Enterprise customers deliver mixed messages for telcos as trusted ICT service providers
London, 22 July 2010 – Despite making inroads in the enterprise market beyond legacy connectivity services, telecom operators face a tough time convincing business customers that they can be trusted providers of information and communication technology (ICT) services. Fifty-six percent of respondents believe that the telcos should stick to their core business, rather than being all things to all people, according to a new survey by Ernst & Young - Beyond connectivity: can telecoms operators offer new services to business customers?
The global survey of over 350 senior IT and procurement managers across industries – conducted by Ernst & Young in conjunction with the Economist Intelligence Unit – finds that telcos face a difficult task positioning themselves in certain areas of ICT, with only 15% and 20% of enterprise customers respectively saying they would consider taking cloud computing and business consulting services from operators over the next 12 months.
Nevertheless, operators have made considerable headway with select services. Over one third of businesses worldwide are now purchasing web hosting (41%), network security (40%), conferencing (39%) and network installation and maintenance services (36%) from their telecoms supplier.
In addition, many business customers rate services such as network installation and security, as well as conferencing and web-hosting, as “highly valuable” services, and ones which at least half of respondents are already buying, or would consider buying, from operators.
Vincent de La Bachelerie, Global Telecommunications Leader at Ernst & Young, says: “Enterprises recognize that maintaining a high-performance network, allied with software infrastructure investment, is vital to increasing business productivity. This should give telcos a head start in gaining a stronger foothold in the market for non-core and more IT-centric services.
“There are customers who would consider buying ICT services from operators. In this light, telcos would be in a better position if they showed a greater understanding of individual business requirements, and tailored their service propositions accordingly, rather than promoting a wide range of services that enterprises don’t need or want.”
Telcos might take heart from the 36% of respondents who say they are perfectly happy with their telecoms services. However, the survey shows that there is no correlation between offering a reliable core service and the propensity of enterprises to take on additional services from their telecoms service provider. For those enterprises willing to buy non-core services, telcos must package offerings to their business needs.
“Incorporating real-time IP-based voice and video into Software as a Service (SaaS) or unified communications propositions — which IT suppliers or in-house IT departments might find difficult to implement — may be one way, that telcos (along with IT partners) can bring innovative service propositions to the attention of enterprise customers and generate incremental revenue.”
Spending propensity in the overall telecoms enterprise market is improving with 48% of respondents predicting an increase in expenditure over the next two years. Nevertheless, high cost remains the leading service drawback cited by business users.
Fixed/mobile integrated suppliers well placed
Opinions are mixed on the benefits of integrated providers of both fixed telecoms and mobile services, when it comes to deciding on non-core services suppliers. Thirty-nine percent agree that it is important to buy fixed and mobile services from the same supplier. Of those, 62% see telecoms spend increasing over the next two years.
Jonathan Dharmapalan, Global Deputy Telecommunications Leader at Ernst & Young says: “It could be that those seeking a converged fixed and mobile service have higher expectations about what their telco can deliver and so are willing to spend more on additional services and increase their telecoms budgets accordingly.
“On the other hand, those who prefer separate suppliers of fixed and mobile services are more price-conscious and less likely to ascribe value to additional ICT services. According to this scenario, operators also need to focus on those customers seeking best-of-breed connectivity options at competitive rates.”
Network expertise is telco trump card
Larger companies are putting more emphasis, in particular, on the mobile internet, with 61% giving a higher priority to mobile internet spending (compared with 41% of smaller companies) as workforces are increasingly on the move. The growing use of smartphones also means IT departments are facing much bigger network security and device management challenges, which creates other potential opportunities for telcos.
Dharmapalan concludes: “Network know-how is the telco’s trump card, but they must play it wisely. That means partnering with established IT vendors, which should enable them to move more swiftly and more effectively into newer service areas, such as SaaS and cloud computing.
“Telcos can’t do everything, but they can leverage their network strengths to better advantage.”
About the survey
This online survey conducted by the Economist Intelligence Unit (EIU) in November 2009. 365 senior procurement and IT executives from a broad range of industries participated in the survey - 50% were C-suite or above. Roughly 33% were based in Europe, 36% in North and Latin America, 27% in the Asia-Pacific region and the remaining 4% from the Middle East and Africa. Participants also represented a wide cross-section of company sizes, with 58% having annual revenue of over US$5m, and 20% with revenue of over US$5b per year. In addition, nine executives were interviewed on the record for this report.
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