Advertisment

Test & Measurement: T&M in the Communications Test Era

author-image
VoicenData Bureau
New Update
Highlights
  • T&M companies are gaining more recognition outside of the

    industry
  • The dramatic growth in the communications market has spurred the

    need for test and monitoring solutions in engineering, manufacturing,

    and field applications
Advertisment

The recent formation of Acterna with the merger of Wavetek

Wandel Goltermann (WWG) with TTC and a spate of other recent mergers and

acquisitions, prompt us to dwell on the current dynamics in the Test &

Measurement (T&M) industry. The larger players in the industry have changed

identity from what they were a few years ago and the industry seems to be more

associated with communications rather than a conventional test. Additionally,

T&M companies, hitherto not known to the average person, are gaining more

recognition outside of the industry, thanks to dedicated Internet communities

such as TestMart and Test & Measurement Online, as well as T&M companies

increasingly going public. There is a new face to this critical industry that

transparently makes it possible to improve the quality of our lives by enabling

companies to design, manufacture, and implement products and services that we

use everyday.

The Last Three Years

The last three years have been significant in this industry, which otherwise

has been quite staid and uneventful over the past few decades. Until the

mid-nineties, the T&M industry was mostly dominated by the then

Hewlett-Packard (HP) and a few other companies, such as Tektronix, Anritsu,

Marconi Instruments, Rohde & Schwarz, Wandel & Goltermann, GenRad, and

others.

Advertisment

The past two years have been particularly significant to the

T&M industry, which witnessed several mergers and acquisitions.

In addition, several smaller companies in the field of

network testing and protocol testing have been acquired by companies, such as

Agilent, Teradyne, and WWG. The recent spate of corporate activity in the

industry suggests realignment in the power dynamics in this industry and this

discussion looks at where some of the activities are centered.

When W&G and Wavetek merged in 1998, it brought together

two T&M companies with substantial strengths in the communications test

arena as a competitor to the then Hewlett-Packard (HP). It is generally known in

the industry that HP, or now Agilent, is the leader in the overall T&M

market in terms of combined product range and revenue. Hence, a comparison of

companies at the total level always put HP on the top, notwithstanding the fact

that only the T&M component of HP was taken into consideration for the

comparison. Consequently, it was important to compare companies in narrower

product markets, such as general-purpose test, communications test, component

test, and wireless test, where other companies often established supremacy in

niche product areas.

Advertisment

WWG’s strengths being predominantly in the communications

test area, it made sense to identify the company in that market niche and turn

out to be a fair competitor to HP. Subsequently, the reorganization of HP

created a more aggressive competitor in Agilent. Meanwhile, Tektronix shed its

printers and video networking divisions to re-emerge as a focused T&M player

in the market. At the same time, HP/Agilent was on a consolidation spree

acquiring companies such as Scope, Telegra, and other smaller companies with

strengths in communications test. Currently, Agilent, Tektronix, Acterna,

Teradyne and GenRad, form a heavyweight list in the conventional T&M

industry by virtue of its overall sales revenue and brand identity. The first

three are pure T&M play companies while Teradyne and GenRad are in the

semiconductor and manufacturing test arena.

Communications Test–The New Paradigm

The evolution of ‘Acterna’ is yet another development in

this market evidencing the desire of companies to carve out niche markets. The

spurt in corporate alliances in the industry in recent times prompts the

question "why now"? The resounding answer seems to be "the

communications market", defined broadly as the Internet, broadband

communications including DSL, Pocket over SONET (POS), DWDM, cable, Public

Switched Telephone Networks (PSTN), and multimedia among others.

Advertisment

The dramatic growth in the communications market has spurred

the need for test and monitoring solutions in engineering, manufacturing test,

and field applications. The increased demand for Quality of Service (QoS)

metrics and commitment on Service Level Agreements (SLA) by users, has motivated

service providers to invest in test and monitoring solutions. At the same time,

these providers are placing demands that are more stringent on equipment

providers in terms of reliability and efficiency of network equipment. The

culmination of these factors is an overall steep growth in test and monitoring

solutions for the communications industry. Frost & Sullivan estimates the

market for communications test equipment as defined above, approximately at $5

billion annually. This market is growing at a rapid pace and certain segments in

broadband wireless are growing at double-digit rates.

Within this bucket, the biggest markets are service providers

and manufacturing test, in that order. Supported by extensive deployment of

newer and upgraded networks, such as LANs, WANs, Cellular/ PCS, VoIP gateways,

SONET/ POS/ Frame Relay/ ATM backbones, the installation, monitoring and field

service markets, have swelled dramatically and account for over 40 percent of

the communications test market. The manufacturing test market follows assisted

by increased investment into production test facilities for subscriber and

terminal equipment in wireline and wireless services.

A closer examination of the various recent corporate

alliances suggests that communications test is a common denominator in most of

these alliances, although some companies have other conventional test products

too. However, few of these alliances are based on pure T&M products.

Exceptions are IFR’s acquisition of Marconi Instruments, Fluke’s acquisition

of Wavetek’s DVM business, and other such smaller acquisitions. Most of the

competitors in the communications test area are vying to carve out an identity

and market share in this emerging market, by positioning itself as a ‘communications

test solution provider’. While these companies are focusing on organic growth

to a certain extent, growth through acquisition seems to be a strong force

behind these mergers. Indeed, acquisition of new and readily available

technology is also a factor that helps the acquirer expand product lines

rapidly. However, an interesting aspect is that much of this activity seems to

be isolated to digital test solutions rather than analog or radio frequency

solutions.

Advertisment

Analog Vs Digital

Although several new players have entered this market over

the past three to five years, a significant majority of these companies are in

the business of test solutions, specifically communications test, which deal

with measurement of digital parameters. One can name several new companies

offering solutions for protocol analysis, Bit Error Tests (BERT), LAN/WAN test,

IP test solutions, POS test, Asynchronous Transfer Mode (ATM) test, SONET/SDH

test, DSL test, DWDM test, and a variety of other digital tests. On the

contrary, there are a few new companies offering RF signal sources, spectrum

analyzers network analyzers, and power meters for wireless test, microwave test,

and other analog tests. In this area, one has to fall back upon established

vendors, such as Agilent, Tektronix, Anritsu, RACAL, Rohde and Schwarz, IFR,

Boonton and Giga-tronics. This leads one to wonder why there are no new entrants

here, although wireless communications test is a growth area.

  • Research indicates that many factors influence the lack

    of new entrants in the analog test area. However, some of the primary

    factors seem to be:

  • Analog, especially at higher frequencies, is difficult to

    master in comparison to digital

  • Much of the innovation in RF and wireless communications

    systems has actually been in the area of digital modulation techniques at

    the base band level. The carrier technologies have remained mostly unchanged

  • The growth of digital communications systems in recent

    times, offers a greater motivation and opportunities to new entrants

  • Unlike conventional radio frequency technologies, which

    have not changed much, digital technologies have a faster cycle of

    innovation, thus leveling the playing field for new entrants

Advertisment

At Frost & Sullivan, we find this intriguing and intend

to explore further into this aspect in future discussions on this site.

The New Face of the New Industry

What is the old face of the T&M industry? The answer

would have been HP, Tektronix, Marconi Instruments, W&G, Wavetek, Rhode

& Schwarz, and Anritsu. Few outside of the T&M industry had ever heard

of these companies, and of those who had, HP and Tektronix were better known for

computer products and printers.

Advertisment

And now, what is the new face of the T&M industry? The

current paradigm is ‘Communications Test Solutions’, championed by

companies, such as Acterna, Agilent, ANDO, Digital Lightwave, Fluke, RADCOM,

Spirent, Sunrise Telecom, and several others. Companies such as Tektronix and

Anritsu also have a presence in this emerging digital and network test market

with some versatile products, but seem to blend more into the conventional

T&M space of signal generators, spectrum analyzers, radio test, and

oscilloscopes. Certain companies such as IFR International, Boonton and

Giga-tronics, seem to have more or less stayed with its core competencies in RF/Microwave

testing. We also have companies such as National Instruments, Keithley and Gage

Applied Systems (part of Tektronix), offering PC-based test instruments for

communications test applications.

One interesting aspect of this new face is that many of these

companies have gone public and the names are recognized by people outside the

industry. The fanfare and media coverage associated with the spin-off of Agilent

helped to focus public attention on the T&M industry. Many investors have

started exploring this industry and successive IPOs from companies such as

Sunrise Telecom and Turnstone have been well received from an investor

perspective. It has also helped these companies generate much-needed cash for

R&D and expansion. Additionally, T&M vertical Internet portals, such as

TestMart, and Test and Measurement Online, have significantly helped the

industry gain greater exposure and public recognition. It is heartening to note

that the T&M industry, always considered as a service industry, has come to

gain its own unique community and identity.

The T&M industry, previously less-known outside of its

user-base, is in a period of transformation with successive mergers, spin-offs,

and corporate identity changes. The spin-off of Agilent, the restructuring at

Tektronix and Acterna, and the availability of dedicated communities such as

TestMart that enable on-line multi-vendor sourcing, have helped attract greater

attention from people outside the industry. At the same time, the burgeoning

communications industry has spurred the market growth for communications test

solutions prompting several companies to re-evaluate core-competencies and

strengths in this emerging market by seeking consolidation.

The new face of the T&M industry brings greater

recognition to several companies involved in some form of consolidation and

declaring its presence in the ‘communications test space’. Spurred by these

companies’ desire to acquire new technology in this space and achieve higher

growth, more of such alliances cannot be ruled out in the near future. It is

likely to be an exciting time ahead for the communications testing industry, or

Comms Test, as popularly known.

Shekar Gopalan, director, consulting

(T&M group), Frost & Sullivan.

Article Courtesy: Frost & Sullivan (www.frost.com)-- is a global leader in international strategic market consulting and training, and TestMart

(www.testmart.com) --provider of Web-based marketplaces for organizations that buy test equipment and other precision instruments

Advertisment