2011 to 'test the nerve' of telcos, says IDC

MANILA, Philippines –  Research firm IDC is projecting 2011 to be another banner year for telecommunications companies, albeit one that will “test their nerves” as they adjust to the rapid changes in the information and communication technology (ICT) landscape.

“The opportunities in 2011 should allow telcos to secure their place and define their legacy in ICT history,” said Adrian Dominic Ho, principal, telecom and managed services, Networking Research at IDC Asia-Pacific. “The much celebrated era of mobility, social media and cloud revolution will finally be delivered and this will shape not only the entire ICT industry in the decade ahead but the way we live and work.”

Ho said migration to the new ICT landscape is essential but it will drive competition more fiercely among industry players wanting a slice of the lucrative pie.  

IDC said the Asia-Pacific (excluding Japan) or APEJ telecom services market is expected to reach $283 billion this year, representing a growth rate of 7.5 percent. Mobile and fixed data services are expected to lead that growth.

Moreover, spending in enterprise networks is forecast to grow by over 13.1 percent this year, reaching $15.1 billion. Growth will be driven by continued spending in data center networks, continued migration to an all IP platform and branch office network investments.

“With growth, Asian multinational corporations (MNCs) will be expanding again and this will provide a unique opportunity, while at the same time pose challenges for many telcos. We believe that Intra-Asia connectivity will be a major growth impetus for IP VPN and other ICT services,” said Ho.

While most Asian telcos are poised to take advantage of the opportunities at hand, Ho said “not all telcos will have the intellectual coherence and strength to make significant adjustments and conform to some unique practices and intricacies in the region to benefit from the opportunity.”

As IDC sees it, the communications industry has been in turmoil for the last few years. Key to success in this new battleground is to adapt and eventually transform in the field of IT, while at the same time tapping their “natural strengths.”

Drawing from the latest research and internal brainstorming sessions among regional and country analysts, IDC sees 10 major trends shaping up in the industry that would have the most significant financial impact or long-term market impact across the APEJ region.

‘Socialytic’ applications

IDC predicts that 2011 will be the year where the trend of combining social media with business analytics (BA) will make its mark across most of the key enterprise applications in use today.

“Applications are beginning to be embedded with unified communications (UC) and social features today but IDC expects virtually all types of business applications to undergo a fundamental transformation in functional structure by fusing traditional business applications with both social/collaboration software and analytics in 2011 and beyond,” it said.

Enterprise applications, it added, will thus become both “social” and “analytic” in nature, and IDC refers to these new types of business applications as “socialytic” applications.

Mobility to make a leap into IT

Enterprise mobility has been growing in usage and popularity over the years. Workers are constantly accessing key business applications while away from the office. But although enterprises have embraced the concept of mobility, access has been pretty much limited to mobile e-mail, solutions offering fixed-mobile-convergence and basic applications that run on smartphones.

Today, however, IDC is seeing what a “perfect storm” created by the evolution of different areas of technology combining to create a revolution in mobility.

“It truly is ‘everything’ going mobile,” IDC said and it believes 2011 will be a catalyst year for this.

The death of IP phone as we know it

Video has always been touted as one of the revolutionary technologies. IDC said in the past few years, it has begun to deliver its earlier promise that it will revolutionize the way people communicate as the cost has come down sharply and the convenience of video has made big advances in technology strides like the introduction of telepresence.

“Video has transformed the way businesses communicate internally and externally with their clients and partners. The rise and popularity of video and smart devices in the era of ‘mobilution’ will lead to the death of the IP phone,” IDC predicts.

Asian multinationals

Perhaps one of the biggest changes in market dynamics, not only in 2011 but also over the coming decade, will be the rise of the Asian MNC in what is commonly described as the Asian century. A changed new world order is upon us and is one where the influence of Asian MNCs in the ICT market will change the way market leaders operate and conduct themselves.

In IDC’s looking glass, “adjust or vanish” will perhaps be the key takeaway for all major ICT players competing in the Asian century.

Telecom service providers to return to IT

IDC revealed that T-Systems was one of the earlier telcos to have ventured into the IT outsourcing space and the years that followed saw many telcos following suit, including Telstra, Telecom New Zealand and Singtel in the region, and BT and Orange Business Services globally, to name a few.

“This move was largely driven by the stagnation or even decline of many of the traditional telecom services that led telcos to look into new areas for their next leg of growth,” IDC explained.

However, in IDC’s analysis the move into the IT space has been divisive as many industry watchers have sounded off warnings that telcos would not be able to lift their game sufficiently to earn the confidence of IT buyers across the globe.

“The results over the last decade have been somewhat mixed at best with many telcos suffering high profile setbacks and losses as a result of poor execution of large ICT outsourcing contracts. In the region, Telstra disposed its IT arm, Kaz, only several years after its acquisition. However, the promise of cloud technologies, mobility and many other technologies will mean that telcos will return to IT in 2011,” it said.

Virtualized desktops to pave way for ‘workplace-as-a-service’

Virtual desktops have long showed huge promises for reducing desktop total cost of ownership (TCO) but accessing and implementation in a highly distributed environment has always been the main challenge and has been described by some as “walking through the fire” as you can get burnt if you do not execute it well.

“If there is one thing that everyone that has tested virtual desktop can agree on is its sheer complexity. With the popularity of iPads in the B2B world and the expected entry of alternative media tablets and other mobile devices, client virtualization is expected to generate great interest, proof-of-concept and demands in 2011,” IDC said.

The data center in a SP-enabled cloud world

According to IDC reports, almost 90 percent of telcos in the region now have a cloud strategy, or at least have expressed interest to enter into the cloud marketplace and we expect an acceleration of this trend in 2011 and beyond.

IDC expects telcos to continue to pour billions into constructing and improving their data centers to take advantage of cloud opportunities. IDC expect a frenzy of activities to occur as telcos start to differentiate themselves from everyone else by launching a whole host of new cloud services

Value partnership with IT vendors

IT companies are increasingly looking to partner with telcos to increase their penetration in the SMB space, which continues to be the largest segment in terms of total number of addressable opportunities.

“The SMB market has long been described as ‘the long tail’ and it is very easy to understand why most IT companies struggle to keep up in the SMB segment. It is a tirelessly challenging market given the sheer numbers involved - consider the large number of countries in this region- and also the difficulties in reaching out to each one of them,” IDC said.

Cloud computing for operations

Apart from telcos and Internet service providers (ISPs) offering consumer and enterprise cloud computing services, there is a whole new sub-industry emerging which revolves around the software, hardware, and services network equipment providers (NEPs) that are serving telcos and the transformation of their products/technologies and services into money-making cloud services.

“This type of cloud service offered is not the ‘one-to-many’ model that typically comes to mind when talking about cloud services as carriers typically are very hesitant to share the same servers with their competitors,” IDC explained.

“Instead, NEPs are, and should be, looking at offering these services as hosted private clouds with logical separation of infrastructure between carriers, with a future roadmap of moving into virtually separated cloud infrastructures as carriers become more comfortable with a shared-services concept,” it added.

Next-gen optics 100G

In March 2007, the International Telecommunications Union (ITU) Study Group 15 (SG 15) approved to extend the G.709 OTN standard to the next higher rate beyond the current 43 Gb/s (known as “40G”), and called this new specification OTU-4.

The specifications for the new OTN signals were completed in December 2009 and the OTU-4 line rate was set at 112 Gb/s which can be used for 100 Gps Ethernet connections. The ITU then set out to complete the frames and rate lines for 100G long-distance transport networks or ultra long haul DWDM (Dense Wave Division Multiplex) transport.

The ITU has since then decided to use Dual Polarization Quadrature Phase Shift-Keying modulation and coherent detection for the 100G long-distance specification. Network equipment vendors such as Ciena, Alcatel-Lucent and Infinera have been developing commercial 100G DWDM transceivers paving the way for the first wave of commercial launches in 2011.