Slowdown won't hamper APEJ telecom sector

HONG KONG, CHINA: In 2009, Asia/Pacific excluding Japan (APEJ) telecommunication and networking industry is facing what is possibly the biggest economic slowdown in almost a decade.

However, IDC believes industry players across the region will weather the downturn as carriers and larger corporations focus on investing in strategic projects and technologies, enabling the creation and launch of new innovative services and products.

This will enable them to stay ahead of the competition, increase their competitive wallet share, and ensure business agility, hence optimising the existing investments and reducing overall IT expenditure.

Adrian Ho, research manager, managed services and enterprise network group, IDC Asia/Pacific, said: ''The long term economic prospects in the region remains very promising, as such, we do not expect carriers and enterprises to hunker down and turn off the investment switch. In such economic times, we expect carriers to continue to invest in next generation mobile and IP infrastructure and enterprises to focus on technologies that will allow them to drive IT and cost efficiency, from collaboration tools, software as a service, to datacenter networking technologies''.

The immediate response to the current economic slowdown will nevertheless be largely focused on cost management. Businesses, large or small, will be more conservative in general in their spending including ICT. Cost management is critical to ride the current storm but given the longer term growth potential of the Asia/Pacific region, investments will remain.

IDC expects the APEJ telecom services market to reach $253 billion in 2009, representing a growth rate of 8.9 percent. Spending in enterprise networks is forecast to grow by 9 percent in 2009 reaching $10.3 billion. Growth will be driven by continued spending in datacentre networks and migration to an all IP platform. Carrier equipment market will grow moderately at 3.9 percent with the total market reaching $52.7 billion.

''Industry leaders will need the deft touch to maneuver through 2009. We are still expecting growth in infrastructure and services spending and thus the cost of doing nothing will ultimately be the biggest cost of all. Everyone should anticipate and plan for recovery in order to stay ahead," he added.

Following are the top 10 key predictions that IDC believes will shape the telecommunication industry in APEJ in 2009. These represent major trends with either the most significant financial impact or long-term market impact across the APEJ region.

1. Rethinking Operator Strategies in the Downturn and Planning for the Upswing

The global economic slowdown has affected the telecom service providers (SPs) in different ways, depending on their market share positioning and/or financial health. This first prediction analyses impacts of the troubled financial credit market on SPs, networking equipment providers (NEPs) and technology adoption using two economic scenarios: Recession and Severe Recession. In a recession, IDC expects consumers to be more careful about signing up for new services and SME and large enterprises will curtail spending growth in new telecom bandwidth and networking infrastructure.

In a severe recession, markets will be characterised by significant job losses and bankruptcies among SMEs and enterprises. This will result in contraction in both telecom bandwidth and networking spending with carriers delaying roll out of new emerging technologies because of delays in adoption by weary consumers.

2. Virtual Collaboration Rises to the Occasion in 2009

The increasingly distributed nature of the enterprises and the workforce, tightened budgets for business travels and budget freeze for recruitments are challenging the smooth flow of business processes and collaborations. These limitations have forced enterprises to rely more on technologies to facilitate collaboration. Results from IDC's Unified Communications and Enterprise x.0 survey in 2008 shows that the need for collaboration is indeed the most compelling driver for adopting unified communications by enterprises in APEJ.

3. It's All About Virtualization and Optimization in the Next-Generation Enterprise Datacentre

For most enterprises, the cost of running and operating a datacenter is one of the most resource draining and expensive endeavors. With the economic downturn, IT managers are faced with the challenge to balance the need to lower overall operational cost and to deliver improved application performance. IDC believes that organizations familiar with server and storage virtualizations will start to turn to the networks for further cost savings. Network will be the next frontier in datacenter virtualization.

4. Responding to Network Congestion – Femtocells the Saving Grace for Incumbent Operators

As the market enters into the age of ''anytime, anywhere'' connectivity, more people rely on portable gadgets to get their work done. Most incumbent operators recognize this trend and try to offer the best services. To differentiate themselves and to attract more customers, operators look for ways to improve their bandwidth coverage. For operators that have licenses to provide both fixed and mobile services, as well as the necessary capital to fund upgrades of their networks, IDC believes that Femtocells will be able to offer scalable solutions to improve network coverage.

5. The Age of Reconfigurable Radio Base Stations: Software-Defined Radios

One of the challenges that modern carriers face is that it is becoming increasingly costly to extend their services to either mobile broadband and/or fixed broadband. Managing multiple basestation (BTS) equipments from either the same or multiple vendors is becoming cost inefficient. In an era where carriers are competing for coverage areas, these cell sites have become the core asset on the balance sheet, representing potential revenue to the carriers. IDC believes that implementing Software Defined Radios (SDR), a software module that provides greater flexibility and functionality as compared to their hardwired counterparts, can help operators to better manage these BTS.

6. Alternative Broadband for Small Businesses: Mobile and Wireless Broadband – WiMax and HSPA

Many small businesses have leveraged the available 3G networks and the existing mobile broadband using HSPA technology for their mobile network. This makes better business sense as oppose to paying for a more expensive fixed-line business broadband access. Although WiMax network offers the same promises as HSPA/HSDPA network, the full prowess of this technology will not be seen until the appropriate business model and pervasive coverage area are established.

7. Moving the Wireless Backhaul to IP

Modern mobile operators faced with the challenge to deploy Next Generation Network (NGN) equipments that offer scalable bandwidth have either slapped a flat rate or offered capped-rate pricing to attract more customers. Without the scalable bandwidth in the backhaul, operators will not be able to manage OPEX and CAPEX and could find themselves in the non-competitive situation of not being able to offer new multi-media rich wireless services because of incremental bandwidth constraints. IDC believes these reasons will be enough for the mobile operators to make such migrations.

8. The Convergence of Network Operation Centers

In the face of the global economic downturn, integrated operators are confronted with the challenge of constructing a path to convergence services while providing high-quality services to retain and grow the customer base. Operators are also under considerable pressure to deliver more profits, creating greater efficiency in the business processes and management of networks. A typical situation at almost any of the integrated carriers in Asia/Pacific is a separate Network Operation Center (NOC) for each service and, if more than one supplier is being used, there would be a NOC for each vendor network. Because of this, IDC sees the implementation of the converged NOC as the next necessary and logical step in the evolution to Next Generation and convergence service infrastructure.

9. Resurrection of SaaS: The Phoenix Returns

Software as a Service (Saas) suffers from false starts from the day it was first made popular by Salesforces.com. This is due to several factors - data security issues, bandwidth availability for enterprise intensive applications, and the lack of ''big name'' service providers pushing this concept in the region. The global economic slowdown has resulted in industry players intensifying their cost management agenda, leading to a paradigm shift from CAPEX to OPEX. This creates an opportunity for a SaaS ''resurrection''. The low upfront capital outlay and the simplicity of scaling up and down in typical SaaS offerings have attracted a lot of attention. Furthermore, many of ''the big hitters'' (such as Cisco, HP and IBM) have jumped onto the bandwagon and have been actively promoting the concept to their customers.

10. The Beginning Era for Reconfigurable Optical Add-Drop Multiplexer (ROADM)

Wireline operators are faced with the challenge to meet the demands coming from both the residential areas and business sectors. Bandwidth growth is now higher than ever. The continual rollout of Standard Definition TV (SDTV), High Definition TV (HDTV), Video on Demand (VOD), and more matured Metro Ethernet services have forced the operators to cater for heavier data transactions in the network. This may become a nightmare for network management. A more intelligent solution is required to help the network owners. IDC believes that Reconfigurable Optical Add-Drop Multiplexer (ROADM) may be the solution for better network management.

Source: IDC