SAARC : Need of the Hour

Sri Lanka has been a forerunner in the adoption of advanced technologies like

WiMax and 3G, which are yet to be adopted by a number of countries in SAARC. Sri

Lanka has the highest literacy rate in the South Asian region and has an

increasingly skilled pool of adaptable and cost-effective resources. The economy

is primarily focused on the domestic market. Currently, most businesses are

concentrated around the Colombo region, primarily due to the war. Sri Lanka also

serves as an offshore destination for countries like the USA, Ireland, the UK,

Australia, Sweden, Norway, Japan, etc. It is globally recognized as a niche

center of excellence for financial and accounting outsourcing with the world's

second largest pool of UK qualified accounting professionals. As a result, a

number of multinationals have established their offshore centers in Sri Lanka.

Market Outlook



The telecommunication market in Sri Lanka is experiencing high growth with a

three-fold increase in subscriber numbers (3.3 mn in 2005 to 11.1 mn in 2008) in

the last three years. Subscriber base in Sri Lanka is predominately prepaid, but

the percentage is significantly lower than neighboring countries like India and

Pakistan. In 2007, 3G was launched in Sri Lanka, which is expected to show a

robust growth reaching 25% of overall subscriber base by 2014. This would drive

various content rich applications and communications methodology adaptation in

enterprises and would also enable a significant rise in the mobile workforce in

the coming future.

Like in other South Asian countries, ARPU in Sri Lanka is also declining.

However, the overall services revenue is on a rise, registering a healthy

compound annual growth rate (CAGR) of over 27% in the last five years. Data

revenue has registered an even higher growth at a CAGR of 54% during the same

period. Growth in data revenue is expected to continue at a healthy rate,

primarily driven by demand of enterprise data requirement.

Enterprise Communications



Enterprises are increasingly adopting new communication technology to

fulfill their widespread communication needs. Multi communication devices

(desktop phones, mobile phones, etc) with multiple communication applications

(instant messaging, conferencing application, etc) are becoming the common norm

among employees. Choosing the most effective channel of communication with

co-workers, customers, service providers, partners, and consultants has become a

challenging task. Emergence of 3G would enable the growth of mobile workforce

and content rich video applications, thus further increasing the complexity of

proper channel selection. The enterprise data market is at nascent stage in Sri

Lanka currently; but is expected to grow at a faster rate at a CAGR of 23.8%

over the next six years. Requirement will primarily be driven by increased

communication need among business, setting and expansion of IT/ITeS business

requiring international communication and the government initiative to expand

the telecom and IT sector in the country. Segments like Internet, MPLS/VPN and

Metro Ethernet hold significant growth prospects in turn highlighting the

potential for new IP based communication channels. Presence of a large number of

communication channels/tools creates challenges for organizations in terms of

inability of employees to reach co-workers reliably. This results in wastage of

productive time and effort. Enterprises are thus realizing the importance of

integrating their communication channels so as to increase the efficiency and

effectiveness of employees in terms of communicating to co-workers.

An Overview @ UC



Unified communications (UC) is the convergence of different and disparate

communication channels and providing a single point access to them. It increases

employees' productivity by removing latency in communications among various

business. UC promises to address the challenges of effective channel selection

integrating the following channels in a seamless manner:

a) Voice including traditional telephony, IP telephony, audio conferencing

b) Video including videoconferencing

c) Data including email, messaging, collaboration

It is unlikely that one solution will be able to integrate all channels in a

manner so as the collaboration need of different departments or groups. Any

solution, which impedes flow of information, would prove to be highly counter

productive in this case. Thus convergence solutions is usually selected to meet

the collaboration demand concerned persons. Understanding of current methods of

collaboration among participants becomes highly critical in order to select the

appropriate suite of applications so as the need of all participants.

Different UC applications provide different benefits. Understanding the

advantage of each of these applications and mapping them with an organization's

collaboration needs is necessary in order to reap the benefits of unified

communications.

Adopting UC



Although unified communications has penetrated in the Sri Lankan market,

past adoption has been lukewarm. This is primarily due to the domestic serving

economy, businesses focused around Colombo region and unstable political

environment. However, with the end of the war, businesses are expected to spread

across various regions in the country, thereby boosting the demand for

collaboration and conferencing. In addition, the IT-BPO industry has been

identified as important by the government. The government has provided fiscal

and other incentives and concessions to facilitate the development of this

sector. With the economy under strain, enterprises across the world are aiming

to reduce both their capital and operational expenditure. Travel is one such

expenditure that enterprises would like to reduce. With an increasingly

disparate workforce operating out of different regions and catering to different

markets, unified communications can help reduce the operational expenditure of

travel. Collaboration between remote office locations and remote workforce

requires enhanced communication tools. Increasing competition requires

organizations to respond to the market faster than their competition and

decreasing margins emphasize the need to reduce overheads and increase

productivity. Unified communications enables organizations to converge their

varied communication methodologies of video, voice, and data. Breaking down the

communication silos of video, voice, and data would help the organization

achieve productivity, time to market and gain cost benefits in the long run.

The strained economy could also deter the adoption of unified communications

due to the reduced budget spend on IT and infrastructure elements. In addition,

lack of clear understanding of the benefits of unified communications and

ability to justify the RoI of unifying video, voice, and data applications in an

enterprise are challenges for adoption of unified communications in the Sri

Lankan region. The current workforce concentration around Colombo region makes

it difficult to justify the investment in unified communications. However, over

time, with a distributed workforce, this restraint could be overcome.

Market Opportunity for UC



The current market opportunity for unified communications was estimated at

$11.5 mn in 2008, and is expected to grow at the rate of 16.5% to reach $33.4 mn

in 2015. The market is currently dominated by voice applications amongst all

other applications of unified communications. Traditional telephony currently

holds the highest share amongst other applications. However, the penetration of

traditional telecom networks in this region is low. Thereby, IP telephony,

driven by the palpable benefits of cost and minimal interconnection regulations,

is seeing a significant interest in the market and the deployments of IP

telephony could rise in the near future. The traditional sectors adopting new

technologies have remained the telecommunication and the BFSI sectors. The same

holds true for the adoption of unified communications applications as well. The

Sri Lankan market is seeing significant traction in the telecommunication sector

with a number of players participating in the market as well as receiving

investments from foreign investors. The untapped market is forcing

telecommunication firms to vie for a larger customer pie and thereby in their

aim to provide better customer satisfaction; this sector is adopting Unified

communications rapidly. Similarly with the BFSI segment, as it thrives on

customer satisfaction. The government is a major spender in the Sri Lankan

market and thereby a high adopter of this technology as well.

UC Market Players



The major players in the unified communications space across the world are

present either directly or indirectly, in the Sri Lankan market. Avaya, a world

leader in communication systems, software and services has tied up with

Lankabell, a Sri Lankan telecom service provider, to market, distribute,

install, and maintain its products in the Sri Lankan region. Avaya is a key

player in the Sri Lankan market, offering services to many international banks,

hotels and conglomerates in the region. Avaya has solutions in the IP telephony

and contact center applications space.

Cisco, a world leader in networking solutions, follows both a direct and an

indirect model of sales in Sri Lanka. Cisco has engaged a number of resellers

and partners under its partnership program to facilitate the distribution and

sales of Cisco equipment and solutions in the Sri Lankan region. The prime

customers of Cisco are in the government, large enterprises, telecommunications

and Internet service providers segments. Cisco has partnered with Millenium IT,

one of Sri Lanka's premium technology solution providers, to offer Cisco

solutions in this region. Cisco has solutions in the IP telephony and contact

center applications space. Microsoft offers unified communications solutions in

a variety of models like on-premise, hosted by partners or by Microsoft.

Microsoft has an elaborate partnership model where it facilitates and helps

partners offer Microsoft solutions to its customers. Ceylinco Micro Technologies

has been Microsoft's leading partner since the latter's entry into this market.

Microsoft works closely with the government and education sector in Sri Lanka to

increase awareness and use of its applications and services. Microsoft is a

leading player in the email solutions market in the region. IBM has both direct

presence in Sri Lanka and also reaches out to its customers through a

partnership model.

What's in Store?



The use-case for unified communications in the Sri Lankan market would be

strengthened by the increase in distribution of businesses across the region and

the growing focus on making Sri Lanka a hub for IT/BPO operations. Although,

traditional telephony currently dominates the market, IP deployment is set to

overtake the traditional market with minimal regulations restricting the

interconnection of IP Private Branch Exchange (PBX) with Public Switched

Telephone Network (PSTN) within the country.

The authors are Santosh Kumar Sinha & Saumya Upadhyaya, industry analysts,

ICT practice, South Asia and Middle East, Frost & Sullivan

vadmail@cybermedia.co.in