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Building on B2B: Operators sharpen their enterprise strategy

March 29, 2018

These are testing times for Indian telecom operators. The entry of Reliance Jio Infocomm Limited (RJIL) and the resulting competition have taken a serious toll on operators’ bottom lines. On the one hand, revenues from conventional voice services have dried up. On the other, the growth in the data market is yet to translate into any substantial financial gain. The blended ARPUs have been sliding quarter after quarter, underlining the urgent need for operators to look for additional avenues of revenue generation.

In such a scenario, the business-to-business (B2B) segment is offering a ray of hope to operators. Interestingly, the enterprise business segment is not uncharted territory for operators in India, although their involvement and investments has been limited since they were more focused on the lucrative consumer telecom (direct-to-consumer) market. Over the past few years, they have been offering enterprise mobility, cloud and data services to businesses and have managed to develop a sizeable enterprise clientele. In fact, most operators have established independent business divisions to exclusively service enterprise customers.

Now, operators are looking to scale up their enterprise presence in a bid to augment revenues and tap the growth potential presented by the segment. In line with this, operators like Reliance Communications (RCOM) and Tata Teleservices Limited (TTSL) decided to hold on to their enterprise businesses even as they parted with their legacy consumer businesses. TTSL’s enterprise business division was not a part of the assets sold to Airtel. Recently, a set of Tata group executives, backed by a consortium led by TPG Capital and a large sovereign pension fund, have reportedly placed a bid for TTSL’s enterprise business, which values it at as much as $1 billion. Earlier, Tata Communications, one of the leading players in the enterprise space, had also expressed its interest in buying TTSL’s enterprise business and fixed line assets.

Similarly, RCOM is looking at its enterprise business for a fresh lease of life. The company hopes to become one of the biggest B2B players in the telecom space and is positive on recording profits as early as the fourth quarter of 2017-18.

Incumbent operators such as Airtel, Vodafone India, Idea Cellular and RJIL are also placing their bets on the enterprise segment to revive revenues and return to profitability. They are also looking to capitalise on the growing adoption of machine-to-machine (M2M) connectivity and internet of things (IoT) solutions by enterprises.

Betting on B2B

From the operators’ point of view, enterprise business services pay high rewards, given the criticality of operations involved. Unlike the consumer telecom business, the enterprise segment is largely untouched by price-driven competition as it is highly service oriented. Globally, the consumer telecom market is growing at just 1 per cent, while the B2B market is growing at about 3 per cent annually.

India is mirroring this trend with a growing number of enterprises undergoing an aggressive digital transformation. Their appetite for IT and telecom services is growing at a brisk pace, translating into significant business opportunities for telecom operators.

According to a Deloitte spokesperson, “India is one of the fastest growing technology markets in the Asia-Pacific region, with an ongoing digital transformation of public and private sector enterprises, enabled by changing market dynamics and policy interventions. Enterprises across industries are increasingly adopting technology-driven solutions to improve the customer experience, optimise business operations and compete effectively in the market.”

The year 2018 is likely to see Indian enterprises move towards full-scale M2M and IoT deployments. A major push factor is also coming from the roll-out of GST, and the need for security solutions and managed mobility services. Forrester Research has pegged the technology spending growth of Indian enterprises at 12 per cent during the year. All of this bodes well for telecom operators, who are now moving beyond their conventional roles of connectivity providers towards end-to-end ICT solution providers.

The IoT opportunity

As per Deloitte, IoT is emerging as the next big thing and India will rapidly grow into a hub for IoT solutions. The Indian IoT market is expected to reach $9 billion by 2020. Indian telecom operators are at the heart of driving this IoT growth by using their network infrastructure to deliver solutions, applications and managed services to enterprises. In addition to connectivity, operators are exploring ways to offer application platforms, analytics and even hardware, to position themselves as end-to-end IoT solution providers.

Vodafone’s IoT service platform is a ready-to-use self-service web interface that gives businesses access to vital information, enabling them to reduce the costs of deploying and maintaining IoT solutions. The company’s IoT solutions range from smart metering (which helps monitor domestic gas usage and large-scale grid management) to wireless payments that enable end-to-end transactions between end-devices and payment gateways. Meanwhile, Airtel’s Connectivity Management platform is a one-stop solution for all the IoT needs of original equipment manufacturers of connected devices and global carriers looking to foray into India. Airtel is, in fact, planning to enter the home automation or smart home segment with its IoT and M2M solutions.

RJIL is also ready to enter the enterprise IoT space to ramp up its revenues. It is reported to be in talks with car manufacturers and consumer durable companies for developing IoT solutions. It has plans to roll out home automation solutions too.

Meanwhile, Bharat Sanchar Nigam Limited (BSNL) has partnered with Aeris to offer packaged IoT solutions and services to enterprises, small-and-medium businesses and public sector undertakings, among other segments. It has also partnered with Coriant to roll out IoT products and services in rural India, in domains such as connectivity, connected healthcare, industrial automation, public safety and video surveillance.

Government emerges as a key vertical

The government has emerged as one of the biggest spenders on information technology, owing to the implementation of the Digital India and Smart Cities initiatives. Telecom and IT solutions lie at the heart of the government’s Digital India vision, which requires the creation of digital identities, making documents and certificates available on a cloud platform, providing government services online and on mobile platforms on a real-time basis, ensuring electronic and cashless financial transactions, and seamless integration of government departments. Similarly, successful implementation of the Smart Cities Mission also requires a strong and robust ICT network. A smart city requires significant support from telecom operators to facilitate advanced communications infrastructure for smart parking, smart traffic management system, smart CCTV surveillance, smart utility management systems, etc.

Operators have now set their eyes on opportunities arising from both these programmes. In the smart city domain, the state-run BSNL has won bids on a nomination basis in Dharamshala, Himachal Pradesh and Bhagalpur, Bihar. It has also emerged as a winner through the tender route in Ahmedabad and Rajkot. The operator is expecting to generate Rs 10 billion in revenues from smart city project in the first year itself. Vodafone too is keen on participating in the smart cities’ space.

There also lies a big opportunity for operators in the government-driven cloud services market. In early 2017, the Ministry of Electronics and Information Technology (MeitY) issued a set of guidelines that required all government-related data residing in cloud storage networks to be located on servers within India. The guidelines specify that any company looking to offer cloud services to government entities would need to first to go through rigorous standardisation testing and quality certification by MeitY. The government is planning to empanel 15 firms for providing cloud services to central, state and local governments, as well as public sector bodies. So far, 11 companies including BSNL have been selected for this. Bharti Airtel and RJIL are also trying to join the fray and offer cloud solutions to government enterprises and departments.

Key challenges

Deriving a successful business case from the enterprise segment comes with its own set of challenges for operators. To begin with, the B2B segment requires a high level of customisation. Operators often expand their portfolios to include IT adjacencies instead of focusing on core connectivity-driven enterprise needs and building use cases around it.

Moreover, the enterprise space is not without competition, although the competition is more service-led than price driven as is the case with consumer mobile services. Traditionally, operators had to compete with enterprise IT majors like Tata Communications, IBM and HP. But now, the enterprise ICT competitive landscape has evolved significantly with almost all operators making a foray into the segment.

Moreover, there is also an urgent need for operators to gain market capabilities by either exploring partnerships or acquiring smaller companies to improve their enterprise offerings.

Conclusion

Enterprises are warming up to new technologies, providing a trailer of the coming times where cloud, IoT and M2M solutions will become an integral part of their business. This presents a perfect opportunity for telecom operators that are in need of new revenue streams. A renewed focus on enterprise business offerings could well help them turn the corner.

By Akanksha Mahajan Marwah


 
 

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