NEC banks on SDN to strengthen presence in telecom space

• Currently has 20 POCs with mobile operators
• Believes SDN can provide dramatic savings for mobile operators and data centres

NEC Corporation, a Japanese multinational provider of information technology services and products, is banking on its software-defined networking (SDN) solutions to grow its presence in the telecommunications space.
 
NEC president Dr Nobuhiro Endo (pic below) believes that the company has an edge in its SDN offerings.
 
"NEC has developed SDN functions for over 10 years .... We are kind of ahead in terms of SDN," said Endo during a recent visit to Jakarta where the company hosted the NEC Innovative Solutions Fair 2015.
 
Although the concept of SDN may have been around for some time, it is only in recent years that it has become a popular topic. Experts believe that SDN is able to transform the telecom industry by improving carriers' ability to flexibly deliver bandwidth.
 
Nevertheless, industry players believe that SDN is still in its early days.
 
Endo said that the company is currently accessing the global telecommunications operators market to provide proofs of concept (POCs) to the operators.
 
"We already have 20 POCs and we hope that this can result in some sort of solution for customers," said Endo.
 
In fact, he sees the potential of SDN beyond the mobile operators market.
 
“In the SDN field, we are targeting customers in both the public and private sectors, including government agencies, data centre operators and telecom carriers.
 
"By applying SDN to the data centres, operations expenditure will reduce dramatically," he said.
 
NEC has made good progress in terms of commercialising SDN. In 2014, it supplied network solutions to enterprises, hospitals and transportation networks.
 
“Our track record in SDN now stands at over 100 projects. To further accelerate these initiatives, we have formed a partnership with Hewlett-Packard with the aim of establishing an SDN ecosystem based on open standards.
 
“In the telecom carrier sector, backed by raising interest in SDN to upgrade and automate network operation controls, we promoted cooperative field tests with leading global carriers such as Telefonica,” he said.
 
Also, the company worked with East Japan Railway Company (JR-East) on the railway operator's plan to build a common station network (JR-STnet). The plan involved integrating the vast array of networks laid out around the station and centralising their management.
 
The NEC SDN Solution, which virtualises a network using software control, makes it possible to quickly put together a smart, independent virtual network called a Virtual Tenant Network (VTN). With the technology, network additions and updates can be handled flexibly without having to revise the physical configuration or individually reconfigure each individual machine.
 
Grow overseas revenue

The company's focus on growing the SDN business is also expected to be one of the main drivers to grow its overseas business.
 
The company, which saw its overseas revenue decline to 479.35 billion yen during the financial year ended March 31, 2011, has been steadily growing its international business over the past few years.
 
For the financial year ended March 31, 2014, its overseas sales jumped 14% at 569 billion yen (US$4.7 billion). This represents 18.7% of its total revenue.

[1 Japanese yen = US$0.01]

Although overseas revenue is on the rise, Endo believes that the company can achieve more. Under the company's mid-term management policy, it expects overseas sales to contribute 25% of its total revenue.
 
Its other goals include growing its business so that it generates an operating income of 150 billion yen (US$1.25 billion) and to achieve free cash flows of 100 billion yen (US$836 million) by 2016. These are a set of ambitious targets based on its March 2014 results, when its operating income (or commonly known as earnings before interest and tax) was at 106.2 billion yen (US$890 million) and free cash flow was at 55.2 billion yen (US$460 million).

Based on recent financial results, it looks like the company is on the right track to achieving its goal of 25% overseas sales contribution.

For the nine months ended December 31, 2014, the company's overseas revenue stood at 419.1 billion yen (US$3.51 billion), or 20.9% of its total revenue.
 
During Endo’s recent visit to Jakarta, he also reiterated that the company is committed to deliver “solutions for society” to Indonesia. He sees security as one of the potential growth areas.
 
“Safety is one important element to address in order for a country to grow the economy in a smooth manner.
 
“For example, the country needs to focus on how to prepare itself against cyberattacks, or even natural disasters. These are areas ICT can address efficiently,” he said.
 
IDC estimates that IT spending in Indonesia grew by double-digits in 2014 to hit US$16.5 billion.

Goh Thean Eu reports from the NEC Innovative Solutions Fair 2015 in Jakarta at the invitation of NEC Corp. All editorials are independent.
 
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