Transformation Goes Full Steam Ahead for Telcos in the APEJ region in 2012, says IDC

Kuala Lumpur, November 23, 2011 – Telecom service providers (SPs) in the region are continuing to stick unfailingly in their transformation to redefine themselves in an ever-converging ICT world where separation of networks and IT are almost indiscernible. Many are struggling to remain relevant to end-users or risk being permanently left behind. IDC foresees that the continued economic turmoil on a global scale could potentially add another dimension of uncertainty to many telecom SPs in the region in the next 12 months. More insights will be revealed in a forthcoming report, “IDC Asia/Pacific (excluding Japan) Telecommunications 2012 Top 10 Predictions".

"The convergence of IT and networks has created an enormous amount of new opportunities for telcos in the region far outstripping the possibilities that were imagined only years ago," says Adrian Dominic Ho, Principal, Telecom and Managed Services, Networking Research at IDC Asia/Pacific. "Moreover, the massive delivery of content and endless addiction of consumers to their smartphones have reinvigorated growth in broadband and consumer mobility. This insatiable demand of the Asian consumer will also help define the decade for many telcos, especially in uncertain economic times."

He continues, "The Telcos' manifesto for success in 2012 is one really of common sense stemming from the need to focus on the three core factors driving ICT spending.” He adds, “Internally, telcos should also focus on operational efficiency, business transformation and their customer as shrinking margins and increased competition will make internal transformation more critical than ever before."

Drawing from the latest research and internal brainstorming sessions amongst IDC's regional and country analysts, the following are the top 10 Telecommunications Predictions in 2012 for the Asia/Pacific excluding Japan (APEJ) region. These top 10 predictions represent major trends with either the most significant financial impact or long-term market impact across the APEJ region and IDC has grouped them under “Business Process Manifesto”, “Customer Manifesto” and “Operational Efficiency Manifesto”.


Business Process Manifesto

1. Getting Ready for Big Data – Delivering Hyper Speed to Hyper Connect
There is strong evidence indicating that big data has produced numerous benefits for manufacturers, government, healthcare authorities, retailers, and financial institutions all over the world. Many have experienced increased revenue and competitive positioning, productivity gains, and net margins. Big data requires "big pipes" and the need for ultra-fast connectivity to deliver that extra competitive advantage, thus making the network more critical than ever before. There are large incremental potential network opportunities for telcos especially in low latency networks, and network and bandwidth optimization. Other opportunities for telcos include storage and analytics as a service (AaaS).

2. The New Mobile Enterprise – From Social-Enabled to Business Outcome Led
There are four main driving factors behind enterprise mobility. First, the need to drive increase cost savings from contract and device management. Second, new applications will be integrated into smart devices that will drive sales and delivery execution. Third, customer loyalty and revenue generation will be enhanced by stronger mobile analytics that enables organizations to understand their customer better. Lastly, there will be a need for security and compliance for executive smart devices.

3. The Enterprise Orchestrated Cloud – Outsourcing in a New Dimension
In 2011, IDC estimates that 80% of new enterprise application development will be for the public cloud, and by 2015, 20% of enterprise application spending will be cloud-sourced. As a result, cloud service buyers will now have to manage a much larger number of services and vendors, adding a level of management difficulty to what should have been an easier adoption of new services. To counter this, cloud service providers will provide an integrated management of disparate cloud services – cloud orchestration – in 2012 and beyond. As a result, the market will not be talking so much about cloud services by 2015, but will consider these as a natural evolution of outsourcing, or Outsourcing 3.0.

Customer Manifesto

4. Sub-US$100 Smartphones – The New Middle Class
Smartphones have ushered in a new era of personal computing, with the shipment of smartphones expected to exceed the shipment of PCs in the region in 2012, a milestone that is most likely never, ever going to be reversed. IDC expects the market to see the introduction of sub-US$100 smartphones in 2012, which will in turn create big opportunities for service providers in emerging Asia. IDC also believes that consumers in these markets will soon demonstrate the same addictive nature to mobile applications as seen in mature markets.

5. Content-aware Tiered Pricing – Different Strokes for Different Folks
Mobile operators will soon start offering tariff plans by segmentation (application specific, time of day, speed, etc.) as well as multi-device plans for smartphone- and tablet- users. Accordingly, unlimited data plans will start being phased out wherever possible and replaced with tiered plans especially for 4G LTE services. Analytics throughout the network will enable planners to understand usage patterns by time of day, device type (e.g. Samsung galaxy S II vs. iPhone 4), and by application signatures (e.g. peer-to-peer, e-mail, video and audio streaming, FTP, etc.) so that personalized tariff plans can be offered to users and groups of users (e.g. employees working for the same company) strengthening customer retention and loyalty. Most carriers in Asia/Pacific are using legacy Operational Support Systems (OSS)/ Business Support Systems (BSS) and thus will need to upgrade or modernize the OSS/BSS to support real-time analytics.

6. Personalized Cloud Services – Expanding Cloud Opportunities
Organizations will be examining the possibilities of exploiting cloud technologies to collaborate with their customers. This may include extending their cloud customer relationship management (CRM) system in a collaborative fashion with their clients. The challenge for organizations and service providers will be to guarantee the same enterprise grade experience and performance. Licensing models would have to be modified as the current ones are too prohibitive for many organizations. The potential benefits for telecom SPs include increased bandwidth pull through, managed services, platform as a service (PaaS) and application lifecycle management.

7. The Apps Aggregator – Innovation Scout Team
The explosion of digital content and applications delivered on multiple devices over both fixed and mobile networks has brought about new opportunities for the telcos. With this, they have the chance to aggregate applications and content to deliver connected, personalized and user-centric solutions to the end-user. But telcos can only deliver these through focused and dedicated teams able to identify, bundle, integrate and launch the "right" business or consumer applications. IDC believes that in 2012, the more forward-looking telcos will form dedicated innovation scout teams to find and deliver appropriate applications and content to connected homes, businesses or hotspots.

Operational Efficiency Manifesto

8. Wholesaling Infrastructure-as-a-Service (IaaS) Capacity – Creating PaaS Opportunities
Telecom providers who have built up their cloud infrastructure as a service capacity too rapidly will start looking to fully realize their return on investments. Telcos could potentially wholesale their spare capacity to existing hosters, IT vendors and even other telcos who do not have the deep pockets required to build up datacenters. The other option for telcos is to create PaaS opportunities and claim leadership in this area that has largely been untapped by telcos. IDC believes that this will expand the cloud opportunities for many telcos by a factor of two.

9. Delivering “Super Economics” – Sweating the Assets with Cloud
Asia/Pacific is now developing cloud networking strategies and architectures to support cloud computing services such as Software-as-a-Service (SaaS), PaaS and IaaS. At the same time, “cloudifcation” of the SP's IT systems, edge, and core network starts to make a lot of sense because many, if not most, major SPs will be upgrading their OSS/BSS and service delivery platforms (SDP) in the next three to five years. Telcos would also increasingly look to cloud automation and standardization of many processes to drive further efficiencies.

10. Virtualization of Mobile Packet Core – Coping with Smartphone Proliferation Stress
Most 3G networks are designed to maintain approximately 25-60% overcapacity at the radio base station side and typically 30-50% overcapacity in the packet core. Most 3G operators are still generating over 60% of their cash flows from voice services but the investment in mobile data infrastructure is typically greater than five times that of mobile voice infrastructure. The excess capacity in the radio base station means that the baseband processors are sitting idle or are being underutilized. As such, many telcos will be compelled to virtualize their mobile packet core to ensure that their networks can meet the increased demand expected over the next few years.

For more information about this report, “IDC Asia/Pacific (excluding Japan) Telecommunications 2012 Top 10 Predictions" (forthcoming), please contact Juliana Lai at +603-2177-9255 or julianalai@idc.com.