Telecommunications companies can better serve their customers and their own business interests by giving up the outdated concept of vertical integration, Marc Andreessen, chairman and co-founder of Loudcloud Inc., told 300 people at the Forrester Telecom Forum Monday.
Andreessen, one of the founders of Netscape Communications Corp., said the idea of trying to be all things to all people has already proven difficult over the long term, and he cited IBM as an example.
Noting that IBM Corp. used to make its own computer chips, operating systems and computers, Andreessen pointed out that by the 1990s that had changed. By then, Intel Corp. was making chips, Microsoft Corp. had developed operating systems and Cisco Systems Inc. was building internetwork routers.
The latter approach, which Andreessen described as a layered or horizontal model and one that ultimately boosted innovation in the computer industry, "will occur here [in telecommunications], too," he said. Technology becomes "standardized by layer, and customers can make bets on technology standards instead of relying on a particular vendor."
Andreessen said telecommunications offerings that can cut costs, trim time to market, reduce the need for large numbers of experts and provide externally facing applications, such as extranets and e-commerce systems, are what customers are seeking.
And what customers want has implications for carriers, software companies and "hybrid companies like Loudcloud," he said. For example, telecom-related companies need to focus on a specific business "layer" -- optical infrastructure or managed Web hosting, for example -- and then figure out how to make money on each customer.
"Everybody's a service company now," Andreessen said, and customers will become much more conscious about how well providers meet their service-level agreements.
A horizontal approach to telecommunications isn't foreign to corporate customers, he said. "Corporate customers are becoming increasingly sophisticated at dealing with these layers," Andreessen said.