IT and Telecom Supplier Industries are Merging

Cisco (News - Alert) has said it wants to be known as a preeminent provider of information technology information technology solutions – not just a supplier of communications solutions. In fact, Cisco has been moving in that direction for some time.

Now, Oracle is approaching that same objective from the IT side of the business.

Oracle, which earlier had acquired Acme Packet, is now acquiring Tekelec (News - Alert). The issue is not really hardware firms acquiring software firms, or software firms buying hardware firms.

The issue now is that communications is so fundamentally related to information technology, that the two formerly distinct businesses are becoming one business – in some cases.

IT-centric and telecom-centric vendors “both are trying to help communications service provider customers better manage and monetize their networks and the data they generate,” according to Dana Cooperson, principal analyst at Ovum (News - Alert). “Tekelec will extend Oracle communications network control capabilities, which it also bolstered with its February announcement to acquire Acme Packet.”

If the trend is real, we should expect to see other mergers or acquisitions by Alcatel-Lucent (News - Alert), Huawei and Ericsson; with HP, SAP and SAS Institute.

One might even speculate that it is the telecom players that will be acquired by IT suppliers, not the IT suppliers acquired by the telecom shops.

That might happen, even as the trend is for cloud-based computing to move information technology “into the telecom network,” because the telecom supplier industry is under pressure, perhaps more so than the information technology suppliers.

“Network infrastructure vendor revenues – across mobile and wireline – declined 6 percent in 2012,” according to Ovum Principal Analyst Matt Walker. “With prolonged economic turmoil and top-line revenue stagnation at the carriers, the industry is trying to right-size itself” in the face of declining profit margins.

Margins have weakened for network infrastructure vendors in the last several quarters, arguably because of increased price competition caused by Huawei (News - Alert) and ZTE.