ENTERPRISE COMMUNICATIONS: GROWTH OPPORTUNITIES FOR TELECOMS OPERATORS - VOLUME I - Analysys Mason
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VOLUME I ENTERPRISE COMMUNICATIONS: GROWTH OPPORTUNITIES FOR TELECOMS OPERATORS
Contents Introduction p 3 Singtel outperforms a declining telecoms enterprise market p 4 Enterprise telecoms survey: operators must do more to overcome customer dissatisfaction p 6 Security-as-a-service solutions offer operators the chance to boost enterprise revenue p 8 KPN analyst day: its focus is on healthcare, government and manufacturing verticals in the Netherlands p10 Colt analyst day: Colt focuses on high-quality connectivity services, while other operators diversify p12 Operators in Asia with fixed–mobile convergence ambitions should consider the opportunity presented by small and medium enterprise ICT p14 Analysys Mason’s Enterprise Research p16 About Analysys Mason p17
Introduction
All telecoms operators interested
in the enterprise market are facing
similar challenges
Welcome to our first collection of The articles in this collection cover
articles on the enterprise the following topics.
communications market.
• Singtel outperforms a declining
Telecoms operators that are telecoms enterprise market. We
interested in the enterprise market explore how a small number of
are facing similar issues in all incumbent operators in high-
countries; they want to defend income countries are reversing the
existing revenue and find new trend of declining enterprise
sources of growth. In high-income revenue.
TOM REBBECK - @Tom Rebbeck
countries, these issues are • Enterprise telecoms survey: Research Director
tom.rebbeck@analysysmason.com
particularly pressing because operators must do more to
enterprise revenue for most overcome customer dissatisfaction.
operators declined in 2016. In This article is based on our
• Operators in Asia with fixed–
middle-income countries, operators extensive survey of operators and
mobile convergence ambitions
are under less pressure – enterprise demonstrates that low levels of
should consider the opportunity
revenue continues to grow – but even satisfaction are leading to increased
presented by small and medium
here, as markets approach churn and reducing the opportunity
enterprise ICT. This article provides
saturation, price competition will to sell new services.
ideas on how operators can tackle
intensify and new service revenue • Security-as-a-service solutions the SME market in Asia.
will be needed. Operators have the offer operators the chance to boost
option of providing enterprises with We hope you find this collection of
enterprise revenue. Security is one
security, SaaS, IaaS, hosting, IoT and articles useful. We welcome
of the most promising areas for
pay TV services, but all will require feedback and encourage you to
operators to boost their revenue.
operators to adopt new ways of This article examines the contact the authors directly if you
working. opportunity with small and would like to discuss any of the
medium-sized enterprises (SMEs). points raised, or are looking to
This collection of articles will help understand how a specific issue or
operators to understand these new • KPN analyst day: its focus is on trend will affect your business.
services, and provides ideas and healthcare, government and
suggestions for implementing them. manufacturing verticals in the We look forward to working with you.
Netherlands. We explore how KPN
If you want more insight, our is trying to become one of the
research programmes have an largest ICT providers in its home
expanding range of content on the country.
enterprise market and our
• Colt analyst day: Colt focuses on
consulting team can help with
high-quality connectivity services,
bespoke requirements. We have
while other operators diversify.
helped over 100 clients on a range of
We outline how Colt is leaving ICT
strategic, regulatory and technical
services to others and is instead
issues relating to the enterprise
focusing on customer satisfaction
market. with core connectivity services.
3
Singtel outperforms
a declining telecoms
enterprise market
“ Operators are responding to declining legacy
enterprise revenue with strategic acquisitions TERRY VAN STADEN -
”
@TerryVanStaden
and more-advanced IT portfolios. Research Analyst
The enterprise revenue of most compared to 2015 (Figure 1). Financial bundles to counter potential churn.
incumbent telecoms operators in reports for these companies point to KPN appears to have followed this
high-income countries fell between three common causes for this decline. approach: its number of small and
2015 and 2016, despite the increasing medium-sized enterprise (SME)
• Intense price pressure. The market for
importance of connectivity for many customers on fixed–mobile packages
basic services (such as broadband) is
firms. Most operators are widening increased substantially from 58 000 in
either already saturated or
their portfolios and providing a broader 4Q 2015 to over 300 000 in 4Q 2016.
approaching saturation and strong
range of IT services (such as security Swisscom took a similar approach,
differentiators are rare, which has led
and cloud) to offset this decline, with increasing the total number of SMEs
to strong price competition. European
some success so far. This article on bundles by 20% over the same
operators also face regulatory pressure
examines the financial performance of period. Discounted bundles can be
to limit roaming and termination rates.
operators’ enterprise divisions in effective at countering churn, but can
Mobile ARPUs for enterprise contracts
developed markets and the strategies impact revenue due to reduced ARPU.
fell by an average of 4.6% year-on-year
that operators are adopting to improve Swisscom’s 20% increase in bundled
in 4Q 2016 among those operators that
results. subscriptions was accompanied by a
report this statistic. Several operators
corresponding 8% decrease in bundle
Telecoms operators’ enterprise also reported large public and
ARPU.
revenue streams are under pressure enterprise contract losses.
• Product substitution. Adoption of
The enterprise revenue of large • Product bundling. Some operators are
alternatives to traditional services (for
operators in developed countries fell by proactively migrating enterprise
example, unified communications
an average of more than 2% in 2016 customers to discounted converged
solutions, such as Skype for Business,
replacing traditional fixed voice
minutes) is having a strong impact on
6%
operators’ traditional revenue streams,
4% 3.7% with revenue from fixed voice calls
1.9%
2% suffering the largest decline. Ofcom
reported that fixed voice minutes in the
Revenue Growth
0%
-0.1% -0.2% -0.3% UK declined by 11% from 3Q 2015 to
-2%
-0.7% -1.4% -1.4% -1.9% 3Q 2016.
-2.1%
-4%
-3.8% Operators are trying to increase
-6% revenue with advanced ICT portfolios,
-6.0%
-8% boosted by strategic acquisitions
-7.2%
-10% Not all operators report ICT revenue,
-10.0%
-12% but those that do are seeing an
increase in its share of their total
KPN
(Germany)
Telstra
Verizon
Orange (Group)
AT&T
Deutsche Telekom
Eircom
Swisscom
Telefonica (Spain)
DTC (Denmark)
Singtel (Group)
Proximus (Group)
Average
BT
enterprise revenue. The services that
operators categorise as ICT vary, but
this segment is principally composed of
services such as cloud and security,
which go beyond operators’ traditional
FIGURE 1: GROWTH OF TELECOMS OPERATORS’ ENTERPRISE REVENUE, 2015–2016¹
[SOURCE: ANALYSYS MASON, 2017]
4
voice and data connectivity products. increased 10% from 4Q 2015 to 4Q 2016 Opportunities to develop new revenue
ICT revenue increased by an average of and accounted for 15% of its ICT streams do exist
almost 6% between 2015 and 2016 revenue in 4Q 2016 as a result. Singtel
The key factors affecting enterprise
(Figure 2). Growth in ICT revenue more has since expanded its security services
revenue in 2017 will be whether strong
than offset declines in other enterprise to Japan (in conjunction with a
price competition for traditional
revenue streams for Proximus and Japanese systems integration company,
services continues and the extent to
Singtel, and growth in ICT revenue TIS Inc) and launched a new data centre
which product substitution erodes
partially mitigated other operators’ in Singapore (DC West) to meet
usage of these services. Our recent
losses. Operators with robust ICT increased demand. Other operators
survey of 1600 enterprises showed that
portfolios are also reporting the also made strategic acquisitions to
only 21% of SMEs and 45% of large
strongest overall enterprise revenue bolster their ICT credentials in 2016.
enterprises use unified
– AT&T, Orange, Singtel and Swisscom TDC acquired two cloud-based
communications services, which
all performed better than the average. companies, Adactit and Cirque, to
indicates that there is potential for
improve its Microsoft Office and Skype
Acquisitions have been key to growing much higher penetration. The survey
for Business offerings, respectively.
ICT revenue. Singtel bought Trustwave, also showed that 9% of SMEs and 11%
KPN acquired DearBytes to improve its
a cyber security company, in September of large enterprises are considering
security capabilities.
2015. Singtel’s security revenue purchasing new cloud services in the
next six months. Opportunities for
operators to develop new revenue
50% streams do exist, if they can
2015 2016 successfully position themselves
Percentage of enterprise revenue
to win them.
40%
30%
20%
Questions?
10% Please feel free to contact
Terry van Staden, Research Analyst, at
terry.van.staden@analysysmason.com
0%
Telstra
Telefonica (Spain)
Swisscom
Orange (Group)
Singtel (Group)
DTC (Denmark)
AT&T
Proximus (Group)
Average
FIGURE 2: ICT REVENUE AS A PERCENTAGE OF TOTAL ENTERPRISE REVENUE BY OPERATOR,
2015–2016 [SOURCE: ANALYSYS MASON, 2017]
1 Growth rates calculated using raw quarterly data. Results may vary
depending on the accounting standards operators have used to provide
comparable or organic annual figures
5
Enterprise telecoms survey:
operators must do more to
overcome customer dissatisfaction
“ Operators must improve the quality of
their traditional services if they are to mitigate
enterprise customer churn and generate new
revenue streams.
” Enterprise revenue is declining for many
telecoms operators in high-income
countries.¹ It is essential for operators to
TERRY VAN STADEN -
@TerryVanStaden
Research Analyst
keep customers satisfied in order to help
defend revenue. However, our survey of recommend their telecoms provider²,
1600 enterprises, reveals that enterprise were around three times more likely to be
customers are often dissatisfied with the planning to switch to a new provider in
service they receive and this is leading to the next 6 months. Operators that can
churn. This article explores the improve satisfaction should see a clear
importance of enterprise satisfaction reduction in churn (see Figure 1).
levels in relation to maintaining revenue Regression analysis of 22 operators’
from existing services and gaining intended churn rates and corresponding
revenue from new services. Net Promoter Scores (NPSs) revealed
Operators can reduce intended churn that operators can reduce intended churn
by 1.6 percentage points for every by 1.6 percentage points for every
10-point increase in its NPS.
10-point increase in their Net
Promoter Scores Price is not the only factor driving
Our survey showed a clear relationship churn
between levels of satisfaction and As part of the survey, we asked
whether an enterprise intends to leave enterprises that said they were intending
their telecoms service provider. to change provider, what was driving this
Enterprises that were unlikely to intention to churn (see Figure 2). Price
25%
20%
Percentage of SMEs
15%
10%
5%
0%
-70 -60 -50 -40 -30 - 20 -10 0 10 20 30 40 50
Net Promoter Score
FIGURE 1: PERCENTAGE OF SMEs THAT INTEND TO CHANGE MOBILE SERVICE PROVIDER
WITHIN 6 MONTHS AND CORRESPONDING NET PROMOTER SCORE BY OPERATOR [SOURCE:
ANALYSYS MASON]
6
was the main concern for SMEs buying SMEs are less satisfied with their Operators need to improve the quality
mobile services; for all other products telecoms services than large of their traditional connectivity
and segments, factors other than price enterprises are services if they are to compete in the
were rated as more important. This ICT market
suggests that operators have scope to Satisfaction with fixed and mobile
differentiate their services from those of services generally increases with Increasing customer satisfaction will help
competitors in aspects of quality rather enterprise size, indicating that operators operators to defend revenue and improve
than just on price. do a poor job of servicing the lower end of their chances in new product categories.
the market. Poor customer service and According to our survey, SMEs that are
Incumbent operators with high shares low speeds are the main reasons for this satisfied with their traditional services
of subscribers are especially and will drive a lot of the activity (when asked how likely they are to
vulnerable to churn described in Figure 1. SMEs awarded a recommend their provider) are twice as
positive NPSs to only 4 operators out of likely to purchase additional services, like
Our survey found that the highest rates of
21 for mobile service provision. security, from their telecoms operator
intended churn were in countries where
Furthermore, SMEs gave their mobile than those SMEs that are dissatisfied.
incumbents have a particularly high share
service providers an overall NPS of –5, Operators need to ensure that the basics,
of subscribers – Australia, Malaysia and
indicating a general level of such as customer service and network
UAE. This suggests that competitors are
dissatisfaction. quality, are of a high standard in order to
starting to gain ground. The exception to
effectively compete in the broader ICT
this observation is in France where NPSs vary widely between countries
market.
Orange has a high market share but its and operators – market-leading
enterprise customers have a low rate of operators should capitalise on this
intended churn. In our survey, Orange had
the highest margin in NPS between an AT&T, Optus, (relative to competitors)
Orange and Verizon were the highest- Questions?
operator and its closest competitor, Please feel free to contact
making Orange the top performing scoring operators in our survey based on
NPS. Operators that perform well in Terry van Staden, Research Analyst, at
operator relative to its competitors, and is terry.van.staden@analysysmason.com
a good example of how an incumbent is customer satisfaction surveys should use
retaining its market share with a high this in their marketing. These marketing
quality of service. Incumbents in all messages would have the benefit of
countries tend to have a higher market enabling operators to attract enterprises
share in enterprise than they do in that are seeking better services, and
consumer services. If incumbents are to would let current customers know that
maintain this high share, they need to they are subscribing to market-leading
improve customer satisfaction. providers, which would mitigate churn.
Service type SMEs Large enterprises
Mobile 1. Price (62%) 1. Customer service (45%)
2. Customer service (36%) 2. Price (45%)
3. Network coverage (36%) 3. Network quality and data speeds (39%)
Fixed 1. Data rates or bandwidth (51%) 1. Customer service (41%)
2. Price (40%) 2. Price (41%)
3. Customer service (28%) 3. Network coverage (23%)
FIGURE 2: TOP THREE REASONS FOR CHURN BY ENTERPRISE SIZE AND SERVICE TYPE
[SOURCE: ANALYSYS MASON, 2017]
¹ For more information, see Analysys Mason’s Singtel outperforms a declining telecoms
7
enterprise market.
² That is, enterprise customers that rated their provider 6 or less out of 10 when asked
how likely they are to recommend their service provider.
Security-as-a-service
solutions offer operators
the chance to boost
enterprise revenue
“ Operators have the assets to capitalise on
SMEs’ growing interest in security solutions.
Deutsche Telekom and M1 (Singapore) Operators have a clear rationale for
”
PATRICK DONEGAN
Senior Contributor
are among the first telecoms operators to investing in SECaaS – operators are
launch security-as-a-service (SECaaS) seeking new sources of revenue and
solutions for small and medium-sized demand for security solutions is growing.
enterprises (SMEs). Operators have clear Enterprise revenue is flat or declining for
incentives for offering such applications, most telecoms operators in high-income
including increased revenue. However, countries.3 SMEs are increasingly
operators must ensure that SMEs threatened by cyber crime and many have
understand the risks of not buying underinvested in protecting themselves.
security solutions, keep costs down and The market for cyber-security services for
offer applications that are easy to use. SMEs is expected to grow, but operators
This article is based on our recently are only taking a small share of this
published report, Cyber security services market in most countries (see Figure 1).
for small and medium-sized enterprises:
Operators bring important assets to
opportunities for CSPs,¹ and explores how
operators should approach this the SECaaS market
opportunity. Operators bring two critical attributes to
the SECaaS market. Firstly, and perhaps
Demand for cyber security is growing
most importantly, they have existing
at a time when operators need new
customers of connectivity services.
sources of enterprise revenue
Secondly, the operators have scale;
100%
Percentage of respondents
80% 16%
18% 9%
60% 9% 15%
17%
10%
40%
20%
11%
0%
Australia China France Germany Malaysia UAE UK USA
Other providers CSPs None
FIGURE 1: ENTERPRISE ADOPTION OF CYBER SECURITY SOLUTIONS BY COUNTRY AND PROVIDER2
[SOURCE: ANALYSYS MASON, 2017]
1 http://www.analysysmason.com/Research/Content/Reports/Cyber-security-services-May2017-RDMZ0
8 ² Results based on Analysys Mason’s survey of 1600 enterprises
3 For more information, see Analysys Mason’s Singtel outperforms a declining telecoms enterprise market.
scale with which to negotiate attractive Operators can help build demand A rich portfolio of SECaaS services is
pricing from security technology vendors among SMEs for security solutions key to success for operators
and the scale with which to generate a
Operators need to lead in communicating Security priorities vary considerably from
decent RoI by selling SECaaS sales to
the specific threats that SMEs face. Media one SME to the next. To truly scale,
large numbers of customers.
reporting of cyber crime inevitably operators need a portfolio that is broad
However, operators face risks as well as focuses on the impacts on large enough to cater for both basic and
opportunities in this market. SECaaS organisations or high-profile individuals. advanced SME security requirements.
solutions for SMEs are highly replicable, SMEs can think they are not likely to be Some larger SMEs might want the kinds
and there should be little or no need for targeted, or that the consequences of any of 24/7 monitoring from a security
customisation. In contrast, security attack will be limited. SMEs also lack operations centre (SOC) that are usually
services for large enterprises often need awareness of the specific legal associated with large corporates.
to be highly customised, which can obligations on them to protect third-party
In order to position themselves as
require specialist resources and drain data arising from forthcoming data
protecting the SME before, during and
margins. protection regulations such as the
after an attack, telecoms operators
General Data Protection Regulation
Serving SMEs comes with margin risk. should consider reselling value-added
(GDPR) in the EU.
Most large enterprises have IT and cyber services such as cyber security insurance
security professionals to implement and A compelling SECaaS offering must also or executive training in leading recovery
operate security solutions, but SMEs do leverage the potential of virtualised from the impact of a major cyber attack.
not. This can result in SMEs calling infrastructure solutions. The cost of
Operators that want to target SMEs need
customer support for assistance in proprietary vendor hardware has
to be open to leveraging new channels to
understanding and optimising their traditionally been a barrier to investing in
market. Operators are used to working
solution. It can be challenging for SME security for both operators and
with private sector-run business
operators to manage margins for security SMEs. Traditional security solutions
organisations and confederations,
services for which operators can only required SMEs to make sizeable, often
institutes and the like, to reach their large
charge a couple of euros or dollars per prohibitive, upfront investments in
and small business members, including
user. To counter this problem, telecoms dedicated on-premises hardware. In
their IT and communications directors.
operators must develop SECaaS solutions addition, staff training, and the on-site
Operators also need to be open to
that are easy for SMEs to use. Any on-site operation and maintenance of the
partnering municipal authorities that are
configuration needs to be automatic; proprietary hardware had opex associated
investing in cyber-security services for
manual configuration can be an option with them. Until recently, an operator
small businesses such as the Mayor of
but not a requirement. The user interface looking to invest in a SECaaS proposition
London’s London Digital Security Centre
also needs to be simple to use, for found itself similarly constrained. The
(LDSC) in the UK.
example via a self-service portal. model often implied a sizeable initial
Telecoms operators that are faced with a capex investment in the hope of
trade-off between large gains in ease of generating enough sales to generate an
use or minor gains in the level of security acceptable RoI. The transformation
provided, must prioritise ease of use towards software-controlled networking
for customers. provides a platform for a more flexible Questions?
pay-as-you-grow cost model for the Please feel free to contact
operator, the benefits of which can then Patrick Donegan, Senior Contributor, at
patrick.donegan@analysysmason.com
be extended in part or in full to the
SME customer.
9
KPN analyst day: its focus is
on healthcare, government
and manufacturing verticals
in the Netherlands
“ Customer satisfaction is a central part of
KPN’s ambition.
” KPN outlined its ambition to become
TOM REBBECK - @Tom Rebbeck
“the best ICT service provider in the Research Director
Netherlands” at its analyst day on 5 April
2017. It is a bold ambition but one that the
operator needs if it is to break the trend vertical markets. As Joris van Oers, EVP,
of declining revenue in its enterprise stated “not a single IT provider has a
business from which it, and many other better position in the Netherlands than
operators in high income markets, are KPN”. We believe that this emphasis on
suffering.¹ the national opportunity is the right
approach for many operators, and KPN’s
Analysys Mason believes that the focus of strategy mirrors the points discussed in
KPN’s enterprise efforts on sectors with our previous reports.2
local needs is the right approach,
especially because they are being Growth will come from new ICT
supported by targeted acquisitions. services
However, reversing the declines in
KPN has around 8% of the Dutch ICT
revenue, with enterprise revenue falling
market; a low figure, but one which
by more than 7% between 2015-2106, will
suggests considerable potential for
be challenging and take time.
increased revenue. KPN believes that,
KPN is doubling down on the Dutch even with this low share, it is the
market third-largest player in a fragmented
market.
Since 2014, KPN has changed
considerably: Telefónica Deutschland KPN is confident that as a product-
bought its German business, and Liberty focused telecoms operator it can service
Global acquired its Belgian arm, following the IT market well: Joris van Oers said
its decision to exit countries where it only that “we truly believe that a large part of
had a mobile business. This leaves KPN IT service will be a commodity”. KPN is
as purely a Dutch business, a focus it is hoping to use its scale and business
trying to turn to its advantage. relationships (very few Dutch businesses
do not buy any KPN services), combined
KPN is concentrating on three vertical with some select acquisitions, to become
markets: healthcare, government and a larger player in ICT. KPN completed the
local manufacturing. These were selected purchase of RoutIT, an IT service provider,
because they fit the company’s existing in March 2016,3 and bought DearBytes in
strengths: KPN has strong relationships January 2017 to bolster its cyber security
in place and these organisations have positioning.⁴ As with other operators,
unique local needs that KPN is well security is an important priority for KPN.
placed to address. KPN contends that it Jasper Snijder, EVP, said that “in a couple
will be competitive against international of years, we won’t be able to sell an ICT
IT providers, telcos or technology solution without security”.
providers in these nationally bound
10Customer satisfaction is a central part IoT continues to be important to KPN’s As with other aspects of its enterprise
of KPN’s ambition strategy, but in a revised form strategy, KPN is maintaining a strong
Dutch emphasis for IoT. While it faces
KPN’s net promoter score languished at Having scaled back from its previous,
competition from DT, Tele2 and Vodafone
just –23 back in 2012. The figure has more-aggressive plans for IoT, KPN’s
– three operators with major international
improved every year since, ending 2016 at current approach is driven by
ambitions for IoT – KPN is centred on
–3. KPN expects to have a positive NPS in pragmatism. KPN is offering both a range
local opportunities that may not get the
2017 and move into “solid double figures” of connectivity options (with a nationwide
same attention from the other operators.
in the longer term. The aspects behind LoRa network already operational, and
For example, KPN is supporting the IoT
this increase were wide-ranging. KPN LTE-M expected soon) and support and
Academy in Rotterdam, which helps local
officials talked of improvements capabilities for other parts of the solution.
companies develop IoT solutions and
throughout the customer journey, from For instance, it is helping clients develop
allows KPN to position its IoT capabilities.
the accuracy of an initial quotation, proofs of concept, supplying hosting and
reducing lead times and even through to other components, such as security, for All European incumbents are facing
the layout of the invoice. The changes applications. However, KPN is not trying similar pressures to KPN, with revenue in
were described as “not an IT project but a to build or resell full stack solutions. Even the legacy business in decline due to
business transformation project” by Erik if this were its ambition, many of its saturation. At its analyst day, KPN clearly
Verkouter, EVP of Customer Experience. customers are integrating IoT into articulated its strategy with emphasis on
existing processes; end-to-end solutions becoming the leading local ICT provider.
KPN faces a challenging enterprise The test will be whether it can grow ICT
would not be relevant.
market revenue quickly enough to arrest the
KPN’s approach involves a slow
KPN’s enterprise revenue fell by 7% decline in its core revenues.
consultative sale, but this is well adapted
between 2015 and 2016 due to a mix of to the state of IoT today. KPN assistance
product migration and pricing pressure, reduces the procurement and
and the company does not expect development challenges for customers
enterprise growth to return until 2019. that need support in this new domain
Despite Tele2’s entry to the mobile Questions?
where technologies are immature and Please feel free to contact
market in 2015, KPN maintained its dominant standards yet to emerge. KPN’s
market share in telecoms at over 50% by Tom Rebbeck, Research Director, at
approach also represents a way for the tom.rebbeck@analysysmason.com
responding proactively to potential price company to take a greater share of value
threats. However, continued pricing without needing a grand vision or funding
pressure on core services reinforces the for large acquisitions.
need for revenue growth from ICT
services.
1
For more information, please see Analysys Mason’s Singtel outperforms a 3
Reuters (4 April 2016), Koninklijke KPN acquires remaining stake in
declining telecoms enterprise market. Available at: www.analysysmason.com/ RoutIt. Available at: http://www.reuters.com/article/
Singtel-enterprise-market-Apr2017 idUSFWN1740OH.
² For more information, please see Analysys Mason’s Telecoms operators ⁴ KPN (The Hague, Netherlands, 5 January 2017), Press release:
should avoid competition with tech giants when selecting vertical market KPN acquires cyber security company DearBytes. Available at:
opportunities. Available www.analysysmason.com/Vertical-market- https://corporate.kpn.com/press/press-releases/kpn-acquires-
11
opportunities-Aug2016. See also Analysys Mason’s Telecoms digital strategies: cyber-security-company-dearbytes.htm.
a framework to help operators evaluate digital service opportunities. Available
at: www.analysysmason.com/telecoms-digital-strategies-aug2016Colt analyst day: Colt
focuses on high-quality
connectivity services, while
other operators diversify
“ Most operators are exploring new types of
product (particularly cloud services) to drive
growth, but, in contrast, Colt has been reducing
”
TOM REBBECK - @Tom Rebbeck
its portfolio. Research Director
Colt announced that its new focus would wants us to be disruptive.” This would
be on core infrastructure service just return the company to its roots as a
before being taken private by its main disruptor.
shareholder, Fidelity, in June 2015. Colt’s
Colt asserts that its core strengths are an
management team provided an update on
excellent fit for evolving demand – more
this approach at its analyst day on 17
customers need very high bandwidth
March 2017. Colt’s strategy is simple
circuits and fewer customers want a
(indeed, simplicity is part of its appeal): it
single supplier for all their global
focuses on providing a high-quality
connectivity. Colt also believes that
service to enterprises that require high
enterprises want simple ways of buying
bandwidth circuits (that is, 1Gbps or
and managing services, often using
more). Most operators are exploring new
self-service tools, and the company is
types of product (particularly cloud
therefore developing systems to support
services) to drive growth, but, in contrast,
them. Harsha Gowda, Vice President of
Colt has been reducing its portfolio. The
Service Transformation and Strategy,
open question for Colt is whether
pointed out that most of Colt’s customers
high-quality connectivity will differentiate
are engineers, who may not want to deal
the company sufficiently from its
with suppliers in person: “if we give them
competitors for it to avoid having to
the tools, they will use them.”
compete on price alone.
Colt has five strategic pillars, based on
The analyst day demonstrated how much
this view of demand.
has changed since Colt went private,
almost two years ago. Almost all of the • Focus on very high-speed connectivity.
senior management team have been Colt is targeting organisations of all
replaced and the shape of the company sizes and sectors that require high-
has changed. The number of employees speed connections and are located
has also been reduced to 4800 from close to its network, rather than
around 8000, following the sale of the IT concentrating on any particular
services business to Getronics in 2016.1
enterprise size or client type. Colt will
Even the offices were new. Colt’s CEO,
pursue this market aggressively:
Carl Grivner, was keen to position the
Grivner told the meeting that the
company as an aggressive operator
company “should not lose any deal that
following its restructuring – one that is
is a gig or greater.” Colt also wants
growing and investing at a time when
most of its competitors are doing neither. higher-speed connections to be
Grivner also referred to the support of the standard offerings – Rajiv Datta, CTO,
company’s shareholder Fidelity for the stated that “In the new network,
plan, commenting that “our shareholder 10Gbps or 100Gbps will be something
12standard, not something that needs to longer term. However, its current Colt has an investment plan of
be ‘looked at’.” A central part of this scores are already much higher than approximately EUR500 million to support
strategy is to provide on-net access to those of other high-speed services these efforts, of which EUR400 million is
multiple data centres round the world. operators. The average NPS for for network upgrades, including some in
Colt could then control the end-to-end operators providing 1Gbps or higher metro networks in Hong Kong and
experience for an enterprise customer, services was just 12, according to our Singapore. The rest of the investment will
as all the traffic would be on-net. This recent survey of enterprises. An NPS of be in people and tools, including
would be an important differentiator for around 60 would give Colt one of the recruitment of more than 200 new sales
the company. highest scores of any telecoms brand people.
• Leave services beyond connectivity to (only a small number of consumer Colt’s strategy was summarised by Rajiv
others. Colt wants to work closely with MVNOs have higher scores) and would Datta as “we’re focusing on connectivity,
data centre providers, but not to be comparable with some of the which means we need to be the best at
compete with them. According to Datta leading technology brands (for connectivity.” This is a bold strategy and
“What we do, and what the data centres comparison, Amazon’s NPS is 69 and an interesting counter-example to the
that of Apple’s iPhone is 63²). Colt also majority of operators, which are looking
providers do, are the two most
aims to reduce lead times for delivery beyond connectivity to drive growth. Colt
important elements in this system
of new connections from its current will need to show that its focus on quality
[cloud services]. Incumbents try to get
target of 74 days to 30, largely by is something for which customers are
both parts and more than that if
automating processes, as part of this willing to pay and that it can maintain its
possible.” Colt is also not interested in
focus on its customers. advantage in customer satisfaction in the
competing on other services: “We offer longer term.
DDoS, managed firewalls. There are • Emphasise its leadership in software-
wraps around the connectivity that we defined networking (SDN). Colt’s
want to do, but the line of what we want repeated emphasis on SDN, both for
to do doesn’t go too far.” supporting bandwidth-on-demand
• Differentiate on quality. Colt argues services and in using SD-WAN as a Questions?
that aspects such as latency, dynamic complement to traditional VPNs, links Please feel free to contact
its twin focuses of connectivity and Tom Rebbeck, Research Director, at
bandwidth, dedicated bandwidth,
customer service. SD-WAN was tom.rebbeck@analysysmason.com
unified access and privacy, as well as
price, can be differentiators for described as “absolutely core to the
higher-speed circuits, in contrast to strategy” and is an area in which Colt
lower-bandwidth services where price considers itself a leader. However, Colt
is the dominant factor. has identified that few customers have
a clear idea of what SDN can deliver,
• Differentiate on customer service. Colt
although many are interested in it. Colt
claims that it has a Net Promoter
will need to explain the benefits and
Score (NPS) of 24 for operations and
manage expectations.
one of 32 for relationship, and has a
target to increase both to 60 in the
1
See https://www.getronics.com/news/getronics-company-news/getronics-completes-
acquisition-of-colts-cloud-business-and-launches-new-managed-cloud-services-portfolio/
² See https://npsbenchmarks.com/industry/consumer_brands
13Operators in Asia with
fixed–mobile convergence
ambitions should consider the
opportunity presented by small
and medium enterprise ICT
“ SME ICT is an attractive opportunity in a telecoms
operator’s fixed–mobile convergence play, but execution
requires adopting a delivery model that goes beyond
the traditional connectivity business.
While telecoms operators in Asia have
found it increasingly challenging to grow
”
40–60% of the overall enterprise market
revenue come from SMEs, with SMEs in TAYLOR LAM
Principal
consumer telecoms revenues, enterprise more mature markets making larger
ICT appears to provide an opportunity for contributions. Analysys Mason Research
steady growth. The enterprise ICT space expects healthy growth from the SME ICT • Easier to win over – Large enterprises
has historically been dominated by fixed segment in Asia at a CAGR of 4% to reach rarely switch their ICT service
network operators. There has, however, revenue of USD73 billion in 2020.1 providers, due to perceived operational
been an increasing demand for mobility in Emerging markets will drive the majority risks in changes to legacy systems and
enterprise ICT. Providing ICT services to of SME ICT segment growth at a CAGR networks. SMEs, on the other hand,
small and medium enterprises (SMEs) of 5%.
have lower barriers to switching and
could be an attractive growth area for
For a market challenger looking to make can be persuaded to do so relatively
operators in Asia with fixed–mobile
inroads into the enterprise ICT market, easily.
convergence ambitions.
the SME segment represents an ideal • Potentially overlooked by incumbents
SME ICT services are attractive, entry point. This is due to the following – There are a small number of
especially for enterprise market general SME characteristics: mega-accounts delivering
challengers in emerging markets disproportionally large revenue
• Simpler ICT requirements – SMEs
Revenue is generally concentrated have less demanding ICT requirements, streams at the top end of the
among large accounts in the enterprise and complex ICT set-ups are rarely enterprise ICT market. Incumbent
ICT market, but SMEs remain a present. In fact, many SMEs prefer operators in that market naturally
significant, often overlooked opportunity. pre-packaged solutions. focus their efforts on these accounts,
Analysys Mason estimates that between which means that the SME segment
may be potentially underserved.
Telecoms operators with fixed–mobile
convergence ambitions should take an
active role in SME ICT
Recent fixed–mobile convergence strategy
has centred on consumer broadband and
mobile services bundling, network
integration and other opex savings, yet
SME ICT services could also form a key
part of fixed–mobile convergence
strategy.
14The enterprise ICT space has historically Pre-packaged solutions, distributed The latter is a complex skill for those
been dominated by fixed network through enhanced sales and technical working in typical operator sales
operators. There is, however, an support channels, are the key to channels that only sell connectivity
increasing demand for mobile services in success products. Channel partnerships are
enterprise ICT. The SME segment is of therefore critical.
particular interest to operators with While SME ICT is an attractive opportunity
for certain operators in Asia, these • Establish technical support for all
fixed–mobile convergence ambitions.
players would be required to adopt a components of the pre-packaged
Many SMEs in Asia, for example, are
delivery model that goes beyond the solution – Similar to the demand on
expected to adopt ICT applications that
require both fixed and mobile connectivity, traditional connectivity business. sales channels, servicing SME ICT
which presents an opportunity. Operators that aim to successfully tap requires technical support capabilities
into the SME ICT market should: for all components in the pre-packaged
Even in a highly developed market like solution. These components are often
Hong Kong, overall enterprise Internet • Develop pre-packaged solutions that
third-party products. In-house training
penetration grew from 75% to 80% enable savings or convenience – A key
supported by clearly defined service-
between 2013 to 2015, with SMEs driving value proposition that operators with
level agreements with solution
the majority of this growth (see Figure 1). fixed–mobile convergence bring to
partners are important.
SMEs’ increased web presence means SMEs is a standardised solution. SME
that these businesses will also require decision makers are often business
ICT services beyond pure Internet access, owners with basic ICT skills, therefore
including website hosting, cloud cost savings and process Questions?
applications and even digital payment simplifications are key selling themes. Please feel free to contact
capabilities. Adoption of mobile Taylor Lam, Principal, at
• Build sales channels that are capable
technologies also shows significant taylor.lam@analysysmson.com
of more highly skilled, consultative ICT
growth between 2013 and 2015. The
sales – ICT sales require more
potential for first-time fixed and mobile
customer education, and salespeople
ICT adoption is even larger in emerging
markets in Asia. able to propose customised solutions.
3G adoption 4G adoption
Internet penetration Web presence (% of businesses (% of businesses with
(% of businesses) (% of businesses) with Internet access) Internet access)
99.3% 91.2% 50.4% 56.4%
Large
98.9% 86.9% 37.7% 17.3%
92.1% 61.6% 42.1% 53.8%
Medium
90.3% 60.4% 25.8% 12.9%
78.1% 27.9% 30.8% 57.0%
Small
72.2% 20.7% 33.6% 17.1%
2015 2013
FIGURE 1: ICT ADOPTION AMONG BUSINESSES IN HONG KONG
[SOURCE: CENSUS AND STATISTICS DEPARTMENT, HONG KONG, 2016]
1
Analysys Mason SME ICT Forecast 2015–2020
15Analysys Mason’s Enterprise Research
The SME and enterprise communication programmes have a common structure with
forecasts, surveys and strategic analysis
Large enterprise Large enterprise
SME Strategies voice and data emerging service
connectivity opportunities
• Country-by-country • Country-by-country • Country-by-country
forecasts for voice, forecasts for voice and forecasts for new
data and cloud data connections and services opportunities
Forecasts services, connections revenues, fixed and (e.g. security, PaaS,
and revenues, fixed mobile IaaS, SaaS)
and mobile
• Survey of 8 countries • Survey of 8 countries • Survey of 8 countries
with over 1000 SMEs with over 500 large with over 500 large
interviewed enterprises enterprises
interviewed interviewed
• Questions on current
Survey services, satisfaction • Questions on current • Questions on current
and future purchase services, satisfaction services, satisfaction
intentions and future purchase and future purchase
intentions for voice and intentions for new
connectivity services
Reports such as: Reports such as: Reports such as:
• Strategies for bundling • Approaches to • Strategies for
cloud services with enterprise fixed and combining IT services
Strategy voice and data mobile bundling and the traditional
reports & connectivity telecoms portfolio
• Strategies for
commentary
• Operator best practice differentiating • Best practises of
for selling to SMEs enterprise connectivity operators selling SaaS
to large enterprises
16
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are uniquely positioned
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influential role in key industry milestones and helping clients through major shifts in the market. We continue to be at the forefront of
developments in the digital economy and are advising clients on new business strategies to address disruptive technologies.
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