COMPLIMENTARY ADVISORY REPORT

AT&T’s Domain Sourcing
– What It Means

| Sep 14, 2009 | Telecom Infrastructure | Advisory Report

| Analyst: Peter Jarich, Research Director, Telecom Infrastructure

On September 4th, AT&T announced a “Domain Supplier” strategy aimed at streamlining its supply chain and facilitating, “a more collaborative relationship with its equipment and software suppliers.”

Beyond the rhetoric, the long-rumored move essentially consists of a few basic principles. First, AT&T defined a number of network “domains” – components of its network delimited by a specific set of technologies. The wireline access domain, for example, would include technologies such as DSLAM and FTTx. Second, AT&T will select two vendors per domain, pre-qualifying them within the domain for a multi-year period. Finally, these vendors will be expected to deliver end-to-end solutions within the domain including the integration, testing and support of their own products, partnered products and products already within the AT&T network.

For its part, AT&T claims that the program will help it better focus on new technology and future network demands while keeping costs in check, fostering supplier diversity and driving its purchasing towards system capabilities vs. product functionalities. And, despite the potentially onerous demands placed on its vendors – the vendors are expected to help deliver cutting-edge, end-to-end and cost-effective solutions – AT&T claims benefits to its new domain suppliers in terms of project timeline and roadmap collaboration as well as expedited revenue realization.

When one of the world’s most visible service providers moves to shake up its supply chain, a few things are certain. The vendors winning a piece of this business will rightly herald their wins. Some will likely see their market positioning (at least within North America) shift. Competing operators, in turn, will investigate the value of similar moves. Yet, amidst this marketing and bluster, it’s important to ask, “What does AT&T’s supply chain transformation really mean to the telecom vendor landscape, and should AT&T’s competitors follow its lead?”

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