VOICE SOLUTIONS: IP Spreads Its Tentacles

The enterprise voice solutions market during 2003—04 was pegged at 13 lakh
lines at an estimated worth of Rs 702 crore. This represents a 10 percent growth
in number of lines and 11 percent in value. During 2002-03, the voice solutions
market was pegged at 11.8 lakh lines at an estimated worth of Rs 630 crore.

In terms of value, the market was dominated by total solution providers. IP
started making more headway as enterprises adopted it and all vendors started
offering it. The size of deals have became bigger with several deals over 2000
seats and as prices in the organized sector crash, the gray market operating at
the lower end of the spectrum had a tough time.

The demarcation between KTS and PBX has become increasingly blurred as the
market became feature-driven and as also PBX prices came down steadily. However,
strictly speaking KTS as a segment experienced slow growth. The overall market
was still dominated by PBX at an overwhelming 82 percent, followed by IP-PBX at
12 percent and W-PBX at 5 percent.

The market is clearly demarcated by different categories of players. Tata
Telecom, Cisco, Nortel are positioned at the high-end as total solutions
providers, followed by the price warriors Siemens, Ericsson, NEC, ABS,
Panasonic, LG in the mid-range and the Accord, Matrix, Samsung, Syntel, Crompton
Greaves etc in the lower-end along with the unorganized sector.

The price dynamics among the high-end players are very different as the focus
is on selling total solutions and not just number of lines. Therefore, there
could be a discrepancy in determining the market share based on the number of
lines sold vis-à-vis the value of the market. For instance, a player like Cisco
focussed on IP-centric solutions may have a insignificant market share based on
the number of lines although its revenue realization would be higher than any
other player. Yet for the sake of simplicity, we have taken the number of lines
sold as the parameter for estimating market share.

IP Gets More Takers

The year saw IP telephony make impressive headway. Enterprises have started
seeing IP as a reality. Not surprisingly every vendor has something to offer in
IP and have mentioned it as their priority in the next fiscal. The arrival of IP
is indicated by the fact that vendors have started offering IP platforms in the
lower end. Panasonic, ABS, NEC introduced IP-ready platform in the 50—300 port
system during the year. This means that IP adoption has filtered down to the
smaller enterprises indicating a desire to be at least future-ready.

V&D estimates CyberMedia Research

The adoption of pure IP solutions or IP-centric solutions was still slow
during the year and is expected to take some time due to the initial high cost
of deployment and regulatory issues.

However the year saw increasing tendency amongst enterprises to go in for
hybrid environment particularly as those with multi-locational presence are
seeing the immense cost benefits that can accrue in the long run despite the
initial high cost. Centralized banks and telecom operators in their bid to have
connected enterprises to reduce cost of management and in order to have disaster
recovery measures are taking the lead in adopting hybrid environment.

A huge consideration for the uptake of IP solutions is that enterprises are
increasingly mobile-enabling more applications in order to have a connected
workforce.

Tata Telecom, Nortel and Cisco have established themselves in the IP space
although ABS, Panasonic and NEC also did some IP installation. Growth in
IP-based contact centers was fuelled by global offshore leaders like Dell
International and Convergys.

New Indian third-party players like V-Customers, TracMail, Transworks,
Epicenter Technologies, Hinduja TMT, Progeon which do not have the legacy
systems were early adopters in the industry.

Tata Telecom emerged the largest player in the IP space as it has offerings
on the hybrid platform while Cisco, the other big player in the IP-space is only
focussed on IP-centric solutions. Therefore Tata Telecom has a larger market
share, as not everyone is willing to jump the IP gun completely. It was also a
concerted effort on Tata Telecom that saw it gain market-share in the IP
solutions space.

Cisco's IP-centric march was aided to a large extent by tech-savvy software
companies like Infosys, Wipro, Intel, IBM. Among the contact centers it was
existing customers like v-Customer (1000 seats), Nirvana, TransWorks who brought
repeat business to Cisco with their expansion strategies. However, a proud
feather in Cisco's cap is the SBI order to connect various branches on an IP
platform. Another Cisco achievement during the year is that company has touched
a milestone of shipping 25,000 IP phones and is expected to close the fiscal at
double the figure having already shipped 20,000 phones since during this fiscal.

The other player in IP, Nortel did good business but is poised for the big
leap during the next fiscal. In fact, Nortel bagged a 4,500 ports IP-centric
deal across multiple location during the year. Nortel is likely to make
considerable ingression into the IP domain during the next fiscal as 60 percent
of its existing customers have already registered for its hybrid platform and
plans to migrate within the next 2—3 months.

Vendor Performance

Tata Telecom continued to dominate as the largest player both in terms of
revenue and number of lines sold. Sadly, this player will not feature in our
next annual issue as the company has been taken over by Avaya and is expected to
see a name change soon.

The total revenue of Tata Telecom is Rs 401 crore with the estimated revenue
from pure voice solutions pegged around Rs 220 crore. In terms of the number of
lines also, Tata Telecom takes the clear lead and would have sold about four
lakh lines.

V&D estimates CyberMedia Research

The company had a major presence in the contact center space with over 48
percent of its revenues coming from the segment followed by the enterprises
space bringing in 38 percent revenues and services bringing the rest. Tata
Telecom's success in the contact center space is not surprising considering
that Avaya is the vendor of choice amongst most outsourcing players in the US.

Besides, Tata Telecom has actively positioned as the solution provider in the
contact centre space by aligning itself with a wide range of solution providers.
ACD comprise a major chunk of the business bringing in as much as 30 percent of
the segment's revenue to the company.

The company's contact center business was led by voice-based offshore
centers in the telecom and BFSI. Interestingly most of the business in this
sector was for expansion with not many new customers. The scene was very
different in the previous fiscal when growth was led by new customers setting up
operations in India.

Telecom as a sector has also been active in the domestic front. As the growth
of wireless telephony spread like wildfire, operators had to make provision for
customer care. Tata Telecom bagged two large deals in this space: a 500 seat
call center for Reliance and a 2000 seat call center for Tata Indicom across
multiple locations.

Banking which was a large driver the year before was a poor customer during
this year bringing in only 2—3 percent growth. Tata Telecom has the
distinction of bagging one of the largest deal of the year-a 5000-seat order
from Tata BPO company Tata Airline.

Education as a segment was lucrative as institutions made substantial
investments to enable converged networks within campuses. A major win for Tata
Telecom was the Kalinga Institute of Information Technology.

Siemens Ltd, the second largest player, focussed on traditional PBX during
the year. With the launch of its hybrid platform, High Path 400, it will become
active in the IP space. The company made progress by increasing its presence
from 15 locations to 30 locations. It also appointed more channel partners up
from 80 partners in the previous fiscal to 130 partners during the last fiscal.
A good deal of Siemens' business came from two large deals from the defense
forces.

Panasonic emerged a strong player in the mid-segment range with a formidable
brand name. It won a number of large deals including IDBI, ICICI Bank and Max
New York Life. The largest deal was a 5,000-port deal from Reliance Infocomm at
an estimated value of Rs 12 crore. The company mostly focussed on digital PBX
systems but sold some analog systems as well. This year the company also forayed
into IP on which it is betting big in the next fiscal.

Ericsson, represented by HCL and BPL, performed moderately. There are
speculations that the company will reposition its enterprise business with
stronger focus on the carrier switching market. Consequently it is expected that
the company would phase out the BP series by 2005 and increase the price of MD
series. Accenture has placed orders to HCL Infinet for 6000+ ports of Ericsson
MD110 system for its facilities at Bangalore and Mumbai.

Nortel did well particularly in the call center market, courtesy its huge
presence in the US call center market. Other segments like corporate houses,
defense and government institutions also brought good business. In fact Nortel
bagged the largest IP deployment of 5,000 ports in the enterprise segment.
Although it is focussed in the total solutions space, it also offers a lower end
product called NorthStar, which is a digital KTS.

Last year saw ABS (formerly Alcatel Business Systems) valiantly trying to
build up its team and presence in the market. It increased the number of
employees from 40 people a year ago to 125, set up offices in five locations and
indirect presence in 25 other locations. ABS addressed the market with its two
categories of products: OmniPCX Office targeted at the lower end and the OmniPCX
Enterprise a hybrid solution targeted at large enterprises. The Omni Enterprise,
which was launched in mid of last year, is expected to boost company's
performance during the next year. The company also tied up with SNOM, a German
company for IP and SIP phones.

The company did well as compared to the previous year during which the
transition from Alcatel to ABS was effected. Yet the performance may not have
been good enough as the market is agog with rumors that Alcatel has appointed
GTL as its second distributor.

NEC did well in niches particularly in the hospitality sector and the broker
community. It also made its foray into the lower end of the call center market
during the third quarter by launching its product Aspila (called Aspire in the
US market) with 512 ports. The company will target the domestic call center
market with 300 seats with Aspila. It has made a beginning by winning the Taj
Group order.

NEC dominated the hospitality sector with deals from ITC (in which 27 hotels
were networked on its IP platform), Intercontinental (Park Royal and Grand
Mumbai), Natraj Udaipur, Ecotel Group of Hotels, Best Western Group and Kwality
and Group.

Balaka Baruah Aggarwal

Outlook: Growth Likely

l The segment is expected to do
well in the next fiscal. Banks, government departments, educational institutions
are likely to drive growth. Growth in the government and bank segments will
emerge from upgradation as well as mobile-enabling of corporate workforce.

l The contact center segment,
which has been driving growth over the last couple of fiscal will bring
negligible business during this fiscal due to the uproar against outsourcing in
US. However, domestic call centers may grow and this is an opportunity area for
vendors.

l The market will move towards
IP-PBXs over the next three years. All vendors will have an IP focus this year.
However, customers are likely to opt for hybrid platforms.