end-user market, so much as the middle-tier market. We have no plans to bundle a system solution with our boards.

Q. How important is industrial computing for voice-over-data networks and the future of next-gen networking?

A. Voice-over-IP vendors are becoming a large percentage of our business, and there's a greater demand for boards that can handle this technology. Industrial computers and single board computers are perfect for these markets. They offer advantages like greater number of slots, high availability/uptime, and better thermal characteristics. For these reasons, more and more companies are turning to this technology. There's lots of buzz about CompactPCI, although it doesn't seem like many customers are buying it yet. (Trenton announced a new CPBI CompactPCI single board computer in early March, 2000.) CompactPCI is also more of a play for the telco switch and communication industries. I think companies will start getting into it, although there are plenty of reasons not to. Crystal, for example, has a good argument against it.

Q. What do you see as important trends and advances in industrial computing and how will they impact voice applications running over data networks?

A. Vendors in this market have become more responsible as a result of the many Intel alliances. There also seems to be a trend toward the Linux operating system, although Windows is still the leading OS we deal with by a long stretch. Unix-based OSs would be next in line.

I think there will be some thinning out of competitors in this market as well. Quicker time to market will also be a factor, and that's where I think our proven strategy will come into play. You can't beat reputation, and that's a Trenton strength.

Trenton's industrial processor boards and backplanes are the backbone of some of the nation's most prominent OEMs and system integrators, and are integral components in computer telephony, imaging, instrumentation, communication, and industrial environments. For more information, visit Trenton's Web site at www.trentonprocessors.com