The cost-cutting measures at Nokia Siemens Networks (NSN) don't come by surprise: Also NSN's customers increasingly are under pressure. Other telecommunication equipment vendors will have to implement similar measures.

The situation is contradictory: While applications such as IP TV, cloud computing and multimedia make data traffic explode, the revenues for telcos and internet providers are stagnating. It is not only the economic downturn that keeps their revenues from climbing; it is also the fact that telecommunication services are increasingly becoming a mature market with razor-sharp margins and not many growth options.

According to experts, the traditional business model for fixed-line and mobile telcos is increasingly becoming less lucrative. "It is simply not profitable anymore just to run a network," a NSN insider described the situation. "Operators are desperately seeking for new business models, because they need to differentiate from their competition."

In this situation Nokia Siemens Networks is not the only equipment provider struggling against sales decline and red figures. Swedish competitor Ericsson recently reported declining sales figures amid soft demand for equipment. And Alcatel-Lucent is apparently one step ahead: The company has announced major job cuts already earlier this year.

While demand for hardware and equipment remains low, the network operators increasingly are demanding software solutions that can help them to differentiate themselves in the competition and generate additional revenue streams. Customer management, charging and billing are currently the elements telcos are betting on in their quest for differentiation.

Among the carriers there is already a trend in place to outsource their networks or assign the network operations to a service provider which in turn can be identical with the equipment vendor. Thus, the equipment providers tend to cover a larger chunk of the value chain, from design and production of the network systems to running and servicing them. Their customers, the carriers, increasingly define customer account management with its multifaceted options to open up additional revenue streams as their strategic business. Against this background it is only logical that companies such as NSN shift their core activities towards software and consulting. NSN will not be the last equipment vendor moving in this direction.

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Nokia Siemens Networks cuts thousands of jobs