Telecommunications Seen as Offering New Opportunities for Increased Productivity.
There is a revolution occuring in the commercial building industry.
Unitl very recently, virtually all the 'people who had anything to do with putting up large buildings--the architects, the civil engineers, the developers, the owners--have been making only minute advances in technology.
During the next decade, our industry will generate unprecedented growth, a proliferaton of new technologies, new products and new opportunities far exceeding what was imaginable just a few years ago. The pace of change in our industry will accelerate even beyond its current blur.
Today we are fond of saying, that telecommunications systems serve the needs of business and industry. That era is ending. Soon we will be saying it another way. Our industry will not only serve; it will define the needs of business and industry.
In 1983, domestic sales of communications hardware alone reached $60 billion. According to recent studies, that number will be higher for 1984 and is expected to grow to $90 billion in 1988. Adding to that will be fees for communications services and software development--up to $50 billion a year by the end of the decade. And these are conservative projections.
In the midst of this volatile market, we find ourselves on the horns of a difficult dilemma. It's dilemma telecommunications managers must deal with daily. Let me explain.
As promising and exhilarating as our future is, we also know that the telecommunications industry faces very tough challenges in the very near future. The changes are obvious and undeniable. During the next three years we will witness a revolutionary realignment in our industry. This realignment will mean fewer companies developing and producting products. It will also mean fewer people trying to sell telephones.
It's been commonplace for some time to say that a shakeout in the industry is inevitable. The shakeout is not only inevitable, it's happening right now. I fully expect that when we return to the Mid-western Telecommunications Conference three years from now, one-third of the names above booths seen at this conference will not be in existence. That's a sobering prediction. Telecommunication Is Maturing
You may ask how it squares with my earlier assessment that our industry is on the verge of unprecedented expansion. Well, my answer is simple. Telecommunications is an industry in the process of maturing. We're growing up very fast. During adolescence, you can expect spurts of rapid growth. You can also expect growing pains.
What we are seeing in our industry is a race toward maturity. Technological and product maturity, of course, but also marketing maturity. And as the pace of the race accelerates--not year to year, but week to week--there will be fewer vendors around to dazzle and baffle you with their smorgasbord of services. Don't misunderstand. The smorgasbord will still be available, even expanded, but the number of suppliers won't be.
For telecommunications managers it's a heady time. It's time when the telecom managers role is growing in importance an stature. In fact, it's a crucial role. The question is, however, how do you take advantage of a technological expansion in telecommunications, while avoiding the pitfalls of the marketplace in rapid transition? Every decision made will shape a broad range of future communications decision for your company. Your choices today will leave an imprint for years to come. This is a big responsibility.
You must sort through a wide array of option and evaluate them. You must ask tough questions in order to make good decisions. This requires a perspective that focuses on future needs--what your business will need, what will be available, at what cost and for what value. A Sense of the Future
In other words, to shop wisely in today's telecommunications marketplace you need to know much more than technology and product, you need to have a sense of the future. And as you evaluate suppliers you must assess things other than the technological competence of systems. You must look beyond initial cost comparisons and examine a company's ability to provide timely service, to develop industry-specific software applications, even to provide financing.
For more and more telecommunications managers today the paramount consideration is the financial staying power of the vendor company. That's right. If you are smart, if you are cautious, you are looking at questions that were once considered the exclusive province of investors. Will my vendor survive? What is my vendor's cash flow, revenues, earnings? What corporate commitment can a vendor demonstrate?
These are the essential ingredients that go into increasing numbers of telecommunications buying decisions. Will my vendor have adequate resources for research and development and continuing product development? Will my vendor be capable of developing expanded training and service programs? Can my vendor afford to remain responsive? Will my vendor exist three years from now?
These considerations require of telecommunications managers sophistication. You may find yourself in the position of a financial analyst, predicting a supplier's future as well as evaluating his products and prices. And you may find yourself working extra hard, educating yourself, to gain a new working perspective--a sense of where we are going to be in few years, and how fast we are going to get there.
I grant you, predicting the future has nver been easy, and it may seem especially difficult today. Even the most favorable forecasts have a way of turning sour overnight in an uncertain economy and volatile marketplace. However, there are fundamental trends in the telecom industry, trends that I'm convinced will be key in shaping and predicting the future. If we understand the direction our technology is heading, we know where to look for future opportunities. Trends Shaping the Telecom Industry
I would like to share some of the trends that are already shaping our industry-- and which we can expect to be a dominant force in our industry in the next decade.
The first is an increased empahis on industry-specific software development. We have had an explosion in hardware over the past three years. In the coming years you will see a similar explosion in software. The first simultaneous voice/data PBX, for example, was introduced just a few years ago. We now have a crowded field selling several versions of this basic software.
The differentiating factor among these many competitors will be the ability to design reliable software to enhance productivity. In other words, sophisticated telecommunications users will ask for more than slick pieces of equipment. They'll want a system focused on their needs, a system that reduces labor costs and improves operating efficiency. They'll want centralized messaging, for example, and voice messaging. They'll require flexible systems for their unique marketing goals and operational needs. The big winners in our industry will be those of us who can supply this reliably and economically.
A second dominant trend we can expect to see is increased modularity in systems. This means that it will be easier for users to move among suppliers from purchase to purchase. It means that many telecommunications users will be able, at a greater extent, to service their own systems, even quite sophisticated ones. It means many moves, adds and changes will be done by users.
A third trend, which may have the largest impact, is a rapidly increasing emphasis on integration of systems. This means increased integration of telecommunications with computers and work stations to create unified business information management systems. The result will be a quantum leap in office productivity. For all of the recent talk about advances in office automation, most offices today are surprisingly backward, even archaic. Small Rise in Office Productivity
According to one study, the productivity of office workers has improved only about four percent during the past 10 years. According to this study, the productivity of factory workers increased by 100 percent during the same period and the productivity of farm workers went up by 200 percent.
When you remember that office workers now account for about 53 percent of our working population, this four percent productivity rise, which really could be called a zero rise for all practical purposes, amounts to a massive failure on the part of American business. This failure creates an area of vast opportunity for telecommunications and information-management technology.
Admittedly there have been great advances in the way buildings are engineered and constructed. We have better insulation today, better window designs, better machinery for heating, lighting, people-moving and communications. But when you look at how a building works-- the basic ways it accomplishes the purposes of its builders, owners and tenants--the more it looks the way it did one hundred years ago.
Today's buildings are going to be in use for the next 20, 30 or 50 years. To remain competitive in the future they had better take into account systems technology.
How is this done? You start by installing a central computer and distributed microprocessors. These tie in to every part of the building by means of what we call a data highway. This is a combination of traditional electronic wiring and fiber-optic cables, which are extremely high-speed can carry any sort of signal that is likely to be used for many years to come. The data highway is installed, ideally, at the time the building is constructed (although you will also be seeing retrofitting in a number of major buildings throughout the country.)
A building that is equipped this way has an inherent capacity for efficiency, comfort, economy and productivity--far beyond what a traditional building can offer. If you add microchip-based equipment for the elevator system, the heating, ventilating and air conditioning system, the lighting system, the fire-protection and security systems, you have a building that thinks for itself, making decisions that reduce maintenance, labor and operating costs. Telecommunications is becoming a key in systems for monitoring and controlling building equipment.
As more and more business change their expectations of telecommunications, they are not simply buying the latets, sharpest looking hardware. Increasingly business are choosing telecommunications for productivity-enhancing solutions to basic business problems. They want systems that help them to be more efficient in their operations--that help them to be more competitive.
These expectations are changing the ways companies purchase telecommunications. More of you are becoming more sophisticated. Upfront cost is no longer the first consideration for many of you. Productivity, reliability, potential profit are now your primary concerns.
And because they are, many telecommunications managers are advancing within their companies. In more and more corporate structures, telecommunications managers are no longer thought of simply as technical support. Instead you are becoming key members of general management responsible for shaping overall operations.
This is a big change. It's big challenge. I said at the beginning of my remarks that telecommunications is an industry racing toward maturity. Meeting the difficult challenge of productivity is the major test in this rapid maturing process.
What we make of this great and growing potential will determine success or failure for each of us--for telecommunications users as well as for telecommunications providers.
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|Date:||Dec 1, 1984|
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