With Indian enterprises making ncreasingly bigger investments n telecommunications infrastructure to gain an edge in the highly competitive marketplace, the Indian enterprise telecom market is growing at the rate of 18-20 per cent per year. We bring you a series of excerpts from presentations made by analysts, operators and vendors at tele.net’s conference on “Telecom for Large Enterprises”.
The Indian enterprise telecom market has witnessed considerable growth over the past few years and this trend is expected to continue. The growth in telecom spending by enterprises has been driven primarily by the need to remain connected to their internal and external partners and customers, and access information in real time. It has also been driven by an increasing emphasis on mobility and “always-on” services, and an awareness among enterprises to adopt data services. Moreover, there is a strong demand for enhanced voice and multimedia services.
Size and growth
The Indian enterprise telecom market grew to Rs 298.07 billion in financial year 2007-08, and constituted 30 per cent of the Indian telecom market. It comprises fixed, mobile and data services. Currently, fixed services at 42 per cent (approximately Rs 89.82 billion) dominate the Indian enterprise telecom market, followed closely by mobile services which account for 38 per cent of the market. Data services constitute the remaining 20 per cent.
However, over the next few years, the fixed services segment is likely to lose its position as the leading segment to challenges from mobile and data services. The market for fixed services for the enterprise segment is expected to reach Rs 119.75 billion, growing at a compounded annual growth rate (CAGR) of 4.91 per cent during the period April 2007-March 2013. Of this, the large enterprise segment is likely to account for 60 per cent of the total spend.
The mobile services market is expected to reach Rs 108.85 billion in financial year 2012-13, growing at a CAGR of 14.4 per cent. Here too, the large enterprise segment is expected to contribute 57 per cent of the total spend.
Meanwhile, data services are expected to grow five times faster than fixed voice services and are forecasted to reach a little over Rs 130 billion at a CAGR of 21.3 per cent, up from approximately Rs 41 billion currently. The large enterprises market is expected to account for around 69 per cent of the market. The growth of the data market is being driven by the multi-protocol label switching (MPLS)/virtual private network (VPN) market, which is expected to have a market share of nearly 50 per cent in 2012-13. The international private leased circuit market will also witness high growth rates. On the other hand, the asynchronous transfer mode (ATM)/frame relay market will continue with its decline and phase-out.
Key verticals
While the small and medium enterprise (SME) segment, with over 735,000 organisations, clearly forms the biggest chunk of the market in terms of volume, the 5,400odd large enterprises account for 70 per cent of the revenues in this market. Service providers, therefore, tend to focus on the large enterprise segment and the solutions for this segment reflect a very high degree of customisation.
Amongst the verticals, banking, financial services and insurance (BFSI), IT, and IT-enabled services (ITeS) are the largest segments in terms of spending on communications infrastructure. The key factors for increased demand for telecom products and services from the BFSI segment in the future are growth in the number of branches and ATMs, the business and regulatory needs for services such as internet banking, data storage, business intelligence, regulatory compliance, business continuity and disaster recovery, core banking applications and networking requirements. However, high inflation and interest rates could impact this growth.
For the IT industry which is highly export oriented, outsourcing will be a major factor affecting telecom spends.Moreover, IT companies offer direct employment to around 1.3 million people and this trend is likely to increase in the future, thereby leading to a strong demand for telecom solutions. Some of the factors that constrain this market are the declining value of the rupee, which may have a strong impact on exports, and the economic recession in the US, which is a key destination and accounts for 60 per cent of the export market.
Meanwhile, the ITeS segment is a high growth vertical. The movement to tier 2 and tier 3 cities will lead to growth in the demand for telecom services in this vertical. However, with emerging markets like China, Brazil and Mexico showing a keen interest in this arena, the ITeS segment may witness a deceleration in growth, leading to subdued demand for telecom products and services.
Going forward, the next level of growth is expected to come from manufacturing, the service industry, public sector units (PSUs) and the government. Taking the example of pharmaceuticals in the manufacturing segment for instance, the distribution channel from the manufacturer to the stockist to the su stockist to hospitals, retailers and doctors are demanding increasing connectivity and IT solutions.Moreover, Indian pharmaceutical companies are venturing into lucrative offshore markets by entering into partnerships, alliances and marketing arrangements.As a result, connectivity requirements, and hence the demand for IT/telecom services, are rising significantly in this segment.
In the services segment, as India makes the shift from an agricultural economy to a servicesbased one, key segments like airlines, hospitality and education will have a direct impact on revenue growth and witness accelerated growth in the demand for telecom services which can enhance their businesses.
Finally, as PSUs explore international markets and the government undertakes large IT initiatives, there is a high potential for growth in this segment.
Key trends
Key trends in the enterprise market include mobility and strong demand for Web 2.0 tools, managed services and a UC platform.
The mobile revolution is changing the way enterprises work. Falling prices of hardware, including laptops, smartphones that have more power than some of the computers in the market, broadband access, voice over IP telephony, instant messaging, social networking, web conferencing, and the rise of Wi-Fi ?? a feature offered by virtually every laptop ?? and other communication tools have all combined to make mobility the next big thing. According to a projection by research firm IDC, the enterprise mobility-enabled worker population in the Asia-Pacific region will touch 66 million in 2009, up from just 44 million in 2006.This clearly indicates that enterprises want to deploy solutions that keep their business on the real-time track.
While email is considered a key application by the majority of the enterprises, this is mainly in the short term. In the long term, applications that enable core business access on the move will be implemented. Besides mobility, the other major communication trend that is gaining visibility in enterprises is the strong demand for Web 2.0 tools. Research firm Forrester describes Web 2.0 as the set of technologies and applications that enables efficient interaction among people, content and data in support of collectively fostering new businesses. The reason why Web 2.0 will gain attraction in the enterprise is that many IT departments are already using 2.0 tools for internal tasks like project management and supporting elements. The utility of these deployments will encourage them to push Web 2.0 tools more broadly in the enterprise. In 2008, Forrester also expects the adoption of social networking to accelerate dramatically with many enterprises looking for internal social networking solutions. Another major trend is that enterprises are becoming more responsive to customers and are transforming their transaction periods. In 2008, contact centres are leaning towards an increased emphasis on self-service and applications that provide greater insight into customer experience. More companies are also turning to outsourced and managed services for their operations. IP adoption continues to expand with more than 30 per cent of the companies indicating that they have deployed or are rolling out IP contact centres.
Going forward, enterprises are looking to continuously improve their business.Unified communications (UC), the amalgamation of different and disparate communications systems that are available to an enterprise user, is a key application that is revolutionising the business landscape. UC applications improve enterprise user productivity and enhance collaboration. These applications are expected to be embedded and integrated into business processes and enterprise applications such as contact centres, supply chains, etc.UC has gained significant acceptance among enterprises.An internal study conducted by Avaya on the impact of a new UC platform on its own global sales force comprising mostly “road warriors”, has revealed that productivity could be potentially increased by 6 per cent. A sound UC strategy leads to reduced costs, often resulting in a return on investment in under a year.
Key issues
However, issues such as last mile connectivity; lack of applications that drive the enterprise VAS market; highly variable and skewed fixed line, broadband and mobile penetration rates that lead to varied growth strategies; and finally, resistance on the part of enterprises to adopt new technologies due to investments in already implemented alternative technologies and legacy systems, are key concerns for the immediate future.
Moreover, while the mobility paradigm is yielding several benefits to the enterprise, it is also spelling new concerns for companies. In the 24×7 work culture, companies that earlier had to deal with traditional networking infrastructure and its well-established management processes, are now having to grapple with security issues related to the dominance of laptops and smartphones within this domain.The level of risk on mobile devices can be judged by the fact that there were around 350 viruses available on a Siemens phone alone. These can spread over an internet connection or a Wi-fi network, and some of them are even capable of stealing important information. These issues need to be addressed for the enterprise telecom market to continue on its growth path.
(Based on a presentation made by Girish Trivedi, Deputy Director, Telecom, Frost and Sullivan; and the keynote address by Niru Mehta, Managing Director and Vice-Chairman, Avaya GlobalConnect)
