Transcending Differences

Today connectivity services are much more than just
providing network connectivity. They have now evolved as the lifeline for
running an enterprises' IT services. The enterprises are investing in service
providers who have an evolved service capability to minimize duplication costs,
increase efficiency and not look at merely technical specifications. The need of
the hour is to view the picture with a long term partnership model, like in any
IT services outsourcing case.

The pure connectivity services market in India is close to
$4 bn including both domestic as well as global requirements across a variety of
technologies. Industry experts expect the connectivity business growth in
corporate VPN and corporate Internet services will add to around Rs 1,500 crore,
and is expected to grow by 20% in terms of revenue. Corporate point to point
bandwidth and international bandwidth services will be another Rs 2,000 crore
and will grow at around 15% in revenue terms.

Trendsetters

The key trend that will play a pivotal role in defining the trajectory of
connectivity services is the convergence of services with voice, video and data
on one connection, irrespective of the device.

Higher and a faster adoption of fiber and a demand for
more bandwidth as video traffic continues to grow would bring the need for
technologies which are capable of 10 GB at the core level .

Simplicity will create a demand for the Passive Optical
Network (PON). Then, the demand for 1 GB or 10 GB with simplicity and PON would
result into Gigabit Ethernet Passive Optical Network (GEPON). So GEPON, IPTV
would clearly be the next trend in wireline.

Besides, as far as mobility goes, the industry would
continue to see a demand for more and more bandwidth.

The year gone by was the key to several learnings by
players in the connectivity services space. One impact of the global recession
has been a timely revision of the role mobile working-and the technology that
enables it-can play in organizations that are striving for sustainability while
seeking to drive down costs. CIOs have to reconsider the mobility imperative,
and to present a fresh and coherent case as to how mobile their enterprise needs
to be.

Connectivity requirements in the rural areas is likely to
come up in India in a big way. For enterprise connectivity, rural areas would
need to ride on top of consumer mobility. Remote access services which will
enable end users to access their end user services from anywhere, anytime and
that includes rural areas, is one area to watch out for. The Government of India
has some ambitious initiatives to provide rural Internet access, however most of
these these services will evolve more from the Internet café perspective and not
from the device side.

Tech Focus

Key technologies which will fuel the growth of the pure connectivity
services will be virtualization, cloud computing and remote infrastructure
services. The first two are relatively new to the Indian landscape and will
begin to see adoption by the core technology companies who will be the early
adopters. They will blur the difference between IT and telecom services, and
further commoditize these elements. Bandwidth demands will go up as services
will proliferate across the market segments. Most importantly, the blur between
consumer and enterprise will increase significantly as technologies will enable
the end user to access services from anywhere.

The core technology focus for some connectivity service
providers will be MPLS network to offer VPN and core connectivity services,
hosted services platform to provide hosted contact center services. A major
focus will be on technologies which will enable converged service delivery,
reduce duplication, and thus costs; and enable the service providers to serve
the end user demands and remove blind spots in their target segments.

MPLS - VPN will continue to grow, and the penetration will
increase not only in global connectivity requirements but also for domestic.
According to Gartner, the market for VPN services will grow at a CAGR of 24%.
Ethernet services is another area of high growth and this market is likely to
grow at 25% y-o-y.

While some of the connectivity services will grow faster
like VPN, Ethernet or Internet access; the others, including frame relay, leased
line and ATM will see a decline.

The demand is increasing from various industry verticals,
and it provides a diversified growth. There is a higher acceptance of VSATs as a
broadband access medium by a much larger addressable market of SMEs that will
provide an additional growth compared to the traditional enterprise and
government segments.

Satellite bandwidth availability for VSAT has always
raised concerns for enterprises. Other regulatory constraints keep from
exploiting the benefits of VoIP to the fullest. Tough terrains and terrestrial
infrastructure are yet another challenge for this segment. VSATs continue to be
the preferred media for SCADA type applications that need relatively smaller
bandwidth to operate.

Demanding Enterprises

The customer requirements and expectations are changing, largely
driven by the change in the overall business environment. The complexities in
business processes are making it inevitable for the enterprises to re-strategize
on the connectivity services end. Also need for stricter security and compliance
is an important part of the service package. Financial attractiveness is no
longer the only deciding factor. However in the pure connectivity services
space, it still remains the dominant factor. Enterprises are looking at fast,
reliable and more importantly cost effective connectivity services. They are
looking at connectivity solution which is scalable and flexible, and should be
able to adapt to the customer's changing requirements.

Growth Stimulus

The Indian IT is exciting. Globalization, outsourcing and out tasking
are primarily driving the growth of this segment in the countries. Indian
companies are going global, the country is seeing a trend of outward FDI.
Interestingly, this growth is no longer limited to IT/ITeS companies; but
several pharmaceutical, manufacturing and auto companies have gone global. IT
adoption specifically in the SMB segment is on an upswing. Also, the government
is spending on e-governance and several other e-initiatives.

Impediments

Wireless spectrum is one of the visible ones. Most of the players
complain that the bidding rules are not beneficial for the Indian end user. The
service providers feel a lack of government initiative in the next generation
networks is the key obstacle. NGN should be treated as a national infrastructure
like roadways, railways and airports, else service providers will always use it
to compete unfairly and overcharge the customer. And with so many mature telecom
regulatory models available across the globe, the country need not make the
Indian telecom regulations so complicated. India is known as more lobby driven.
A critical challenge in the rural market is the low ARPU, as right now voice is
the only solution which has been delivered in a cost effective manner. Once the
service providers win over the challenge to deliver video in a cost effective
manner, the ARPU from rural areas is bound to increase as the data relevance
there is relatively lower.

Green Agents

The recession has taught business heads that businesses can strive
for and achieve a lower carbon footprint and a lower cost base, without the
weakening of security or productivity. While global attitudes towards the
environment will remain vigilant in 2010 and beyond, CIOs will need to prove
both financial and sustainability returns on any investment in mobility
technology. The ability to cut carbon emissions will be valued only if it is
balanced by an ability to cut costs.

As the world emerges from the recession, it is important
that the industry keeps its focus on positive ideas such as these, and pursue
all the ways in which technology can support the fight to tackle and adapt to
the climate change.

Readily available, proven mobility technologies such as
secure remote access and video conferencing do work as a way to cut costs, as
businesses that have been forced to take the mobility plunge have found. It is
proven to have a beneficial environmental side effect.

Heena Jhingan

heenaj@cybermedia.co.in