By Charles F Moreira
Looking ahead to what’s in store for communications, Frost & Sullivan sees several key trends in Asia-Pacific ICT Industry.
Among them, mobile operators across the board are facing declining voice revenues, which will fall drastically – even in absolute terms – in most markets in the region, while data substitution as opposed to price competition is now the primary driver.
Consumer behaviour is also changing putting additional pressure on the telcos, as consumer can choose how they want to communicate, and may not use a telco service, while over-the-top (OTT) platforms will hit Telco core services such as SMS revenues.
The term “over the top” generally refers to video, audio and any other third-party, IP-based content or services delivered directly to users over an open broadband Internet connection, which is beyond the control of the communications service provider such as the Internet service provider or telecommunications service providers (telcos), and are not subject to their charging. In this case, it would also apply to IP-based voice services such as Skype, messaging services such as Twitter, Google Talk, etc.
According to Pranabesh Nath, Industry Manager, ICT Practice, Frost & Sullivan Asia Pacific, telcos are facing the significant challenge of getting dis-intermediated – i.e. the emergence of platform providers such as Google, Apple, Microsoft are taking away the traditional opportunities of telcos such as communications, entertainment, e-commerce, social networking, and enterprise services.
“We are looking at tougher competition between all kinds of ICT players as technologies and platforms converge, which is great for the consumer. We expect higher focus in emerging areas such as television platforms that integrate the TV, internet and apps,” he said.
He added, “Here we expect to see Microsoft enter with its Windows 8 mobile platform, as well as Android and Apple in the near future. Currently smart TV platforms are usually made by the TV manufacturers themselves, such as Samsung. The benefit for the consumer is to have one platform or operating system (OS) across their desktop, laptop, mobile, tablet and television.”
There are almost three billion mobile subscribers today, with the majority on 2G or 2.5G service in the Asia Pacific.
So there’s much opportunity for further growth, especially for 3G coverage and of content and services consumption on smart phones and tablet devices. Frost & Sullivan estimates that there 150 million smart phones and five million tablets were shipped in 2011.
LTE not revenue-generating yet
While LTE (Long Term Evolution) deployments are catching up around the globe, however LTE deployment is not yet a revenue generating proposition. By the end of 2012, global LTE subscriptions are expected to exceed 40 million, a four-fold increase over 2011.
(However, this is still very small, compared to the estimated 5.9 billion mobile subscribers worldwide by 2013, according to research firm In-Stat.)
LTE subscriptions in the Asia Pacific region are expected to overtake North America by 2014 and this region will be primarily driven by adoption in China, India, Japan, and South Korea. Presently, the North American region accounts for 60 per cent of total LTE subscriptions, followed by the Asia Pacific region at 37 per cent.
However, spectrum fragmentation still remains the main obstacle to growth of LTE subscriptions in the Asia Pacific. Also, with LTE deployed in more than five spectrum bands, it creates additional costs for handset OEMs (original-equipment manufacturers) to develop an LTE smart phone for every band.
One of the most critical elements in driving LTE penetration is the availability and affordability of devices, and for this very reason several operators, such as China Mobile HK, Korea Telecom, 3 and PCCW, delayed their launches until a handful of LTE-enabled smart phones, rather than just data cards, become available.
Rise of APAC cloud
The Asia Pacific cloud computing market will be worth US$5.81 billion in 2015, up from an estimated worth of US$2.22 billion in 2012. This market includes SaaS, IaaS, PaaS. While all three segments are expected to demonstrate strong growth, IaaS and PaaS will grow at a faster pace to account for a greater share of the market.
Australia leads in cloud computing adoption, with 43% of respondents saying they have implemented some form of cloud services. Malaysia and Singapore are fast growth markets for cloud services.
Based on a Frost & Sullivan survey, most enterprises believe that cloud computing will shrink IT teams and make some jobs redundant. However, there is still some hesitance in adopting cloud applications due to perceived risks such as data security and privacy.
The Content & Media vertical accounts for 20% of the data centre market currently. This is expected to rise to 24-25% over the next three years. Players like Pacnet, Orange, and Citic have expanded their offerings to meet this. Furthermore, the captive data centres of large media companies, such as Google and Facebook, are also expanding greatly in the APAC region to host the content locally.
APAC enterprise communications
Over US$14 billion was spent on unified communications (UC) solutions in the last three years in Asia Pacific. Applications growing rapidly are business video, enterprise mobility, conferencing services, and UC related cloud and managed services.
There is a shift from hardware and software applications for enterprise communications to cloud based apps. Both telcos and Vendors with their platforms are competing in this hotly contested market.
The market for unified communications on-premise applications in the Asia Pacific is expected to be worth US$5.5 billion in 2012, which will rise to US$9.3 billion in 2018. This market includes enterprise telephony, enterprise video, email, mobility, contact centres, instant messaging, presence, social media for business.
The market for unified communications services (hosted/managed/cloud), also known as ‘UcaaS’ (Unified Communications as a Service), is expected to be worth US$3.2 billion in 2012, which will rise to US$7.53 billion by 2018. This number includes the applications listed above –as-a-service, and also includes related professional services such as consulting, build and implementation, maintenance and support.
On-premise video is a booming market, worth US$0.8 billion in the APAC, growing at 20% year-on-year in the last 3-4 years. The rise in types of devices (desktop/mobile/meeting rooms), and availability of new technology is expected to keep this growth steady in the next 3 years.
Economic downturn, cloud upturn
However, the global economic environment is declining and this may have a negative impact on enterprise and consumer spending in the APAC in the next two years.
On-premise solutions are expected to fare worse compared to cloud services in such a scenario as capital expenditure may come down and it may be easier for enterprises to adopt cloud solutions where they can pay-per-month.
For over 50 years, Frost & Sullivan has been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community to help them embrace new waves of industry convergence, disruptive technologies, increasing competition, mega trends, breakthrough best practices, changing customer dynamics and emerging economies.
New revenue sources for telcos
Meanwhile, Ovum’s Shagun Bali believes vendors will focus on creating new sources of revenue growth for telcos in 2013.
“Telcos are operating in an increasingly saturated and competitive environment, where their services are regarded as commodities and their margins are lower than ever and shrinking,” Shagun said.
Telcos are under pressure to reduce operating costs, differentiate their services, enhance customer experience, and generate new revenue streams – all at the same time. The opportunity lies in harnessing their strategic asset – customer information – to generate new sources of revenues.
As a result, IT vendors catering to the unique needs of the telecoms industry are focused on developing new technologies to help telcos monetise their customer data in the face of mounting pressures in the telecoms industry, so IT vendors should position their offerings in 2013 to help them address these challenges.
The telecoms industry is going through a period of intense and rapid change, as new competitors erode traditional revenue streams and customers demand better services.
Furthermore, deregulation, new technologies, and mergers & acquisitions mean telcos are struggling to keep pace. Increasingly they are being forced to squeeze inefficiency and cost from their operations and capital infrastructures, diversify their product portfolios, accelerate launch cycles, improve service delivery quality, and find new revenue streams and ways to compete.
Facing up to these tough challenges, telcos need to become more agile in their operations and decision-making to survive and thrive in such competitive markets. Improved quality of customer experience and service personalisation are viewed as primary means to reduce churn, but service providers still struggle to achieve a holistic, 360degree view of each subscriber.
Telcos must focus on maximising the value of their most important asset – customer data. Whether it is reducing operating costs by consolidating silos of subscriber data, enabling policy-driven service personalisation, providing personalised advertising, or simplifying customers’ interactions with various service departments, it all starts with intelligently using customer data.
Forward-looking telcos treat subscriber data as an asset – the oil that will fuel their future growth. Some telcos are taking the idea so far as to redefine themselves as data services companies in the next five years.
Efforts to target the right customers with the right services will make the difference between success and failure. In 2013, telcos will emphasise innovative ways to leverage customer data to create new revenue streams.
IT trends in the telecoms industry suggest big changes under way. telcos seek state-of-the-art techniques to leverage IT to improve efficiency, shorten time to market, and reduce customer churn as they move steadily towards a software-driven service environment. Because margins are lower than they have been in the past, telcos will increase investment in applications that improve efficiency and support business decision-making, such as business intelligence (BI) and advanced analytics.
As competition for customers intensifies, it becomes increasingly important for telcos to retain the customers they already have, so telcos will work to optimise customer experience and use it to differentiate themselves and to drive new revenues. Gradually, customer experience management (CEM) is evolving into a source of BI reports that deliver performance and service delivery analytics to all management levels.
Vendors have introduced greater flexibility in their IT solutions and partnerships to combat harsh market conditions. Vendors must concentrate on embedding themselves within their telco customers and becoming part of their operating model.
Vendors’ professional services capabilities are central to accomplishing this goal. In addition, vendors must be in constant dialogue with various departments in the telco such as the CIO, not just IT departments, because telcos are changing how they make IT decisions.
More decisions are being made by strategy-focused executives rather than IT. This reflects
greater interdependence among telco processes, where investments in software and IT affect business processes across the entire company.
Strong vendor activity is evident as technology suppliers enhance their existing capabilities to meet the needs of early adopters and anticipate new requirements. In BI and analytics, vendors including SAS Institute, IBM, and Oracle, along with other smaller vendors such as Angoss, Tibco, and Pitney Bowes, address the evolving needs of telcos.
Nokia Siemens Networks (NSN) and Huawei are particularly strong in subscriber data management. Oracle, Amdocs, and Ericsson (which acquired Telcordia) have introduced integrated CRM and business support systems (BSS) solutions. Integrated solutions help telcos reduce costs and transform their operating models.
Essentially:-
*Customer data will drive new sources of revenue for telcos.
*IT vendors view sophisticated data management and advanced analytics capabilities as key differentiators for telcos.
*Telcos are aggressively moving beyond data silos to a 360-degree view of customers.
*Agility and flexibility of IT systems will be key in 2013.
*Vendors are promoting lean and intelligent telco operating models with integrated CRM and BSS solutions.
