When considering enterprise demands, all industries and enterprises are having a fantastic opportunity to digitally transform. This digital transformation would include smart factories in the manufacturing industry moving toward an e-Government Cloud. The transformation would also include the operation of a big city moving toward the use of communication assistance of small and medium-sized enterprises (SMEs). This trend would see enterprises investing more in the ICT every year. Gartner predicts that investment in Telecom and IT services from global enterprises will reach approximately 4 trillion dollars by 2020, indicating a huge market space.
Along with digital transformation, the enterprise requirements of operators are also changing.
First, traditional enterprise requirements focus on basic services, such as internal communication assistance, file sharing, and enterprise bandwidth leasing, which are helpful for continuously improving work efficiency and reducing costs. With the development of big data and cloud services, enterprise requirements are extending into new fields. For example, enterprises may want to use user location information as a promotional tool or use mobile OA to improve management and sales efficiency. In these applications, enterprise requirements are extended to enterprises' sales and operation management processes.
Second, enterprise requirements of operators are changing from traditional basic communication services (private lines and voice services) to one-stop services. In the past, an enterprise would have to purchase one optical fiber and a set of UC from an operator, which was expensive and hard to maintain. Now, to focus on their front-end services, enterprises require one-stop solutions and services that can provide the X-Play service based on only one optical fiber.
Third, the advantages of cloud services, such as low costs, quick service access, and flexible resource scalability, are showing enterprises the potential of application cloudification. For example, the Gartner and Wainhouse reports predicted that enterprise communications cloud services will grow by as much as 26% between 2016 and 2021. In the same period, UCaaS, VCaaS, and CCaaS are predicted to grow by 15.4%, 34%, and 29%, respectively. The possibilities of cloudification for operators are almost endless.
Enterprise Market -- An Inevitable Choice for Operators
The traditional services of operators focus on individual and family customers. However, with the decline in demographic and traffic dividends, the growth of the consumer market has been slowing down and even stopping completely, something particularly evident in some developed markets. This is driving operators to enter the enterprise and vertical industry, starting with a focus on individual and family customers to obtain high values. Operators are finding that enterprise market revenue as a proportion of the total revenue is not high enough. For most typical tier-1 operators, enterprise market revenue, as a proportion of the total revenue, ranges from 15% to 25%. In some emerging markets and for more mobile operators, this figure is dropping below 10%. These proportional percentages show the huge untapped potential within the enterprise market.
So, how can operators improve? Telecom and IT B2B services can be divided into four categories: connection, non-connection, new digital services, and IoT. Connection services include private lines, voice services, traffic, SMS, and MMS; non-connection services cover enterprise communications and IT hosting and outsourcing; new digital services cover cloud services and big data. Connection and communication services are traditionally advantageous for operators, as they are easy to control and have stable growth rates. However, operators also find that they are facing problems of new technology transformation and cost reduction, such as transforming private networks by using SDN&NFV. New cloud and IoT services have a huge market and are developing rapidly. Analysys Mason has predicted that the compound annual growth rate (CAGR) of operators will reach approximately 20% within the next five years. These markets are now enthusiastically being explored by operators.
Natural Advantages for Operators to Enter the Enterprise Market
First, cloudification will bring a wealth of unique and fantastic opportunities for operators. After investing and developing over a number of years, operators already possess unique networks and equipment sites. This vastly reduces investment into equipment sites and networks of large-scale data centers that would otherwise be required.With these advantages, operators can quickly seize the opportunities brought about by cloudification to drive ahead of their competitors. For example, operators can make use of the capital advantages of self-owned global multiprotocol label switching (MPLS) networks and data centers. British Telecom has already entered the cloud field by deploying their Cloud of Clouds.
Second, with customer resources and good relationships of governments and large-sized enterprises, operators are fully capable of understanding the requirements of high-value customers. Therefore, operators can improve product satisfaction from private lines and voice services to IoT and cloud services. At the same time, enterprises can cover a larger customer base from governments and large-sized enterprises to SMEs, further broadening the enterprise market.
Third, compared with OTT and IT service providers (SPs), operators possess basic connection and communication capabilities, so as to develop cloud and IoT services based on those capabilities，which put them in a unique and opportune position for developing B2B services. In contrast, many OTT providers are independently developing cloud services based on the IaaS and SaaS. These OTT providers lack pipes and therefore deeply rely on the operator pipes, resulting in huge costs. This means that the OTT providers cannot provide competitive one-stop ICT products and service packages for enterprises.
Challenges for Operators Entering the Enterprise Market
1. Organization architecture need to be consolidated: Operators may respond too slowly if governments and large-scale enterprise customers have massive E2E requirements. More and more customers require one-stop products and services, but operators still focus on traditional single-product architecture. This means that products cannot be integrated effectively when they are commercialized in markets, and product packages will simply be a combination of separate products.
2. Competitiveness of new service need to be enhanced: Cloud, big data, and IoT services are fiercely competing with IT and Internet services. Usually, operators can only receive traditional pipe product requirements from enterprises, but are bypassed on digital service requirements. This issue is exacerbated by the fact that innovation and the improvement of service capabilities is slow.
3. Position in SME market need to be upgraded:The most advantageous markets for operators are governments and large-sized enterprises. SME markets are fragmented, with one-stop services as their major requirement. Operator channel development is not sufficient to cover the number of enterprises required, while the availability and actual requirements of SME services do not match. As services are gradually cloudified, SMEs will be the first batch of customers to receive cloud services. Therefore, the biggest challenge for operators is to quickly construct cloud services that will meet the requirements of the SMEs.
4. Personnel skill need to be improved: The professional integration service capabilities of service personnel are not satisfying. For example, the traditional Co-Location service is gradually being cloudified, but most operators lack the ability to migrate cloud services. Sales personnel are only good at selling traditional box-type products. Improving the new service expansion capabilities of traditional sales personnel is also a challenge that must be overcome.
5. Urgent cloudification requirements of traditional advantageous products to save costs: Take enterprise communication as an example. Operators are gradually moving from the non-value-added resale market to become SaaS providers. This will present operators with the opportunity to use enterprise communication SaaS with cloudification.
As the B2B develops, SPs that covering the fields including Internet, IT, and Telecom will move into the market in different ways based on their strengths. How can Telecom operators employ their advantages according to the local markets, so that they can seize the B2B strategic opportunities? Huawei would like to go with Telecom operators to find a way towards new growth of B2B service.