Software - The Big Engine Underneath the Hood of Wireless Networking

 

By Sindhu Xirasagar, Senior Manager, Agere Systems

 

 

To the naked eye, it appears that cell phones and wireless base station equipment are the lifeblood of the rapidly mushrooming wireless industry. While this hardware is critical, the essential straw also stirring the gigantic wireless drink is an abundance of software.

 

 

Figure 1: The Role of Software in Network Processing

 

It's instructive to characterize software's importance in this market by considering its non-existence. Without software, there would be no functional wireless cell phones or wireless base stations. Without software, wireless standards would remain chaotic and interoperable. Without software, there would be no promise of third-generation networks enabling faster Internet data down­loading and video streaming on cell phones.  Without software, there would be no optimism about this industry's growth potential during the next several years. Without software, the value and usefulness of a wireless chip would be non-existent. With software, by contrast, a plethora of opportunities for wireless chip, equipment and service provider companies exist to differentiate their solutions from alternatives.

 

Approximately 75 percent of product development costs of a cell phone and wireless base station are software-centric; only 20 percent center on hardware. One of the world's largest manufacturers of wireless base stations spends an estimated four times as much time on software than hardware. Because of software's cost and time to market attributes, software accounts for 50-75 percent of an equipment manufacturer's selection criteria.

 

A plethora of different types of chips, including mappers, framers, network processors, digital signal processors (DSPs), and link layer proces­sors, rely heavily on software for practical usefulness. Network processors in telecom equipment, for example, use software to identify various types of traffic, such as voice, video and data, and prioritize them accordingly. Hardware management, call management and signaling software is also prevalent. Furthermore, in wireless-enabled enterprise, small and medium business, and small office/home office applications, software plays a critical role for programming Gigabit Ethernet chips.This ubiquitous software reality raises important issues likely to determine winners and losers in this market during the next five-to-ten years.

 

One is how com­panies position themselves in the market.  An example of a quest­ion they will have to address is: If a silicon chip comp­any designs chips for cell phones and delivers software that works with the chips, is that company a chip company or a software company or both? Or is that company a system solutions company?

 

Conventional industry lexicon suggests such companies would probably call themselves system solutions companies. Everybody in this industry seems to claim to be a solutions seller. But what fundamentally are they selling, chips or systems, software or firmware? And how do they want their customers to think of them, as software companies or chip companies, integrated solutions companies or subsystem companies, or system companies?

 

If everybody is selling system solutions, where is the differentiation? Could it be in the software? In many cases, the answer is yes.

 

Companies are and will continue to grapple with funda­mental and strategically critical questions about how to grow their businesses using software as a key driver. Typically a chip company cranks out chips and associated software to a cell phone manufacturer. In such an arrange­ment, the manufacturer pays the chip company primarily for the chips. But the software isn't sold typically as a separate­ly priced item; the software is lumped into the price of the chips and/or overall solution.

 

With chip companies spending increasing amounts of time and money writing software for wireless networking equip­ment, their interest in selling software separately—gaining significantly more revenues than they do now from the software they write—is intensifying. How, when and why companies pursue this figures to be pivotal in determining the chip winners and losers in the wireless arena during the next several years.

 

Because software is so important, wireless chip companies are exploring new ways of selling the software they write to generate more revenues. 

 

“Selling value is no longer optional when selling software,” said Jim Allen, founder and president of Value Based, Inc., a sales consultancy company. “It's mandatory.”

 

Allen suggests two software sales strategies for chip com­pan­ies. First is to help their customer understand how their software will help them position and differentiate their hardware. And second, early in the sales cycle chip companies need to test their customer's willingness (philos­ophy) and ability (budget) to pay for their software by probing for software “value antagonists.” 

 

Allen offers other ideas for chip companies to consider for building their software revenues. They include:

 

  • Being able to enhance their sales performance by selling software in conjunction with hardware. This will shorten customer's sales cycles.

 

  • Being able to effectively position their software offering and its value. One way is to communicate to customers that the hundreds of thousands of lines of software code they provide saves manufacturers multiple person years in software engineering resources and development time, as well as millions of dollars in hardware. Articulating a value proposition, which is a collection of value statements associated with a group of feature and benefit statements, also works well.

 

  • Understanding several key software sales strategies they can use when approaching a software sale

 

  • Understanding the role software has played in the success of major telecom and PC equipment manufacturers

 

  • Convincing their customers of the value of having a single, responsible party for all software-related problems associated with their systems and silicon

 

The importance of, and ways to, realize hard cash from software as a wireless chip company is a core goal this situation aims to achieve. These ways include starting sales incentive plans, technical documents, system validation plans, web-based sales support tools, software applications notes, and software training seminars.

 

These ways to make hard cash are necessary as part of the plan to create higher customer value for the chip company's software. From a solution perspective, this means starting from the bottom with silicon, and moving upward to providing soft­ware tools, integrated circuit software, and application level solutions, all “hardened” with comprehen­sive system validation.

 

Business models usable at each stage of this progression include:

 

  • charge the silicon device price;
  • charge licensing fees and annual maintenance fees for software tools;
  • include the integrated circuit configuration software into the device price;
  • charge on a per board price, i.e., a royalty-based model; and
  • charge license and per device price add fees, as well as annual maintenance fees, for application level software solutions.

 

There are various types of software on wireless network chips that require different types of code and often require more resources and time to write.

 

For example, a link layer processor chip includes software with a device-independent application programming inter­face, which eliminates the need for customers to understand device-level details or source the software from third parties. Via software downloads, this type of chip allows wireless equipment manufacturers to enable both Asynchronous Transfer Mode or Internet Protocol functionality, either independently or concurrently.

 

 

Figure 2: Core Software Components as part of the Complete Network Solutions

 

Network processor selection depends on the quality of soft­ware available and the ease of programming and maintain­ing the software. The successful wireless solution offerings include a software-efficient network processor architecture for higher-layer processing and easy configurability for link layer protocols.

 

Software is undoubtedly a major part of the chip business, and in many cases is and will be the most crucial component during the next three-to-give years in terms of determining which companies prosper.

 

A fundamental paradigm shift of this magnitude and import­ance, therefore, suggests that wireless chip providers should consider totally re-thinking and re-positioning themselves to maximize their software revenues. Doing so could be the right recipe for survival and success.