An exclusive read from our Founder, Viktor Kovacs, and Sophie Papasavva, Partner at EM Finance Consulting, appeared in Teletimes International.
An exclusive article appeared in June issue of Teletimes International magazine, written by Viktor Kovacs, Founder and CCO of CE On-Demand and Sophie Papasavva, Partner at EM Finance Consulting.
To read the full article, please click here.
Excerpts of the article:
“Essentially conservative in nature, telecom operators make steady cashflows from a heavy reliance on voice and messaging, including data. Some telcos admit they have a poor track record in successfully deploying new value added services. For many the cloud presents an attractive proposition, with new services that offer the opportunity to stem voice revenue declines and competition from Over-The-Top players. Telcos should look to take advantage of cloud service providers’ expertise in cloud enablement services and go-to-market know-how. Strategic partnerships with players that can quickly establish the telco as a cloud provider in its markets are key. The benefits of partnership are clear: lower capital commitments, faster time to market and much reduced risk.
1. Positive Market Dynamics
Ubiquitous broadband availability in the business, home and on mobile handsets has provided an opportunity for companies and individuals to change the way they communicate and measure productivity. Communication tools such as e-mail, voice and video communications, which have long been considered the domain of corporate IT, are today considered to be fundamental competitive tools for any company. According to the International Telecommunication Union, 1.8 billion people access the internet today. As penetration continues to grow, industry experts such as Intel forecast that the data centre build outs that are required in order to satisfy future demand can only be achieved with the increased efficiency, performance and flexibility of cloud architectures.(…)
2. The Obvious Opportunity
While the market anticipates strong growth in cloud services and therefore broadband connections across the globe, telecom operators have pushed broadband as a solution to reversing ARPU declines. Wireless Intelligence reports European blended mobile monthly ARPU fell by €5 between 2007 and 2010, due to declining voice call prices. For blended fixed and mobile ARPU, market analysts note that voice ARPU is declining by 23% to 60%, while mobile data traffic continues to grow dramatically, reaching over 25% of total ARPU for many operators, with others seeing data’s share at over 30%. While some of the larger telecom operators are focusing on balancing declining voice ARPUs with improved data revenues, to-date they remain the exception.
The opportunity is particularly clear for users to access productivity-enhancing applications, such as e-mail and for telecom operators to ensure customer satisfaction and retention by delivering such within a data bundle. Small businesses and large enterprises have begun to adopt IT as a competitive tool; in turn, telecoms operators have begun to appreciate that with the commoditisation of voice, they need to focus more and more on value added services (“VAS”) to enhance their product offering and specifically focus on data as a service. While the connectivity is there, VAS have been slow to hit the market, primarily due to the focus by telecom operators on network build-out and lack of experience in selling ancillary services other than SMS.
Market analysts concur that the enormous potential for SaaS has yet to be realised in the SME segment. Often SMEs may not be aware of the potential and value that cloud services could bring to their business yet it is SMEs that are most likely to value a trusted advisor to steer them through the hype and into the cloud. Most telecom operators have a significant SME subscriber base, which has increasingly been demanding more advanced IT solutions. It is obvious therefore, that the greatest strategic fit for telecom operators is the ability to offer SMEs communications and collaboration solutions from the cloud.
Many companies across the emerged and the emerging world have developed well-defined and clearly expressed cloud strategies. Several of these are telecom operators or systems integrators and others are large enterprises with an apparent view as to the benefits of moving IT to the cloud. However, whereas many may have a clear strategy, few have been successful in deploying their cloud vision to the market. Fewer still have effectively captured a significant portion of cloud revenues that market analysts tell us on a daily basis are there to be made.
In a recently published report, Informa Telecom & Media states that using cloud services, telecom operators have a multi-billion dollar opportunity to change the dynamics of ICT wallet share. However, whilst US$14 billion was spent by telecom operators on cloud pursuits in 2011, only a handful generate more than 5% of revenues from cloud services. The report recommends that through strategic partnership with expert cloud enablers who can offer a lifecycle of services to them, telecoms operators can absolutely expedite their success in the cloud.
3. Partnerships – The Business Rationale
Telecom operators make ideal candidates to successfully deploy a cloud provider business model; this is due to:
The above imply that each and every telecom operator has the basic elements of becoming a successful cloud provider offering value added services, to help keep ‘stickier’ subscribers and stemming revenue declines. However, several costs (both in terms of money and time) have been associated with deploying a cloud strategy, thus impeding the wide implementation by prospective telco cloud providers. Some of these include:
On average, a hosted platform provisioning for 10,000 cloud users implemented in-house by a telecoms operator could bear a capital investment of €2.25 million. In addition, the telecoms operator would have overheads to facilitate the provision of services as their own IT resources are geared for internal service delivery, not for external subscribers. The service delivery would require additional headcount that is often a complete replica of their internal IT messaging staff. Further go-to-market challenges include a primary focus on technology versus product development and marketing, a long time to market and, as often seen, extremely low success with respect to market penetration.
Partnerships with cloud service enablers can address all of these challenges. Such cloud experts are able to:
The time to assist emerging markets SMEs to grow and manage their business on the cloud is here and who best to enable them to do so, than their trusted telecoms operator? Between the software provider and the telecom operator, specialist cloud enablers such as CE On-Demand effectively act as a reseller of SaaS subscriptions, but provide so much more. These partners offer additional value with crucial services related to integration with the telecom operator’s core systems, white-labelling of the cloud services and seamless customization for the end user. The right cloud enabler has both the data integration solutions and the expertise to work through technical issues. The right cloud enabler assists the telco to monetise the cloud by implementing the best solution and launching white-labelled cloud services to market in an effective and timely manner.”
About Viktor Kovács
Viktor is co-founder and Chief Commercial Officer of CE On-Demand (www.ceondemand.com), a company active in cloud services enablement since 2008. CE On-Demand creates cloud providers by assisting white-label partners and direct end-users to realise and implement their cloud strategies. Since inception, CE On-Demand has supported 27 partners in deploying their cloud strategy, 17 of which have been telecom operators. The Company’s footprint spans 15 countries across Europe. Viktor is a board member of EuroCloud Hungary, the pan-European cloud computing association; he also enjoys sharing his invaluable experience by speaking at cloud and telecom conferences. Viktor’s expertise in the cloud is unprecedented, especially in emerging markets, where the sector has been slower to penetrate and few innovative cloud companies have emerged. Prior to CE On-Demand, Viktor held executive roles with EDS Corporation, Octel Communications Corporation (acquired by Lucent), Portal Software (acquired by Oracle) and Cisco, and thus benefits from more than 20 years of experience in the ICT sector, both in the US and Europe. Viktor may be contacted directly on vkovacs@ceondemand and followed on Twitter at @VKovacs_cloud.
About Sophie Papasavva
Sophie Papasavva is a Partner at EM Finance Consulting (“EMFC”), a borrower’s side advisor that bridges the gap between corporates and the finance community. EMFC translates funding needs into financeable propositions and navigates borrowers through the entire loan process. Prior to establishing EMFC, Sophie was a loan banker for 12 years, first as telecoms, media & technology relationship manager and later in loan syndications and sales, where she gained experience in multiple sectors such as oil & gas, mining, infrastructure, agribusiness and others. Sophie has originated, structured, executed, sold, restructured and syndicated loan financings ranging from simple bespoke bilaterals to complex multi-billion dollar, multi-currency syndicated transactions. Her expertise lies in arranging structured, bespoke financings for corporate borrowers operating in the emerging markets. Sophie may be contacted directly at firstname.lastname@example.org and followed on Twitter at @Sophie_EMFC.
 “Why is Mobile ARPU Declining?” The Strategy Analytics Tariff and Revenue Strategies (TRS) Insight, Sep 2010
 “Navigating the Telco Cloud” Informa Telecom & Media, May 2012