MWC: NEC aims to dominate western telco infrastructure and energy storage markets

President expects 50 per cent company profit to come from overseas by 2017

Japanese tech firm NEC is to make an agressive play for dominance of western telecommunications and energy storage markets, one of its executives has revealed to Computing.

Some 80 per cent of the company's revenue currently comes from Japan, but this is set to change as the firm aims at two key markets in Europe and beyond; telecommunications software defined network (SDN) solutions, and energy storage.

The company was hit by financial fallout from 2011's earthquake, and saw a loss of ¥1,900,000 yen in 2012, though it has since returned to profitability.

"NEC is still a Japan-centric company in terms of business and revenues," CEO and president of NEC Italy, Ugo Govigli, told Computing. "More than 80 per cent of our revenue is in Japan, but the direction given by our president is to move to 50 per cent of revenue shares overseas by 2017."

For its attack on telecoms infrastructures, NEC is positing an ambitious SDN-based approach to replacing incumbent hardware-based solutions, in the hope that existing providers may not want to make the investment on the latest hardware.

"Ericsson is probably the biggest provider, and if I was them I wouldn't do anything to destroy the market they already have," said Keiichi Miyahara (pictured), corporate chief engineer, network platform operations unit at NEC.

"Some 30 or 40 per cent of the market is using Ericsson's equipment. And if they want more capacity, they just add a layer to an existing platform. And I would say that would be true for all of the major incumbants; Ericsson, Siemens, Alcatel Lucent," added Miyahara.

In comparison, NEC's proposition to the market is to use standard, off-the-shelf server hardware and an open source hypervisor - the software controller that creates and runs the virtual machines that comprise the SDN telecoms system.

MWC: NEC aims to dominate western telco infrastructure and energy storage markets

President expects 50 per cent company profit to come from overseas by 2017

"The current network is too complicated, and because of that it's too difficult to maintain, and so is not necessarily cheap. So what we're trying to do is make it simple, and also flexible," said Miyahara.

The advantage of such heavy virtualisation, explained Miyahara, is that "two different categories of virtualised network" can be produced.

As well as a basic "public network services"-geared solution, which offers telephone, video and data services on a virtual network, it's NEC's "customised network services" that it hopes will make the bigger impact.

"We can create a virtualised network for each client," said Miyahara, describing how the expected growth of the LTE (4G) sector will mean businesses start to demand the configuration of their telecommunications platforms in highly idiosyncratic ways.

Though there is, admitted Miyahara, one problem with planning for this expected explosion.

"It's difficult to tell when it will be," he told Computing. "Research has shown that many people, even in businesses, now have smartphones as just a status symbol. They're not really doing much more than phone calls, sending and receiving SMS, and perhaps occasionally checking the weather forecast."

Miyahara actually believes that LTE uptake is "maybe about the kids".

"Doing social networking, sending photographs, and other high-data activity."

But NEC is certain of one thing, said Miyahara: "Just about everybody already has EPC [Evolved Packet Core - converged voice and data networking, widely used with LTE]. So we're really waiting for LTE traffic to skyrocket. So we want people to be doing the things they do on PCs on their mobile devices. We have that next-generation capability, we're just waiting to unleash it. Though it's hard to know when that's going to happen."

But from NEC's perspective, said Miyahara, the SDN approach is so cheap to implement that, from currently having "nothing outside Japan" in terms of market share, "we're not losing anything by diving into this new architecture".

NEC is also focusing on an area it has little previous experience in: large-scale energy storage.

The catalyst for this move was the 2011 earthquake, said Govigli, when people began to realise how precarious energy supplies can be.

"All, of a sudden what seemed a world of certainties became a world of uncertainties," said Govigli. "I was there, two months [after the quake] and for the first time I saw people looking at ads on trains of the instant energy consumption curve versus the capacity the country actually had. They all looked scared, and for the first time they were realising energy saving was an issue."

The company has already begun creating electrical energy storage solutions in Japan, which can be placed in, or just outside, premises.

Govigli is confident NEC has what it takes to lead this emerging market.

"Many companies coming from the IT sector claim they can have a place in smart energy networks, simply because that's a convergence of energy and ICT," said Govigli.

"We have a long ICT history, but we're also coming from a different angle. Not many people know we have 40 years' experience in basic R&D of lithium ion batteries. We've played a big role there, and made history in mobile communications because of it."

NEC believes that, right now, "the need for storage systems is stronger in Europe and the US than in Japan, because of the structure of the electrical networks".

Already being rolled out in Italy, Govigli says the rest of Europe will be in NEC's sights very soon.

"In 10 years' time we want to be competing with the big incumbent suppliers of energy systems in Europe. We have not delivered anything yet," Govigli admitted, "but we're starting to deliver in 2013. We want energy to become one of the core businesses of NEC - one of the pillars - in the next three to five years. So it‘ll be one of our top revenue generators."