Alcatel-Lucent Is Outsourcing Its 2G/3G R&D – Should Service Providers Care?

Peter Jarich

Peter Jarich

Summary Bullets:

  • As a part of the Shift Plan, Alcatel-Lucent has inked an agreement to outsource some 2G/3G R&D along with related technical support, design, development and testing operations.
  • As mature technologies, the move should not concern most of the vendor’s customers. However, as 3G continues to evolve – particularly around Alcatel-Lucent’s focus on small cells – operators must make sure the outsourcing scheme still results in solid products.

Late last week, the media began reporting that Alcatel-Lucent had signed an agreement to outsource its 2G/3G R&D and maintenance activities to HCL, an Indian ICT firm. For what seems to be a major decision – something that competitors will be quick to bring up with their customers – the news went relatively unnoticed. I can only guess why.

– We might blame the timing. Last Friday, after all, marked the U.S. Independence Day holiday along with the France vs. Germany quarterfinal World Cup match. Who was actually reading the news in the run-up to all of this?

– We could blame the fact that Alcatel-Lucent did not actually announce this. We have confirmed “an agreement for the outsourcing of 2G/3G R&D activities, related technical support services and associated design, development and testing operations.” However, unless you asked the company, it was not exactly sharing this information. Why would it?

– Or, we might just blame the idea that it is not really as big a deal as it might seem.

Not a big deal? Really?

To be sure, it is a big deal for competitors. Where vendor stability is a major buying criterion for service providers, every one of Alcatel-Lucent’s mobile infrastructure competitors will want to argue (and should argue) that this is a sign of weakness and will impact Alcatel-Lucent’s customers negatively. For the most part, however, they would be wrong. 2G and 3G are relatively mature technologies, especially when compared with LTE. Vendors routinely outsource R&D and product development to outside parties, especially in the latter years of a technology when those products are not strategic or are in end-of-life phases. Oh, and Alcatel-Lucent told us this was coming. When it announced its Shift Plan in June of last year, it called out planned cuts to legacy RAN R&D. To repeat: that was over a year ago. So, vendors that are on the ball should have been seizing on this “weakness” for a while, and most Alcatel-Lucent customers should not be too impacted, especially since the part of 3G that Alcatel-Lucent still sees as strategic (small cells) is not included in the outsourcing.

That’s right, I said “most.”

Just because 2G and 3G are relatively mature, it does not mean they are dead. Take a look at the 3GPP’s release 11 – the one that was frozen a little over a year ago. It includes plenty of 2G and 3G content. The same holds for release 12, and that will not be frozen until late this year. The fact that 2G and 3G live on and on in 3GPP releases should not be news to anyone. Still, it is a reminder that 2G and 3G continue to evolve and Alcatel-Lucent’s customers will need to keep tabs on how well the vendor’s outsourced R&D and product support partner keeps up with this evolution. Of course, it is also in Alcatel-Lucent’s interest to make sure this happens since, per the company, it will “retain product and portfolio ownership” of the 2G and 3G products. And, back on the small cells front, the vendor will want to make sure that any 3G macro cell and small cell synergies are executed on while loudly messaging that, for customers, it is “business as usual.”

About Peter Jarich
Peter is Vice President for the Current Analysis Consumer and Infrastructure services. Peter and his analyst team monitor and evaluate activities in the markets for Consumer Services and Devices, Digital Media, Fixed Access, IP Services, Mobile Access, and Transport and Routing Infrastructure, Telecom Vendor Services, and overall coverage of the Mobile Ecosystem.

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