The Future of Telecom: Industry Outlook for 2022 and Beyond

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There have been some long-term shifts in market dynamics in the telecom industry. Network traffic growth rates have accelerated; new business models emerged; and cloud services matured and spread to new verticals, applications and customer sizes. Networks are more important than ever. Revenue growth rates and profitability in the three segments – telecom, webscale, and carrier-neutral – have been stronger in recent quarters than anticipated.

Looking ahead, networks will increasingly revolve around data centres, which will continue to proliferate both at the core and edge.

Data centre innovation will be rapid, as webscalers push the envelope on network design and function, and telecom operators seek cheaper ways of running their networks. The telecom operator’s need for cost efficiency will increase as overhyped 5G-based opportunities fail to materialise in any big way. Carrier-neutral operators (CNNOs) will benefit from an ongoing wave of new capital which will help them transform to more integrated providers of “digital infrastructure” assets.

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AWS to Open Data Centres in New Zealand

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Last week AWS announced their plans to invest USD 5.3 billion to launch new data centres in New Zealand’s Auckland region by 2024. Apart from New Zealand, AWS has recently added new regions in Beijing, Hong Kong, Mumbai, Ningxia, Seoul, Singapore, Sydney and Tokyo; and are set to expand into Indonesia, Israel, UAE and Spain.

In a bid to deliver secure and low latency data centre capabilities, the infrastructure hub will comprise three Availability Zones (AZ) and will be owned and operated by the local AWS entity in New Zealand. The new region will enable local businesses and government entities to run workloads and store data using their local data residency preferences.

It is estimated that the new cloud region will create nearly 1,000 jobs over the next 15 years. They will continue to train and upskill the local developers, students and next-gen leaders through the AWS re/Start, AWS Academy, and AWS Educate programs. To support the launch and build new businesses, the AWS Activate program will provide web-based trainings, cloud computing credits, and business mentorship.

New Zealand is becoming attractive to cloud and data centre providers. Last year, Microsoft had also announced their Azure data centre investments and skill development programs in New Zealand. To support the future of cloud services and to fulfil the progressive data centre demands, Datagrid and Meridian Energy partnered to build the country’s first hyperscale data centre, last year. Similarly, CDC Data Centres have plans to develop two new hyperscale data centres in Auckland.

An Opportunity for New Zealand to Punch Above its Weight as the New Data Economy Hub

Ecosystm CEO, Amit Gupta

The flurry of data centre related activity in New Zealand is not just a reflection of the local opportunity given that the overall IT Market size of a sub-5 million population will always be modest, even if disproportionate. Trust, governance, transparency are hallmarks of the data centre business. Consider this – New Zealand ranks #1 on Ease of Doing Business rankings globally and #1 on the Corruptions Perception Index – not as a one-off but consistently over the years.

Layered on this is a highly innovative business environment, a cluster of high-quality data science skills and an immense appetite to overcome the tyranny of distance through a strong digital economy. New Zealand has the opportunity to become a Data Economy hub as geographic proximity will become less relevant in the new digital economy paradigm. 

New Zealand is strategically located between Latin America and Asia, so could act as a data hub for both regions, leveraging undersea cables. The recently initiated and signed Digital Economy Partnership Agreement between Singapore and New Zealand – with Chile as the 3rd country – is a testimony to New Zealand’s ambitions to be at the core of a digital and data economy. The DEPA is a template other countries are likely to sign up to and should enhance New Zealand’s ability to be a trusted custodian of data.

Given the country’s excellent data governance practices, access to clean energy, conducive climate for data centres, plenty of land and an exceptional innovation mindset, this is an opportunity for global businesses to leverage New Zealand as a Data Economy hub.

New Zealand’s Data Centre Market is Becoming Attractive

Ecosystm Principal Advisor, Alan Hesketh

The hyperscale cloud organisations investing in New Zealand-based data centres is both a great opportunity and a significant challenge for both local data centre providers and the local digital industry. With AWS and Microsoft making significant investments in the Auckland region the new facilities, will improve access to the extensive facilities provided by Azure and AWS with reduced latency.

To date, there have not been significant barriers for most non-government organisations to access any of the hyperscalers, with latency of trans-Tasman already reasonably low. However, large organisations, particularly government departments, concerned about data sovereignty are going to welcome this announcement.

With fibre to the premise available in significant parts of New Zealand, with cost-effective 1GB+ symmetrical services available, and hyperscalers on-shore, the pressure to grow New Zealand’s constrained skilled workforce can only increase. Skills development has to be a top priority for the country to take advantage of this infrastructure. While immigration can address part of the challenge, increasing the number of skilled citizens is really needed. It is good to see the commitment that AWS is making with the availability of training options. Now we need to encourage people to take advantage of these options!

Top Cloud Providers Continue to Drive Data Centre Investment

Ecosystm Principal Advisor, Matt Walker

Capital investments in data centres have soared in recent quarters. For the webscale sector, spending on data centres and related network technology account for over 40% of total CapEx. The webscale sector’s big cloud providers have accounted for much of the recent CapEx surge. AWS, Google, and Microsoft have been building larger facilities, expanding existing campuses and clusters, and broadening their cloud region footprint into smaller markets. These three account for just under 60% of global webscale tech CapEx over the last four quarters. The facilities these webscale players are building can be immense. 

The largest webscalers – Google, AWS, Facebook and Microsoft – clearly prefer to design and operate their own facilities. Each of them spends heavily on both external procurement and internal design for the technology that goes into their data centres. Custom silicon and the highest speed, most advanced optical interconnect solutions are key. As utility costs are a huge element of running a data centre, webscalers also seek out the lowest cost (and, increasingly, greenest) power solutions, often investing in new power sources directly. Webscalers aim to deploy facilities which are on the bleeding edge of technology.

An important part of the growth in cloud adoption is the construction of infrastructure closer to the end-user. AWS’s investment in New Zealand will benefit their positioning and should help deliver more responsive and resilient services to New Zealand’s enterprise market.

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Cloud Adoption Creating a Land Grab in the Data Centre Market

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The emergence of COVID-19 last year caused a rapid shift towards work and study from home, and a pickup in eCommerce and social media usage. Tech companies running large data centre-based “webscale” networks have eagerly exploited these changes. Already flush with cash, the webscalers invested aggressively in expanding their networks, in an effort to blanket the globe with rapid, responsive connectivity. Capital investments have soared. For the webscale sector, spending on data centres and related network technology accounts for over 40% of the total CapEx.

Here are the 3 key emerging trends in the data centre market:

#1 Top cloud providers drive webscale investment but are not alone

The webscale sector’s big cloud providers have accounted for much of the recent CapEx surge. AWS, Google, and Microsoft have been building larger facilities, expanding existing campuses and clusters, and broadening their cloud region footprint into smaller markets. These three account for just under 60% of global webscale tech CapEx over the last four quarters. Alibaba and Tencent have been reinforcing their footprints in China and expanding overseas, usually with partners. Numerous smaller cloud providers – notably Oracle and IBM – are also expanding their cloud services offerings and coverage.

Facebook and Apple, while they don’t provide cloud services, also continue to invest aggressively in networks to support large volumes of customer traffic. If we look at Facebook, the reason becomes clear: as of early 2021, they needed to support 65 billion WhatsApp messages per day, over 2 billion minutes of voice and video calls per day, and on a monthly basis their Messenger platform carries 81 billion messages.

The facilities these webscale players are building can be immense. For instance, Microsoft was scheduled to start construction this month on two new data centres in Des Moines Iowa, each of which costs over USD 1 billion and measures over 167 thousand square metres. And Microsoft is not alone in building these large facilities.  

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#2 Building it all alone is not an option for even the biggest players

The largest webscalers – Google, AWS, Facebook and Microsoft – clearly prefer to design and operate their own facilities. Each of them spends heavily on both external procurement and internal design for the technology that goes into their data centres. Custom silicon and the highest speed, most advanced optical interconnect solutions are key. As utility costs are a huge element of running a data centre, webscalers also seek out the lowest cost (and, increasingly, greenest) power solutions, often investing in new power sources directly. Webscalers aim to deploy facilities that are on the bleeding edge of technology. Nonetheless, in order to reach the far corners of the earth, they have to also rely on other providers’ network infrastructure. Most importantly, this means renting out space in data centres owned by carrier-neutral network operators (CNNOs) in which to install their gear.

The Big 4 webscalers do this as little as possible. For many smaller webscalers though, piggybacking on other networks is the norm. Of course, they want some of their own data centres – usually the largest ones closest to their main concentrations of customers and traffic generators. But leasing space – and functionalities like cloud on-ramps – in third-party facilities helps enormously with time to market.

Oracle is a case in point. They have expanded their cloud services business dramatically in the last few years and attracted some marquee names to their client list, including Zoom, FedEx and Cisco. To ramp up, Oracle reported a rise in CapEx, growing to USD 2.1 billion in the 12 months ended June 2021, which represents a 31% increase from the previous year. However, when compared to Microsoft’s spending this appears modest. Microsoft reported having spent USD 20.6 billion in the 12 months ended June 2021 – a 33% increase over the previous year – to help drive the growth of their Azure cloud service.

One reason behind Oracle’s more modest spending is how heavily the company has relied on colocation partners for their cloud buildouts. Oracle partners with Equinix, Digital Realty, and other providers of neutral data centre space to speed their cloud time to market. Oracle rents space in 29 Digital Realty locations, for instance, and while Equinix doesn’t quantify its partnership with Oracle, Oracle’s cloud regions across the globe access the Oracle Cloud Infrastructure (OCI) via the Equinix Cloud Exchange Fabric. Oracle also works with telecom providers; their Dubai cloud region, launched in October 2020, is hosted out of an Etisalat owned data centre.

#3 Carrier-neutral data centre investment is surging in concert with webscale/cloud growth

As the webscale sector has raced to expand over the last 2 years, companies that specialise in carrier-neutral data centres have benefited. Industry sources estimate that as much as 50% or more of the cloud sector’s total data centre footprint is actually in these third-party data centres. That is unlikely to change, especially as some CNNOs are explicitly aiming to build out their networks in areas where webscalers have less incentive to devote resources. It’s not just about the webscalers’ need for space; the need for highly responsive, low latency networks is also key, and interconnection closer to the end-user is a driver.

Looking at the biggest publicly traded carrier-neutral providers in the data centre sector shows that their capacity has expanded significantly in the last few years (Figure 1)

Data Centres and Rentable Space in the Carrier Neutral Sector, 2011-20

By my estimation, for the first 6 months of 2021, CapEx reported publicly for these CNNOs increased 18% against 1H20, to an estimated USD 4.1 Billion. Beyond the big public names, private equity investment is blossoming in the data centre market, in part aimed at capturing some of the demand growth generated by webscalers. Examples include Blackstone’s acquisition of QTS Realty Trust, Goldman Sachs setting up a data centre-focused venture called Global Compute Infrastructure; and Macquarie Capital’s strategic partnership with Prime Data Centers.

Some of this new investment target core facilities in the usual high-traffic clusters, but some also target smaller country markets (e.g. STT’s new Bangkok-based data centre), and the network edge (e.g. EdgeConneX, a portfolio company of private equity fund EQT Infrastructure).

EdgeConneX is a good example of the flexibility required by the market. They build smaller size facilities and deploy infrastructure closer to the edge of the network, including a PoP in Boston’s Prudential Tower. The company offers data centre solutions “ranging from 40kW to 40MW or more.” They have built over 40 data centres in recent years, including both edge data centres and a number of regional and hyperscale facilities across North America, Europe, and South America. Notably, EdgeConneX recently created a joint venture with India’s property group Adani – AdaniConneX – which looks to leverage India’s status of being the current hotspot for carrier-neutral data centre investment.

As enterprises across many vertical markets continue to adopt cloud services, and their requirements grow more stringent, the investment climate for new data centre capacity is likely to remain strong. Webscale providers will provide much of this capacity, but carrier-neutral specialists have an important role to play. 

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Zoom Joins the Contact Centre Fray with Five9 Acquisition

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An Update (1 October 2021): This acquisition did not go through even after the boards of directors of both companies had approved it. It was voted down by Five9 shareholders, citing growth and valuation concerns. This is an unusual example of an acquisition not going through because of unwillingness of one of the companies. In recent times, regulators have stopped some acquisitions. Incidentally, there were some concerns raised by the by Federal Communications Commission (FCC) as Zoom is based in US. but has product development operations in China.

The partnership arrangement between the two companies will continue including support for integrations between their respective Unified Communications as a Service (UCaaS) and Contact Centre as a Service (CCaaS) solutions and joint go-to-market initiatives.

Zoom has announced their intention to acquire cloud contact centre service provider Five9 in an all-stock deal for about USD 14.7 Billion. This is Zoom’s largest-ever acquisition as the communications platform continues to expand their services and launch new products. The deal is expected to be completed in the first half of 2022 and Five9 will be an operating unit of Zoom.

The last year has seen Zoom scaling up their product offerings, including cloud calling solution – Zoom Phone, conference hosting solution – Zoom Rooms, and applications and productivity tools – Zoom Apps and Zoom Marketplace. Zoom also acquired real-time translation startup Kites GmbH to offer multi-language translation capabilities, and Keybase – a secure messaging and file-sharing service to build end-to-end encryption for its video conferencing platform.

Ecosystm Analysts share their thoughts on Zoom’s strategy and roadmap, how Five9 will augment Zoom’s capabilities, and the impact the acquisition will have on Zoom’s competitors and the market.

Why Contact Centre?

Ecosystm Principal Advisor Tim Sheedy says, “Zoom is moving beyond its period of ‘organic hypergrowth’ brought on by the pandemic. While the paying customer base for their core video collaboration service will continue to grow, growth rates are likely to begin to track the market. To grow beyond market rates, Zoom needs to move into new markets – through product development or acquisition.”

Talking about the importance of voice services, Sheedy adds, “Voice services are an obvious adjacent market to help drive growth, and Zoom already has seen some success with their Zoom phone service and associated devices – in fact, they already have 1.5 million users. The Five9 acquisition gives the company a stronger and deeper capability in the voice sector; buying them a significant chunk of the voice services in business – the contact centre. In many businesses, the contact centre already accounts for over 50% of their voice minute usage, so winning this space will go a long way towards winning the overall voice and collaboration supplier in enterprises.”

Ecosystm Principal Advisor Audrey William predicts exciting times ahead for Zoom. “With Zoom already having a platform for video, then bringing voice into that equation and now a contact centre solution, makes them take on their competitors in an all-native cloud stack. There is a still a large installed base of on-prem UC customers and with Zoom seeing success with Zoom phones in the short time frame since its launch, this is where this will get exciting for Zoom. The telephony piece is still important in the race to simplify how we work, communicate, and collaborate today. It is that same voice/telephony discussion that can lead to a routing discussion, which then leads to a contact centre discussion.”  

Ecosystm research shows that 54% of organisations are challenged in their customer experience delivery because of integration issues between multiple platforms. William sees this as an opportunity for Zoom. “The use cases to integrate workflows into the video environment is going to be important for Zoom. Video is now being used to solve customer service issues like letting the agents take over the screen to see how to help solve the customer problem immediately by using video and contact centre applications. The ability to bring this natively together will be very powerful. Zoom is investing heavily into apps and working to partner with ISVs who can develop workflows suitable for easy customer communication in specific industries such as Healthcare and Financial Services.”

Why Five9?

Five9 is considered a pioneer in cloud contact centre solutions and owns a comprehensive suite of applications for contact centre delivery and customer management operations across different channels. Five9 has made several acquisitions and enhancements to their CCaaS solution in recent years to make their stack more complete with richer AI offerings. They include Inference Solutions to offer their customers a Conversational AI solution and Whendu’s iPaaS platform which provides a no-code, visual application workflow tool.

William says, “More contact centres want to do away with monolithic IVR systems that confuse customers with too many long menus. The Agent Assist solutions are also gaining importance especially in the hybrid work model where agents face challenges working in isolation and not being on a floor with their colleagues and managers.”  

Five9 has acquired a cloud workforce optimisation provider Virtual Observer. “So, we are not looking at just a basic level contact centre solution but an offering with important capabilities demanded by customers,” says William. “During the investor call this week, Zoom’s Eric Yuan and Rowan Trollope made it clear that they have been listening to customer feedback on how effective it would be to have a single platform that can accommodate UC and contact centres in the cloud. Zoom also sees Five9 as a good fit culturally; and their goal now will be to disrupt all legacy systems with cloud-native communications.”

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What lies ahead?

William thinks that Zoom’s competitors will be watching this integration closely, especially those that lack an all-in-one native cloud UCaaS and CCaaS stack. “However, some of Zoom’s competitors have an established base of large enterprise customers and have done well to grow revenues and defend their base over the years. Working with in-country partners and ISVs will be critical for Zoom’s growth across regions.”

Sheedy thinks that the most important takeaway from this acquisition is not that Zoom is moving into the contact centre space. “It is that Zoom realises they have a “once in a generation” opportunity to grow beyond their core and cement their position as a supplier of collaboration and communication services – and that they are willing to flex their balance sheet and share price to create their future. The competition – from Microsoft in particular – will be strong. Google, AWS, Salesforce, and Facebook are also making a play for this market. Zoom has found themselves in their current position of strength due to good luck and good timing – and they appear to be telling the market that they aren’t going to give up their leadership without a significant battle.”

“Enterprises will be the true winners in this battle – with better, more integrated, lower cost and easier to implement communications and collaboration solutions for their employees and customers,” adds Sheedy.

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Zoom Announces Apps Fund

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Last week Zoom announced a USD 100 million Zoom Apps Fund to promote the development of Zoom’s ecosystem of Zoom applications, integrations, video, developer tools, and hardware.

As part of Zoom Apps Fund, the company will invest in a portfolio of companies that are promoting and innovating on Zoom’s video conferencing platform. The portfolio companies will receive initial investments between USD 250,000 and USD 2.5 million to build solutions. To support the practice, Zoom is providing its tools and expertise to various start-ups, entrepreneurs, and industry players to build applications and integrate Zoom’s functionality and native interface in their products.

In March, Zoom introduced an SDK designed to help programmers embed Zoom functionality inside their applications. Zoom SDK is a component of Zoom Developer platform which includes SDKs, APIs, webhooks, chatbots, and distribution for applications and integration. Last year Zoom launched Zoom Apps and Zoom Marketplace at its Zoomtopia virtual conference to bring applications and productivity into the Zoom experience.

Zoom is not alone in evolving their Unified communications as a service (UCaaS) capabilities and market. Tencent rolled out their video conferencing solution for the global market, Facebook expanded their offerings in videoconferencing applications through the integration of new features, Google announced a series of upgrades and innovations to better support the flexibility needs of frontline and remote workers in Google Workspaces, and Microsoft introduced Viva that aims to bring together communications, knowledge, learning, resources, and insights together.

Ecosystm research shows that 50% of organisations will continue to increase use of collaboration platforms and tools in 2021. However, if videoconferencing remains just a tool to log in to for meetings without purpose-built workflows and functionality that suit worker profiles, then it will start losing its attractiveness. Vendors need to work on user interface, UX, the lighting, security, audio quality and many other aspects that draws users to the platform.

The big question is what next for videoconferencing vendors? How can engineering teams innovate to build the capabilities organisations want when they use drawing tools, share images, have chats and discussions within collaboration platforms? How do you make the experience real so employees can “live and breathe” in the environment?

Zoom investing in understanding what apps and workflows are suited for a particular vertical or business is fundamental to the future of video and collaboration and will be a big game changer.”

“Zoom is continuing to expand the markets in which they operate and investing in start-ups increases their opportunities to grow as a platform. Their App Marketplace already offers a rich source of innovations, with Zoom themselves appearing to develop integration with market leaders such as Salesforce and HubSpot in the CRM category. This has led to Zoom integrations in close to 80 CRM products – including integrations developed in-house by Salesforce and HubSpot to supplement Zoom capabilities.

They are promoting an open web and audio-conferencing platform that does not limit users to the walled-garden approach of competitors such as Microsoft Teams.

Zoom’s strategy creates the opportunity for CIOs to access a widely used, rich functionality, digital collaboration channel – one they can integrate seamlessly into their existing digital channels knowing that their customers are likely to be highly familiar with the user experience.”


Get more insights on the impact of the COVID-19 pandemic and technology areas that will see innovations, as organisations get into the recovery phase.

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Ecosystm Predicts: The Top 5 Telecommunications & Mobility Trends for 2021

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2020 saw a shutdown in both supply and demand which has effectively put the brakes on many economic activities and forced a complete rethink on how to continue doing business and maintain social interactions. The COVID-19 pandemic has accelerated digitalisation of consumers and enterprises, and the telecommunications industry has been the pillar which has kept the world ticking over. The rise in data use coupled with the fervent growth of the digital economy augurs well for the telecom sector in 2021.

Ecosystm Advisors Claus Mortensen, Rahul Gupta, and Shamir Amanullah present the top 5 Ecosystm predictions for Telecommunications & Mobility trends for 2021. This is a summary of the predictions – the full report (including the implications) is available to download for free on the Ecosystm platform.

The Top 5 Telecommunications & Mobility Trends for 2021

  1. The 5G Divide – Reality for Some and Hype for Others

Despite the economic challenges in 2020, GSMA reports that the global 5G subscriptions doubled QoQ in Q2 2020 to hit at least 137.7 million subscribers. This accounts for 1.5% of total subscribers – and is expected to rise to 30% by 2025.

The value of 5G will become increasingly mainstream in the next few years. 5G offers a tailored user-centric approach to network services, low latency and significantly higher number of connections which will power a new era of mobile Internet of Everything (IoE).

However, there are many operators who are still sceptical about 5G. In the US, many operators failed to get any tangible positives from 5G. In the near term, many operators will continue to evolve their 5G capabilities – a full grown standalone 5G technology implementation in some verticals might take longer. 

The unsuccessful launch of 5G by the US operators does not mean that 5G is a failure, however. It also implies that we need to look at other geographies to lead us into 5G – and Asia Pacific may well emerge as a leader in this space. China, for example, leads the drive in 5G adoption; and 5G smartphones account for more than half of global sales in recent months.

  1. Telecom Operators Will Accelerate Digital Transformation

Telecom operators are facing increasing demands for cutting-edge services and top-notch customer experience (CX). The global pandemic has caused revenue loss, due to struggling economies and many operators will aim to reduce OpEX to circumvent these financial pressures, raise the quality of CX and retain existing customers. To realise this, there will be much focus on improvement in efficiencies, better operations management as well as improving the IT stack. These digital transformation efforts will enable rapid and flexible services provisioning, which will be better prepared for the tailored services customers now demand.

Many operators are increasingly incorporating cloudification alongside the 5G network deployment. Operators are moving towards transforming their operations and business support systems to a more virtualised and software-defined infrastructure. 5G will operate across a range of frequencies and bands – with significantly more devices and connections becoming software-defined with computing power at the Edge. Operators will also harness the power of AI to analyse massive volumes of data from the networks accessed by millions of devices in order to improve CX, ramp up operational efficiencies as well as introduce new services tailored to customer needs to increase revenue.

  1. Remote Working Will Transform Telecommunications Networks

The changing patterns in peak network traffic and the substantial movement of traffic from central business districts to residential areas require a fundamental rethink in network traffic management. In addition, many businesses continue to ramp up digital transformation efforts to conduct business online as physical channels will remain limited. Consumer onboarding will also be fervent, as organisations look at business recovery – resulting in increase in bandwidth requirements.

The increasing remote working trend is amplifying the need for greater cybersecurity. Cybersecurity has catapulted in importance as the pandemic has seen a worrying increase in attacks on banks, cloud servers and mobile devices, among others. Cyber-attack incidents specifically due to remote working, has seen a rise. A telecom operator’s compromised security can have country-wide, and even global consequences.

  1. SASE Will Grow – and Sprawl

Although it was perhaps originally seen as an Over-The-Top (OTT) provisioned competitive service to operators’ MPLS services, many telecom service providers have been embracing SD-WAN over the years as part of their managed services portfolio. “Traditional” SD-WAN offers some of the flexibility needed to address the change towards a more distributed access and the workload requirements that the pandemic has accelerated – the technology does not address all of the issues related to this transformed workspace.

Employees are now working from a variety of locations and workloads are becoming increasingly distributed. To address this change, organisations are challenged to move workloads and applications between platforms, potentially compromising security. Despite all the challenges that the pandemic brought with it – both human and technical – it has also provided organisations with an opportunity to rethink their IT and WAN architectures and to adopt an approach that has security at its core.

We believe that secure access service edge (SASE), which is a model for combining SD-WAN and security in a cloud-based environment, will see a drastic rise in adoption in 2021 and beyond.

  1. OTT Players Will Continue their Expansion in the Telecommunications Space

Facebook, Google, Amazon are no longer considered as web companies as they moved from standalone ‘web’ companies to become OTT providers and are now significant players in telecom space. With the Facebook-Jio deal in India earlier this year, and with Google and Amazon actively eyeing the telecom space, these players will continue to explore this space especially in the emerging markets of Asia and Africa. There are telecom providers in these countries which will be prime targets for partnerships. These operators could be those that have a large customer base, are struggling with their bottom lines or are already looking at exit routes. OTT players were already offering services like voice, messaging, video calling and so on which have been the domain expertise of mobile operators for a long time. The market will see instances where telecom providers will sell small stakes to OTT players at a premium and get access to the vast array of services that these OTT providers offer.


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Industry Spotlight for August – Future of Work

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The Future of Work is here, now. Organisations were faced with unprecedented challenges of coping with the work-from-home model, when COVID-19 hit earlier this year. Many organisations managed the pivot very successfully, but all organisations were impacted in some way. Various trends have emerged over the last few months, that are likely to persist long after the immediate COVID-19 measures are removed by countries. In the Ecosystm Digital Priorities in the New Normal study, we find that organisations will continue to cater for remote employees (Figure 1) and keep a firm eye on employee experience (EX).

Organisations will continue to Enable Remote working 2020-21

August has seen these clear trends in the Future of Work

#1 Tech companies leading from the front in embracing the Future of Work

As the pandemic continued to spread across the globe, various companies adopted the work from home model at a scale never seen before. While it is still unclear how the work model will look like, many companies continue to extend their remote working policies for the remaining year, and some are even thinking of making it a permanent move.

Tech companies appear to be the most proactive in extending remote working. Google, Microsoft, and AWS have all extended their work from home model till the end of the year or till the middle of next year.  Earlier in the month Facebook extended its work from home program until mid-2021 and are also giving employees USD 1,000 to equip their home offices. This appears to be a long-term policy, with the company announcing in May that in the next 5-10 years, they expect 50% of their employees to be remote. Similarly, Salesforce and Uber also announced that they would be extending remote working till the mid-next year, and are providing funding for employees to set up the right work environment.

In Australia, Atlassian has made work from home a permanent option for their employees. They will continue to operate their physical offices but have given employees the option to choose where they want to work from.

Some organisations have gone beyond announcing these measures. Slack has talked about how they are evolving their corporate culture. For example, they have evolved their hiring policies and most new roles are open to remote candidates. Going forward, they are evaluating a more asynchronous work environment where employees can work the hours that make sense for them. In their communique, they are open about the fluid nature of the work environment and the challenges that employees and organisations might face as their shift their work models.

Organisations will have to evaluate multiple factors before coming up with the right model that suits their corporate culture and nature of work, but it appears that tech companies are showing the industry how it can be done.

#2 Tech companies evolve their capabilities to enable the Future of Work

Right from the start of the crisis, we have seen organisations make technology-led pivots. Technology providers are responding – and fast – to the changing environment and are evolving their capabilities to help their customers embrace the digital Future of Work.

Many of these responses have included strengthening their ecosystems and collaborating with other technology providers. Wipro and Intel announced a collaboration between Wipro’s LIVE Workspace digital workspace solution and the Intel vPro platform to enable remote IT support and solution. The solution provides enhanced protection and security against firmware-level attacks. Slack and Atlassian strengthened their alliance with app integrations and an account ‘passport’ in a joint go-to-market move, to reduce the time spent logging into separate services and products. This will enable both vendors to focus on their strengths in remote working tools and provide seamless services to their customers.

Tech companies have also announced product enhancements and new capabilities. CBTS has evolved their cloud-based unified communications, collaboration and networking solutions, with an AI-powered Secure Remote Collaboration solution, powered by Cisco Webex. With seamless integration of Cisco Webex software, Cisco Security software, and endpoints that combine high-definition cameras, microphones, and speakers, with automatic noise reduction, the solution now offers features such real-time transcription, closed captioning, and recording for post-meeting transcripts. 

Communication and Collaboration tools have been in the limelight since the start of the crisis with providers such as Zoom, Microsoft Teams and Slack introducing new features throughout. In August Microsoft enhanced the capabilities of Teams and introduced a range of new features to the Teams Business Communications System. It now offers the option to host calls of up to 20,000 participants with a limit to 1,000 for interactive meetings, after which the call automatically shifts to a “view only” mode.  With the possibility of remote working becoming a reality even after the crisis is over, Microsoft is looking to make Teams relevant for a range of meeting needs – from one-on-one meetings up to large events and conferences. In the near future, the solution will also allow organisations to add corporate branding, starting with branded meeting lobbies, followed by branded meeting experiences.

While many of these solutions are aimed at large enterprises, tech providers are also aware that they are now receiving a lot of business from small and medium enterprises (SMEs), struggling to make changes to their technology environment with limited resources. Juniper has expanded their WiFi 6 access points to include 4 new access points aimed at outdoor environments, SMEs, retail sites, K-12 schools, medical clinics and even the individual remote worker. While WiFi 6 is designed for high-density public or private environments, it is also designed for IoT deployments and in workplaces that use videoconferencing and other applications that require high bandwidth.

#3 The Future of Work is driving up hardware sales

Ecosystm research shows that at the start of the crisis, 76% of organisations increased investments in hardware – including PCs, devices, headsets, and conferencing units – and 67% of organisations expect their hardware spending to go up in 2020-21. Remote working remains a reality across enterprises. Despite the huge increase in demand, it became difficult for hardware providers to fulfil orders initially, with a disrupted supply chain, store closures and a rapid shift to eCommerce channels. This quarter has seen a steady rise in hardware sales, as providers overcome some of their initial challenges.

Apart from enterprise sales, there has been a surge in the consumer demand for PCs and devices. While remote working is a key contributor, online education and entertainment are mostly prompting homebound people to invest more in hardware. Even accessories such as joysticks are in short supply – a trend that seems to have been accelerated by the Microsoft Flight Simulator launch earlier this month.

The demand for both iPad and Mac saw double-digit growth in this quarter. Around half of the customers purchasing these devices were new to the product. Apple sees the rise in demand from remote workers and students. Lenovo reported a 31% increase in Q1 net profits with demand surges in China, Europe, the Middle East and Africa.

 #4 The impact on Real Estate is beginning to show

The demand for prime real estate has been hit by remote working and organisations not renewing leases or downsizing – both because most employees are working remotely and because of operational cost optimisation during the crisis. This is going to have a longer-term impact on the market, as organisations re-evaluate their need for physical office space. Some organisations will reduce office space, and many will re-design their offices to cater to virtual interactions (Figure 1). While now, Ecosystm research shows that only 16% of enterprises are expecting a reduction of commercial space, this might well change over the months to come. Organisations might even feel the need to have multiple offices in suburbs to make it convenient for their hybrid workers to commute to work on the days they have to. Amazon is offering employees additional choices for smaller offices outside the city of Seattle.

But the Future of Work and the rise of a distributed workforce is beginning to show an initial impact on the real estate industry. Last week saw Pinterest cancel a large office lease at a building to be constructed near its headquarters in San Francisco. The company felt that it might not be the right time to go ahead with the deal, as they are re-evaluating where employees would like to work from in the future. Even the termination fees of USD 89.5 million did not discourage them. They will continue to maintain their existing work premises but do not see feel that it is the right time to make additional real estate investments, as they re-evaluate where employees would like to work from in the future.  

There is a need for organisations to prepare themselves for the Future of Work – now! Ecosystm has launched a new 360o Future of Work practice, leveraging real-time market data from our platform combined with insights from our industry practitioners and experienced analysts, to guide organisations as they shift and define their new workplace strategies.   


Ecosystm Principal Advisors; Tim Sheedy (Technology), Ravi Bhogaraju (People & Organisations), and Mike Zamora (Infrastructure & Offices) provided holistic view of what the Future of Work will look like.
Ecosystm Engage Future of Work

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The Resurgence of India’s Telecom Industry

5/5 (1)

5/5 (1) The telecom industry in India was in a pretty tight spot due to various challenges led by the Adjusted Gross Revenue (AGR) contention. AGR is a fee-sharing mechanism between the Government and the telecom providers who shifted to ‘revenue-sharing fee’ model in 1999, from the ‘fixed license fee’ model. Telecom providers are supposed to share a percentage of their AGR with the Government. While the government says that AGR includes all revenues from both telecom as well as non-telecom services, the operators contend that it should include only the revenue from core services. While the legal proceedings continue, India’s telecom industry continued facing other challenges such as one of the lowest ARPUs in the world and intense competition.

However, COVID-19 has given the industry a boost, changing the market dynamics and due to the increased interests of global investors. In his report, The New Normal for Telecom Providers in Southeast Asia, Ecosystm Principal Advisor, Shamir Amanullah talks about how the telecom sector has fast evolved as the backbone of business and social interactions as the adoption of applications such as video conferencing and collaborative tools surge. Streaming services such as Netflix have become the go-to source for entertainment, putting the telecom sector in the spotlight today.

India’s monthly active internet user base is estimated to touch 639 million by the end of December, thanks to the COVID-19-induced measures that have forced people to stay indoors. Currently estimated at 574 million, the number of monthly active internet users has grown 24% over that of 2019, indicating an overall penetration of 41% last year. Further, It is estimated that India will have more than 907 million internet users by 2023, accounting for nearly 64% of the population. There are also around 71 million children aged 5-11 years, who go online using devices of family members exhibiting high future digital adoption in the Gen Z.

India’s rural areas are driving the country’s digital revolution, with a 45% growth in internet penetration in 2019 as compared to 11% in urban India. Rural India has an estimated 264 million internet users and is expected to reach 304 million in 2020. Local language content and video drive the internet boom in rural India, with a 250% rise in penetration in the last four years. Mobile is the device of choice for 100% of active users to browse the internet.

Global Interest in the Indian Market

Reliance Jio

Jio Platforms, a subsidiary of Reliance Industries  (India’s most valued firm) has raised an estimate of USD 20.2 billion in the past four months from 13 investors by selling about 33% stake in the firm. To put this into context, India’s entire start-up ecosystem raised USD 14.5 billion last year! Besides Google and Facebook, the list of investors includes Qualcomm Investment Ventures, Intel Capital, KKR, TPG, General Atlantic, Silver Lake, L Catterton, Vista Equity Partners, the Abu Dhabi Investment Authority and Saudi Arabia’s Public Investment Fund.

Google’s new investment gives Jio Platforms an equity valuation of USD 58 billion. The investment today from Google is one of the rare instances when it has joined its global rival Facebook in backing a firm. Google and Reliance Jio Platforms will work on a customised version of the Android operating system to develop low-cost, entry-level smartphones to serve the next hundreds of millions of users, according to Mukesh Ambani, Chairman and MD of Reliance Industries. These phones will support Google Play and future wireless standard 5G, he said.

Jio is increasing its focus on the development of areas such as digital services, education, healthcare and entertainment that can support economic growth and social inclusion at a critical time for the economy. At the Reliance Annual General meet, it was announced that  Jio has developed a complete 5G solution from scratch that will enable us the launch of a world-class 5G service in India. Jio also revealed that the company is developing Jio TV Plus, Jio Glass, and more.

With an estimated 387 million subscribers as on 31st March 2020 making them the largest in the country, Jio Platforms provides telecom, broadband, and digital content services. Leveraging advanced technologies like Big Data Analytics, AI, IoT, Augmented and Mixed Reality, and Blockchain, this platform is focused on providing affordable internet connectivity with the content to match.

Bharti Airtel

Bharti Telecom, the promoter of Bharti Airtel, has sold a 2.75% stake in the telecom operator for an estimated USD 1.15 billion in May 2020 to a healthy mix of investors – long-only and hedge fund – across Asia, Europe and the US. The promoter entity will use the proceeds of the stake sale to pare debt and become a “debt-free company”.

It was reported that Amazon is in early-stage talks to buy a stake worth USD 2 billion in Bharti Airtel. This translates to a 5% stake based on the current market valuation of the telecom operator. There have also been conversations about the possibility of an agreement on a commercial transaction where Airtel would offer Amazon’s products at cheaper rates. However, Bharti Airtel has clarified that it works with digital and OTT platforms from time-to-time but has no other activity to report.

Airtel has also shared plans to integrate technology and telecom to build a digital platform to take on Jio’s ambitions of evolving into a tech and consumer company. To scale up its digital platforms business, Airtel has been betting on four pillars: data, distribution, payments, and network.

Bharti Airtel also announced it has partnered with Verizon to launch the BlueJeans video-conferencing service in India to serve business customers in the world’s second-largest internet market. They have an estimated 328 million subscribers as on 31st March 2020 making them the 2nd largest in the country.

The Third Player

Vodafone Idea Limited

Vodafone has an estimated 319 million subscribers as on 31st March 2020 making them the 3rd largest telecom provider in the country. There was unvalidated news that Google had shown interest in Vodafone but that does not seem relevant now given their investment in Jio.

The AGR case remains a significant factor for the telecom sector, particularly for Vodafone given their precarious financial position.

However, in recent times, their ARPU is expected to increase by over 40% from USD 1.23 to USD 1.88, through increased pricing. The stock market is responding positively to Vodafone with the stock almost doubling in the last 1 month

 


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For more information on Ecosystm’s “The New Normal for Telecom Providers in South East Asia”, report please contact us at info@ecosystm360.com


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Nvidia and Intel Race For The Future Of Machine Learning

4/5 (4)

4/5 (4) Two things happened recently that 99% of the ICT world would normally miss. After all microprocessor and chip interconnect technology is quite the geek area where we generally don’t venture into. So why would I want to bring this to your attention?

We are excited about the innovation that analytics, machine learning (ML) and all things real time processing will bring to our lives and the way we run our business. The data center, be it on an enterprise premise or truly on a cloud service provider’s infrastructure is being pressured to provide compute, memory, input/output (I/O) and storage requirements to take advantage of the hardware engineers would call ‘accelerators’. In its most simple form, an accelerator microprocessor does the specialty work for ML and analytics algorithms while the main microprocessor is trying to hold everything else together to ensure that all of the silicon parts are in sync. If we have a ML accelerator that is too fast with its answers, it will sit and wait for everyone else as its outcomes squeezed down a narrow, slow pipe or interconnect – in other words, the servers that are in the data center are not optimized for these workloads. The connection between the accelerators and the main components becomes the slowest and weakest link…. So now back to the news of the day.

A new high speed CPU-to-device interconnect standard, the Common Express Link (CXL) 1.0 was announced by Intel and a consortium of leading technology companies (Huawei and Cisco in the network infrastructure space, HPE and Dell EMC in the server hardware market, and Alibaba, Facebook, Google and Microsoft for the cloud services provider markets). CXL joins a crowded field of other standards already in the server link market including CAPI, NVLINK, GEN-Z and CCIX. CXL is being positioned to improve the performance of the links between FPGA and GPUs, the most common accelerators to be involved in ML-like workloads.

Of course there were some names that were absent from the launch – Arm, AMD, Nvidia, IBM, Amazon and Baidu. Each of them are members of the other standards bodies and probably are playing the waiting game.

Now let’s pause for a moment and look at the other announcement that happened at the same time. Nvidia and Mellanox announced that the two companies had reached a definitive agreement under which Nvidia will acquire Mellanox for $6.9 billion.  Nvidia puts the acquisition reasons as “The data and compute intensity of modern workloads in AI, scientific computing and data analytics is growing exponentially and has put enormous performance demands on hyperscale and enterprise datacenters. While computing demand is surging, CPU performance advances are slowing as Moore’s law has ended. This has led to the adoption of accelerated computing with Nvidia GPUs and Mellanox’s intelligent networking solutions.”

So to me it seems that despite Intel working on CXL for four years, it looks like they might have been outbid by Nvidia for Mellanox. Mellanox has been around for 20 years and was the major supplier of Infiniband, a high speed interconnect that is common in high performance workloads and very well accepted by the HPC industry. (Note: Intel was also one of the founders of the Infiniband Trade Association, IBTA, before they opted to refocus on the PCI bus). With the growing need for fast links between the accelerators and the microprocessors, it would seem like Mellanox persistence had paid off and now has the market coming to it. One can’t help but think that as soon as Intel knew that Nvidia was getting Mellanox, it pushed forward with the CXL announcement – rumors that have had no response from any of the parties.

Advice for Tech Suppliers:

The two announcements are great for any vendor who is entering the AI, intense computing world using graphics and floating point arithmetic functions. We know that more digital-oriented solutions are asking for analytics based outcomes so there will be a growing demand for broader commoditized server platforms to support them. Tech suppliers should avoid backing or picking one of either the CXL or Infiniband at the moment until we see how the CXL standard evolves and how nVidia integrates Mellanox.

Advice for Tech Users:

These two announcements reflect innovation that is generally so far away from the end user, that it can go unnoticed. However, think about how USB (Universal Serial Bus) has changed the way we connect devices to our laptops, servers and other mobile devices. The same will true for this connection as more and more data is both read and outcomes generated by the ‘accelerators’ for the way we drive our cars, digitize our factories, run our hospitals, and search the Internet. Innovation in this space just got a shot in the arm from these two announcements.

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