Alcatel-Lucent's outsourcing of 2G, 3G R&D unlikely to rock the boat

Alcatel-Lucent's (NYSE: ALU) move to outsource research, development and maintenance activities related to 2G and 3G technologies should not be a big deal to most of its customers, as long as the outsourcing scheme still results in solid products, according to industry analyst Peter Jarich of Current Analysis.

Peter Jarich Current Analysis

Jarich

India-based HCL will take over Alcatel-Lucent's 2G and 3G efforts, including technical support services and associated design, development and testing operations. Alcatel-Lucent did not publicly announce the move, which was reported by Telecom Paper, citing an article in France's Les Echos.

The infrastructure vendor reportedly began outsourcing much of its 2G and 3G activities to India starting two years ago, when some French employees left the company or were reassigned to new R&D efforts, such as those focused on LTE.

The 2G and 3G outsourcing move is part of Alcatel-Lucent's Shift Plan, unveiled by CEO Michel Combes during June 2013, which aims to help the vendor achieve profitable growth and much-needed liquidity. At the time, the vendor said quite clearly that it would emphasize several core areas in IP networking. In wireless, the company planned to target LTE and small cells and move away from investing in legacy technologies, a clear reference to 2G and 3G.

In an entry on the Current Analysis Network Matter blog, Jarich, the research firm's vice president of consumer and infrastructure services, wrote that Alcatel-Lucent's outsourcing effort could provide a boon to Alcatel-Lucent's competitors, which will likely argue that "this is a sign of weakness and will impact Alcatel-Lucent's customers negatively."

Yet Jarich said the customer impact should actually be negligible, particularly since vendors routinely outsource R&D and product development to outside parties, especially when it comes to mature technologies that are "not strategic or are in end-of-life phases."

However, he also cautioned that "just because 2G and 3G are relatively mature, it does not mean they are dead." Therefore, Alcatel-Lucent's customers should tabs on how well HCL keeps up with continuing evolutions in the technologies.

Further, he indicated that with Alcatel-Lucent making a big push into small cells, including 3G small cells, it behooves the vendor to ensure that HCL's R&D keeps its 3G small cells technologically competitive.

For more:
- see this Current Analysis blog entry
- see this Telecom Paper article
- see this Les Echos article

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