Trends like enterprise mobility and an ever growing appetite for data are compelling telcos to emphatically play their ICT trumps. By Heena Jhingan
Over the last decade, operators have learned to compensate for slimming ARPUs by exploiting their assets right from network, towers to fiber beds. However, that has reached a stage of maturity. Meanwhile, the needs of enterprises saw a tremendous change from service plans to end-to-end solutions. With connectivity becoming a commodity, operators had to package connectivity with a dash of management in order to differentiate themselves as enterprise solution providers, while they battled for wafer-thin margins in a hotly contested market.
When operators first realized the need to to offer more than just connectivity through MPLS, adding the management layer was the obvious move, leading to the emergence of managed MPLS. In the current scenario, a telco is equipped to not only connect an enterprise, but also manage its network, IT infrastructure, data centers, security layer, mobility applications and even mobile devices. The enterprise services side of a telco’s business has seen these service providers evolve from being providers of vanilla connectivity to enablers and managers of specialized IT services.
TRAI’s reported gross industry revenue for the Indian Telecom industry in 2010-11 was about $38.67 bn. As per the report, the enterprise service revenue stood at about $8.6 bn, approximately 22% of the total.
Benoy CS, Director – ICT Practice, Frost & Sullivan – South Asia and Middle East, was of the view that the Indian enterprise market was dominated by the large, pan-India operators like Tata, Bharti Airtel, Reliance and Vodafone due to their network and reach. The smaller players are now trying to woo enterprise customers with data cards or voice services.
There are others in the fray with a slice of the Indian enterprise’s datacomm pie. These include global players such as Orange Business Services and British Telecom that bring global connectivity and vertical focused differentiation to the table.
For the large operators, enterprise fixed data services, managed services, Cloud, data center, conferencing and collaboration are the key components of their enterprise business.
While pure connectivity is naturally the highest revenue earner for telcos, accounting for as much as 65% of the entire enterprise business in some cases, vanilla connectivity revenue shares have started tapering off. VS Gopi Gopinath, President & Chief Operating Officer – Global Enterprise Business, Reliance Communications, said that 60% of the telco’s revenues came from connectivity services with its data center business also contributing its mite.
Increased IT adoption across verticals has been instrumental in opening up new revenue streams for telcos, inspiring them to reinvent their enterprise services portfolios.
Sumeet Walia, Senior Vice President & Head Global Enterprise Solutions – India & APAC, Tata Communications, observed that BSFI had stayed ahead of other industry verticals when it came to IT adoption. Initially, core banking initiatives by banks and their DR requirements offered business opportunities for operators. Banks are now demanding superior IT enablement services, especially for the ease of their end customers.
“Ethernet services for banks, enabling high frequency trading etc can be a crucial business for operators,” Walia added.
He explained that, post 2009-10, business from the ITES vertical did see a brief dip. These companies are now looking at availability with the help of 3G services.
Manufacturing has proved to be a pillar of resilience. The automation drive within the vertical is bringing data center management and hosting services business orders for operators.
Large operators are geared up with comprehensive suites of solution integration capabilities to address the domestic market. IT services is a growth area, especially with the requirement for high levels of expertise to manage increasingly complex IT environments.
Managing data, mobility and the Cloud
Reji Thomas Cherian, VP, Telecom, Media & Entertainment, Capgemini India, pointed out that new enterprise services were emerging as a result of the demand for additional data and mobility within enterprises.
According to Cherian, the Cloud Computing market including PaaS, IaaS and SaaS was worth $400 mn for India alone. Data center services revenue is projected to touch $2.6bn in 2012. The managed security mart in India was worth $321 mn in 2011 and the way things are shaping up, this is likely to grow rapidly. Moreover, managed third party data center services generated revenues to the tune of $662 mn in 2011 and this too is on a high growth trajectory.
Another trend in the making is that of managing interoperability amongst network providers for video conferencing. Here, the global players such as Orange Business Services, have an important role to play.
Bala Mahadevan, CEO, Orange Business Services India, saw the lack of device and network interoperability as a critical barrier to the growth of the video conferencing industry to date.
“Various network operators are opening up their core networks to competition and expanding their share of this growing market segment. For instance, we have expanded Telepresence Community, our B2B Telepresence solution, through an interoperability agreement with Tata Communications’ Global Meeting Exchange to allow customers to conduct telepresence meetings seamlessly between these two networks. Consortia like Open Visual Collaboration Consortium (OVCC) and service providers like us are constantly working for driving the market towards video interoperability and facilitating a better video conferencing ecosystem,” he said.
An operator’s strength lies in introducing the heartbeat in a machine when a SIM is inserted. Operators like Vodafone and Airtel are now finding business cases in offering Machine to Machine Services. Several M2M services have been tested including smart metering for utility companies, fleet management for transportation and logistics operators, supply chain management for manufacturers, telemedicine, sales force and field force automation and even asset/employee location tracking for enterprises.
The mass deployment of these application as a platform is yet to happen and that can only take place once a complete ecosystem of chipsets, sensors, network, applications is in place.
In a BYOD environment, operators are going a step beyond the basic Mobile Device Management or MDM layer; there’s a focus on enhanced security and containerization said Najib Khan, CMO, Airtel Business.
He added, “Service providers are trying to offer services that are core to the enterprise; at the same time, they are trying to put ease of use in the employee’s hands. Service providers are now trying to leverage the B2C part in the B2B space.”
Besides, the operators are now thinking on the lines of Mi-Fi for multiple devices accessing a 3G/4G connection over Wi-Fi. They are also building mobile data services for enterprise mobility and bringing core business applications on to mobile devices. Airtel has launched the Mobile Application Tool for Enterprise or MATE, which provides an end-to-end solution for developing as well as integrating enterprise applications such as ERP or CRM systems on smartphones and enabling services that include voice, messaging, push email, Internet browsing and business applications on mobile devices.
These new enterprise offerings will revolve around ubiquitous connectivity, managing the workforce and the availability of enterprise apps and information on mobile devices, managed video, managing BYOD environments, managed security solutions etc. Operators would also be innovating with new variants of NDL and MPLS.
All about throughput
A school of thought, within the telecom and CIO fraternity, had been hailing 3G as a game changer for a telco’s enterprise business. The technology was projected to be a promising one that would give way to newer business cases around high speed data access. Initial uptake was slow on account of unrealistic pricing. Now that the prices of 3G data plans have been rationalized by all the leading operators, we expect to see usage grow.
Benoy of Frost &Sullivan noted, “Data card adoption is a great sign but the industry did not see any significant enhancement in usage from what was already possible on GPRS/EDGE and we hear a similar noise being around 4G now. The 4G opportunity could in fact be for real provided that it is planned properly but, as of now, the industry has a fragmented approach towards the technology.”
Walia said that operators who had invested in these technologies would be keen on developing use cases for the same. Video’s expected to account for most of the collaborative services on 4G.
Khan of Airtel concurred saying that video was expected to see 30% YoY growth over the next few years.
“3G and 4G are both wireless technologies having immense potential. 4G is central to our Digital Media eXchange (DMX) strategy. DMX is Cloud-based, multi-tenanted, media management exchange platform, offering end-to-end electronic distribution of content from content production, acquisition, storage, processing and delivery, and supports every screen (mobile, Internet, IPTV, DTH, digital cinema and digital signage), ” Khan informed.
SMBs are easier to tap
While the large enterprise business is complex and demanding, operators have found a market that offers a faster turnaround. Analysts believe that SMBs are a better bet for an operator to display differentiating traits and play with innovative models.
The best thing about the SMB business, Kamlesh Bhatia, Research Director at Gartner, thought was the fact that it was a volume game and not one of margins. The scale in this business can be achieved through presence, which is an advantage for an operator.
“While the large enterprises have been expressing skepticism towards high revenue churning services like the Cloud, SMBs are the ones that are ready to leapfrog to these new technologies,” said Bhatia.
Gopinath of Rcom said, “Creation of pull among the SMB segment through relevant product bundles, vertical focus, engagement, sales automation and customer experience on the mobile could be pivotal for players in this market.”
For quality and competition
Despite the tireless efforts of the telcos to excel at serving enterprises, lack of expertise in terms of verticalization makes the competitive scenario that much tougher for them. It is believed that, in most cases, significant value is provided by partners that helps telcos build solutions for a particular segment. Therefore, operators need to invest in building these strengths in house so that they can earn fatter margins.
As it is, service providers face tough competition on the enterprise end, and continued CAPEX requirements add to the pressure on their enterprise division to deliver with limited resources. With the enterprise customers’ expectations growing, the challenge to garner and justify more resources to serve enterprise customers has increased manifold.
The telecom operators traditionally engaged with the enterprise through telecom or datacomm services which mostly revolved around providing leased links or at best MPLS networks. The evolution of telecom operators who have started providing Cloud and OTT services have positioned these players as the most logical access point for IT services for SMBs. The question remains as to whether the large enterprise segment will bite but in the SMB sector, telcos are poised to corner a large portion of the market for Cloud and other IT services. Analysts said that this could lead to the question of potential lock-in but which the regulators had to ensure a level playing field with fair practices and an open trade approach. This would enable companies to make a choice and move between services and operators based on the quality of service, costs and other competitive parameters.
