With its growing need for connectivity and IT solutions, the enterprise segment presents a significant market opportunity for telecom operators. Driven by globalisation and virtualisation, the telecom needs of businesses have undergone a significant change over the years. With enterprises expanding their footprint within India and abroad, the importance of mobility solutions in managing their sales force and operations as well as catering to customer requirements has increased. This, in turn, has opened up new opportunities for telecom operators and they have enhanced their focus on enterprise services to counter the impact of declining ARPUs as well as to drive future business growth and profitability.

Currently, all telecom operators in India have a dedicated enterprise vertical to address the needs of businesses. With the onset of the data revolution and introduction of new applications, the telecom and mobility requirements of enterprises have become more sophisticated. As a result, operators are now striving to provide end-to-end solutions to these enterprises by diversifying their service and product portfolios.

tele.net takes a look at the key trends in the telecom enterprise domain, market size and composition, operator initiatives and future plans…

Key trends

In the past few years, the enterprise market has evolved in terms of its requirements and composition. While traditionally, service providers have been focusing on large enterprises, small and medium enterprises (SMEs) are now emerging as a key focus area for operators. These enterprises are increasingly adopting IT and networking technology solutions to improve productivity, drive operational and capex efficiencies, and enable convergence across multiple devices. Further, unlike large enterprises, SMEs do not have in-house IT capabilities and are thus dependent on service providers for their security, communications and IT requirements. As per industry estimates, the SME market in India is currently valued at Rs 105 billion and is expected to witness a compound annual growth rate (CAGR) of over 8 per cent to reach Rs 168 billion by 2018. Further, the SME wireline data market is expected to grow at a CAGR of 14 per cent, from Rs 25 billion in 2012-13 to Rs 50 billion in 2017-18. The SME wireless voice market will grow at a CAGR of 9 per cent, from Rs 32 billion to Rs 49 billion during the same period.

Amongst the key business sectors, IT/ITeS industries and the banking sector were the first to adopt mobility solutions to improve the customer experience. Key drivers for enterprise data connectivity in the banking and financial services industry include the computerisation of regional rural banks, interbank connectivity, initiatives like financial inclusion, and interlinking branches and automated teller machine networks. Further, bandwidth, both domestic and international, plays a crucial role in knowledge-based industries such as BPOs, call centres and software exports. In the IT/ITeS industry, the rise in demand for enterprise connectivity solutions can be attributed to the need for high speed connectivity, voice channels and the growth in BPO/back-office companies, which has led to the demand for IP and international private leased circuits.  Also, national e-governance initiatives such as unique identification and measures for financial inclusion and improving connectivity in rural India have been the key growth drivers for the uptake of enterprise services.

Further, as the need for a secure, reliable, efficient and robust telecom infrastructure to provide seamless operations is increasing, sectors such as retail, manufacturing, energy and utilities are also demanding sophisticated telecom solutions. In particular, the connectivity needs of the retail segment have grown with large domestic and global players making a foray into organised retailing. Some of the factors driving the adoption of telecom solutions in the retail and FMCG segment are the increasing usage of enterprise applications on a real-time basis, the need for greater connectivity to warehouses, higher bandwidth requirements of stores and the growing demand for supply chain management (SCM) solutions.

Meanwhile, the manufacturing sector requires organisation-wide connectivity to fully utilise solutions such as enterprise resource planning (ERP), SCM and customer relationship management (CRM). The sector makes significant investments in IP-VPN and VoIP, and is also turning to e-business to drive cost efficiencies and economies of scale.

The enterprise application ecosystem has also undergone considerable change. While traditionally service providers offered simple telephony, domestic and international leased lines and domestic and global VPN connectivity, most operators have now expanded their enterprise portfolio to include a host of solutions encompassing cloud computing, machine-to-machine (M2M) communication, enterprise mobility, telematics and big data. Business email, mobile office and field force automation continue to be the main commercialised applications while cloud computing and data centres are gradually gaining momentum. A lot of innovation is also being undertaken with regard to applications like telemetrics.

The growth in organisations’ mobile force will be a key driver for enterprise solutions in the future. The growing number of employees working remotely will result in an increased requirement for real-time access to content and applications on devices that vary according to form factor and operating systems. Moreover, SMEs are demanding solutions that are flexible as well as cost effective. To this end, several operators are now providing opex-based enterprise solutions. Further, security has become a key issue with the proliferation of mobile devices as a preferred communication platform and solutions are required to address the same.

Key players

The Indian enterprise market has witnessed strong growth over the years. As per the Telecom Regulatory Authority of India, the total revenue generated from the enterprise segment (national long distance [NLD], international long distance [ILD] and internet service providers) in 2012-13 stood at Rs 520.58 billion. The NLD segment accounts for over 60 per cent of the enterprise market in India, generating a revenue of Rs 318.25 billion in 2012-13. Bharti Airtel, with a revenue share of about 29 per cent, was the market leader, followed by Bharat Sanchar Nigam Limited (BSNL) with a share of about 17 per cent. Other key players in the segment include Reliance Communications (RCOM), Vodafone India, Tata Communications, Idea Cellular, Tata Teleservices Limited (TTSL), Tulip Telecom, Aircel and Sify Technologies.

The revenue contribution of the ILD market to the enterprise market during 2012-13 stood at Rs 122.19 billion. Bharti Airtel led the segment with a market share of about 26 per cent, followed by Tata Communications (13 per cent) and BSNL (11 per cent). Besides Indian players such as Tata Communications, Aircel, Vodafone India and Idea Cellular, global players such as Verizon, AT&T and British Telecom also made a significant contribution to the segment’s growth.

 Operator status and plans

Driven by the growth in enterprise revenues in the past few years, Indian telecom operators have strengthened their presence in this domain. During 2012-13, the contribution of enterprise services to the total revenues of major telecom operators stood in the range of 10-15 per cent. All the leading players are now focusing on providing M2M communications, cloud computing, data centre and managed services; and enterprise mobility solutions.

Bharti Airtel has rebranded its enterprise arm to focus on the SME segment. Its enterprise business currently accounts for over 10 per cent of the company’s total revenues. During 2012-13, the enterprise arm earned Rs 53.2 billion in revenues, a growth of about 20 per cent, as compared to Rs 44.51 billion earned in 2011-12. Further, in 2012, the operator partnered with Hewlett-Packard (HP) to provide cloud services to SMEs through the cloud enablement platform, which includes email, accounting and business software as well as storage services customised to the needs of SMEs. As per industry reports, Airtel is considering the acquisition of AGC Networks to strengthen its enterprise portfolio.

Vodafone Business Service, a subsidiary of Vodafone India, has also expanded its enterprise business by foraying into wireline services in early 2013. It offers a range of products and services such as M2M solutions, wireline data solutions (MPLS-VPN, internet leased lines, domestic and international leased circuits), office wireline voice (E1-DID), toll-free services, conferencing and collaboration, application mobility, and mobile email and connectivity solutions for small and medium businesses (SMBs). The operator currently has 80,000 SMB customers across 150 towns in the country and plans to increase its reach to 200 towns by 2013 and 400 towns by 2014. Further, the company is working with channel partners to expand its product offerings to include software and IT products besides providing communication services to SMB customers.

TTSL also registered a robust annual growth of 20 per cent from the enterprise vertical during 2012-13. Revenues from the SME business accounted for 11 per cent of the total revenues during the fiscal. The operator’s offerings for SMEs comprise wireless and wireline data and voice services as well as managed services. In addition, it offers cloud-based services and comprehensive end-to-end solutions such as Photon Broadband and internet leased lines (enterprise data); 3G, IP voice and security (enterprise voice); and managed hosting, managed networks, co-location, insta-compute and audioconferencing (managed services). TTSL is betting big on its SME business and plans to dedicate 40 per cent of its capex towards network expansion for the SME business. TTSL has identified 75 SME clusters and is in the process of identifying more. It currently has about 100,000 customers and 1,250 channel partners.

RCOM is also optimistic about its enterprise service business. The operator currently serves over 45,000 large, medium and small enterprises. Its key offerings include cloud, data centre and videoconferencing solutions, and data connectivity and managed services. RCOM is targeting a CAGR of 30 per cent over the next five years for its enterprise vertical.

Aircel is another operator that is venturing into the cloud space in a big way. The company has partnered with NEC India for software-as-a-service, where NEC will provide a cloud aggregation platform to Aircel. The two companies will initially offer a software applications portfolio, which would extend to other cloud offerings subsequently. The focus will be on enterprise-grade offerings, such as collaboration, CRM, ERP, human resource management system, business suite and videoconferencing. Currently, Aircel’s business solutions reach out to over 400 points of presence in India.

State-run operators BSNL and Mahanagar Telephone Nigam Limited (MTNL) are also turning to the enterprise segment to drive revenue growth and profitability. BSNL is targeting a 25 per cent growth from its enterprise business during 2013-14. The operator has recently partnered with Dimension Data, a global ICT solutions and services provider, to launch its enterprise cloud services in India. Meanwhile, it has launched its Internet Data Centres in partnership with Dimension Data in Mumbai, Faridabad, Ahmedabad, Jaipur, Ludhiana and Ghaziabad. According to company sources, around 15 per cent capacity of these data centres is already in use and this is expected to reach 50 per cent by end-2013-14. Further, MTNL and BSNL have recently signed an agreement to share telecom and IT infrastructure to provide joint services to enterprises across the country. This is expected to increase BSNL’s revenue from the enterprise segment by 15 to 20 per cent, and generate Rs 1 billion in revenues for MTNL.

Challenges and the way forward

While the enterprise domain presents a significant business opportunity to telecom operators, it also has its challenges. The segment, until recently, was served by traditional IT players such as IBM, HP and Cisco, which have strong expertise in the field as well as long associations with large enterprises. Thus, telecom operators would need to realign their business strengths in terms of reach and offerings to tap the enterprise market.

Further, the needs of SMB and large business customers are unique in nature and  require customised solutions. Also, the pricing of such solutions is a challenge and often an area of disconnect between operators and customers.

As a result, delivering quality customer experience and customised solutions in an efficient and cost-effective manner is key to operators’ success in serving the SMB and enterprise market. To this end, operators are partnering with application developers to provide a complete solution that addresses an enterprise’s needs. They are also looking at leveraging their 3G/4G spectrum to serve their corporate customers better. Cloud computing, mobility solutions and monetising data are the key growth areas for telecom operators in the enterprise space.

Going forward, a redefined focus on the enterprise vertical is a logical step for operators given the declining profitability of traditional segments such as voice services. As operators increasingly turn

to enterprise customers, this domain is likely to evolve as the mainstay of their future business.