Telecom spending among Asian SMBs to cross $50 bn

SINGAPORE: Small and medium businesses (SMBs, or companies with up to 999 employees) across the Asia-Pacific region outside of Japan (APeJ) are on track to invest US$50 billion on telecommunications equipment and services this year. This is up some 5 percent over 2006, according to the latest study by New York-based Access Markets International (AMI) Partners.

“SMBs look toward telecom operators and service providers to offer telecom services to enable profitable business growth,” says Prasannavadan Gaitonde, Singapore-based analyst at AMI-Partners. “SMBs have to work harder for earning their dollar. They have tighter budgets and need high quality, low-priced telecom solutions and services.”

AMI’s findings reveal that developed markets such as Australia and South Korea, and fast-growing markets like India and China will account for more than 70% of the APeJ telecom spending this year. “The market is witnessing a transition from traditional PBX to IP-based PBX, with most new replacements going the IP way,” Gaitonde says. “While the base switch is going IP, the end points are moving to IP more slowly. This is due to the higher price of IP end points over digital end points.”

In 2006, only 8 percent of desk phones of medium businesses (MBs or companies with 100 to 999 employees) in a mature market like Australia had IP phones. Session Initiation Protocol (SIP) will reduce the price, making such solutions even more affordable. As for Unified Messaging—which can be considered a precursor to the more advanced Unified Communications—only 16 percent of Australia’s MBs are utilizing this service.

“SMBs are as interested in advanced solutions like Unified Communications as large businesses,” Mr Gaitonde says. “The difference is that SMBs have smaller budgets and need higher justification for spending their budgets on such services.”

As services mature and can be provided on a hosted model, SMBs can deploy enterprise class solutions. Once these enterprise class solutions are offered as a service—similar to SaaS (software as a service)—SMBs can adopt them at the right price points. Hosted communication services or managed telephony services can be provided by telecom operators and service providers in partnership with equipment vendors to provide low-cost solutions to SMBs.

Hosted communications or managed telephony services are set to grow more than three times the growth rate of premises-based equipment among SMBs over the next 3-4 years. Equipment vendors, telecom operators, and service providers need to work together to provide such hosted solutions to SMBs across the Asia-Pacific region.

MBs are expanding their horizons and need more connectivity between offices. Thus, spending on wide area network (WAN) services is expected to go up by a huge 24 percent in 2007 over 2006 among MBs. More than one in four MBs in this region is currently connected using WAN. In Australia, more than 75 percent of its MBs are connected by WANs.

“SMBs in the Asia-Pacific will continue embracing new technologies to remain competitive,” Gaitonde says. “Telecom equipment vendors, operators and service providers need to offer products and services using the right model and price points to tap this growing market.”