Investment in IT cabling continues despite downturn

Investment in IT cabling has not been cut back despite the economic downturn, according to a senior executive.

But spending is being reviewed to ensure networks are ready for future technologies and data-intensive applications such as high definition video, web 2.0, unified communications, IPTV, consolidation and outsourcing.

Cabling is the passive part of IT infrastructure and represents about 20 per cent of IT investment, according to Swiss cabling specialist Reichle & De-Massari (R&M).

"The active part of IT investment consists of servers, faxes and the rest of the infrastructure," said Jean Pierre Labry, Managing Director, R&M. "Cabling is the stable and passive part of the investment that lasts for a generation. This region is seeing a high level of investment as infrastructure is being built to handle future technologies. Customers are ready to invest in fibre optics instead of copper and are, therefore, looking at long-term return on investment."

R&M has witnessed growth of more than 60 per cent in the Middle East and is on an expansion drive as it plans to invest in people and distribution centres.

However, Tarek Helmy, Regional Director – Gulf and Middle East, of cabling specialist Nexans, believes no IT sector is immune to the crisis. "Looking at the Middle East, the effect is minor in some places and higher in others. We have seen projects cancelled in some countries and many new ones, particularly in health, education, airports and other sectors. The region will continue to be a growing market with several infrastructure projects that are required by the growing population."

Players such as Minerva, a provider of carrier-grade IPTV service management software, are confident a recovery will happen quickly.

Leo Psara, Chairman, Minerva, said: "Revenues and profits are down across the board. However, the industry is poised to exit from the economic downturn in a stronger position than before as companies will merge and consolidate and, as the global economies turn around, IT spending will rise quickly."

Aziz Ala'ali, Regional Director, Middle East and Africa, of California-based Extreme Networks, said the IT industry could learn some lessons from the downturn of 2002.

"The 2002 recession started in IT and, as a result, enterprises reorganised their IT departments to make them more cost-efficient," he said. "Service providers were also hit hard in 2002 as the recession came on top of the expensive acquisition of universal mobile telecommunications system (UMTS) licences, which were auctioned in most countries then. As a result service providers were forced to reorganise their operations between 2002 and 2004 to stay in the market. Consequently, most service providers are today organised in an efficient way and most are achieving positive financial results."

Extreme Networks designs, builds and instals ethernet solutions for network connectivity and IP-based communications. UMTS is one of the third-generation (3G) mobile telecommunications technologies and is now being developed into a 4G technology.

Ala'ali said IT infrastructure would have to support the new resource-intensive technologies being offered by local telecom operators.

"The growth of resource-intensive applications is driving demand for highly scalable 10 gigabit ethernet networks in data centres and managed hosting facilities," he said. "The trend towards more nimble, easy-to-manage cloud computing environment requires networks to integrate and automate."

Broadband services will be the key for customers in the region, according to Psara. "Delivery of broadband services is still a strong area of growth in the carrier and ISP field," he said. "At Minerva we have seen growth in the broadband point-to-point and point-to-multipoint business – the delivery of broadband services over fast-to-deploy wireless networks. Delivery of Wi-Fi at home and in the enterprise space has seen growth as it is an efficient way to deploy and expand connectivity."

Nexans has also seen a shift in the way companies are choosing to build their IT infrastructure.

Helmy said: "End-users are more aware of the need to implement proper and reliable cabling to serve their networks, which is the outcome of efforts made by cabling vendors in educating the market.

"Many companies are looking at conserving energy and reducing their carbon footprint. Businesses have started looking at adopting green technologies while building their data centres."

And customers are concentrating on buying esssentials, according to Minerva. "Companies are reviewing their IT infrastructure requirements in the light of the downturn," said Psara. "IT managers, those working for small and medium enterprises to those in large corporations, are choosing a 'must-have list' over a 'wish list'. IT managers are having to do more with less, which will in the short term force them to work more efficiently."

By planning the right kind of investment and ordering the correct mix of cabling and networking, infrastructure customers can reduce costs by at least 40 per cent.

Mark Bauhaus, Executive Vice-President and General Manager, Service Layer Technology Business Group at Juniper Networks, said: "Major investment is happening on the macro level, especially as more workers are dispersed around the world and there is pressure to integrate networks."


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