where large telecom providers are headed — how it vendors can capture opportunity insights from...
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The TBR Software research team invites you to view a previously invitation-only webinar that aired on on Thursday, July 25, 2013, for a deep dive into vendor opportunity in the telecom vertical as reported in TBR’s Telecom SourceIT Report. Software Practice Director Stuart Williams shared his perspective on the report’s results and provided insight into market performance and how vendors can capture opportunity in the telecom vertical. Questions for discussion included: •How will end users invest in technology solutions in the telecom vertical? •What solutions should providers focus on to maximize opportunities for revenue growth? •What are the key drivers and characteristics vendors should understand and adopt to drive sales? For more information contact us at [email protected]TRANSCRIPT
TBR
TECHNOLOGY BUSINESS RESEARCH, INC.
Where Telecom and Service ProviderFirms Are HeadedHow IT vendors can capture opportunity
Technology Business Research Webinar SeriesJuly 25, 2013
TBR SourceIT℠ Reports
TBR
2 TBR Webinar Series — SourceITSM | 7.25.13 | www.tbri.com ©2013 Technology Business Research Inc.
Where Telecom and Service Provider Firms Are Headed
Stuart Williams Director, TBR’s Software and Cloud [email protected]@s2_williams
TBR
3 TBR Webinar Series — SourceITSM | 7.25.13 | www.tbri.com ©2013 Technology Business Research Inc.
The pace and extent of change across customers, technology and business models challenge telecom and service providers to adapt
3
“Being a telecom company, we face challenges that stem from technology trends as well as customer demands. We are facing tremendous challenges improving profit margins, high customer demands, tough competition, customer experience, falling ARPUs and demand for new services and bundles.”
— IT Manager
Changing Customer Dynamics
Changing Technology
Changing Business Models
Where Telecom and Service Provider Firms Are Headed
$12.6 billion new services in 2014 vendor addressable IT spend
TBR
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Cloud migration is driving a new category of spending among telecom vendors, even as service providers enter to capture market share
By necessity, telecom and service providers are investing to enter, scale and stay ahead of market evolution. Both groups see professional services as the key to rapid evolution of offerings and business process capability.
As businesses and consumers shift workloads and interactions to cloud, telecom providers shift their businesses and agile service providers look to gain scale.
Two competing communities require different IT vendor sales messages and tactics. Emphasize the ability to scale to service providers. For telecom providers, communicate adaptation.
Where Telecom and Service Provider Firms Are Headed
TBR
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Telecom and service providers are challenged with adaptation and aggressive transformation to meet market demand
Where Telecom and Service Provider Firms Are Headed
“There are lots of goals, but the bottom line is … making the business and the company as profitable as possible by bringing the services that customers need and in the way they want in a limited time. The main focus of the company is to meet customer demands as soon as possible with the best possible technology. We have to integrate, manage and optimize systems for more instrumented operations, collecting data from assets, devices, networks, servers and applications.”
— Business Process Director, Telecom Service Provider, Large Enterprise, N. America
TBR
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TBR’s SourceIT research identifies a $17.2B non-network IT opportunity in North America among large telecom players and service providersSourceIT Large N. America Telecom and Service Provider Research Demographics and 2014 IT Spending
4%
96%Service provider and small telecom firms
with 500 to 9,999 employees
Telecom firms with 10,000+
employees
Primary focus of SourceIT Telecom and Service Providers report is non-network IT investment used to establish cloud businesses
$6.9B IT spend
$10.3BIT spend for new cloud business
Network
$40B* in 2014 Network Capex
*Additional Network Spend Analysis in TBR’s Telecom Infrastructure Spending Report
New Business IT Spending Opportunity
Emerging vendor opportunity as investments in
cloud and professional
services enable scalability
Where Telecom and Service Provider Firms Are Headed
Business Distribution
TBR
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Shifting business models and increased network traffic drive telecom and service providers’ investments in IT
Business Summary What Respondents Reported
Where Telecom and Service Provider Firms Are Headed
• Network shifts from primarily voice to voice and data
• Reduced ARPU as a result of declining voice usage
• Pressure from competition and customers to maintain network uptime
External forces:
• Telecom and service providers are increasing investments in network management and automation tools to enable scalability and improve internal operations.
• Telecom and service providers view investments in solutions such as testing, network management and SDN as a means of scaling operations to expand addressable markets and drive top-line growth.
• These investments enable operational improvements that increase margins as revenue growth is hindered by factors such as declining ARPU.
How telecom and service providers react:
What telecom and service providers see:• Increased complexity in
managing and maintaining network uptime
• Balancing maintenance of 2G/3G networks with deploying next-generation (4G) networks
• Increased pressure from customers for value-added services
“We are facing tremendous challenges improving profit margins, high customer demands, tough competition, customer experience, falling ARPUs and demand for new services and bundles. As a result, we have to do fast-paced innovation, improve and implement next-generation wireless technology (LTE/WiMAX) and improve our converged networks and other offerings.” — IT Manager, Telecom Service Provider, Large Enterprise, N. America
TBR
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Business Applications, 23%
Industry Applications, 19%
Productivity, 14%
BI/Analytics, 16%
Database and Middleware, 14%
Systems Management, 13%
Overall IT Project Prioritites, by Workload Category (Total Mentioned %)
SOURCE: TBR LARGE N. AMERICAN TSP SOURCEIT STUDY; N = 198
Applications budgets remain flat, but they are critically important to enable internal flexibility and external competitiveness
Where Telecom and Service Provider Firms Are Headed
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE TELECOM AND SERVICE PROVIDERS REPORT, SUMMER 2013
Respondents: Workload Priorities for Discretionary IT Spending
Though applications budgets remain flat, investments in industry, business and productivity applications are crucial for telecom and service providers to enable internal agility and remain competitive.
“We have a larger portion of the budget allocated to IT discretionary spending. Since there is a continuous evolution of the market space and the technology, what’s new and fresh today gets old in a couple of months; we can’t just set up specific long-term goals for the company and then wait. We will have to think spontaneously, continuously and immediately so that we stay competitive in the marketplace.”
— Project Manager, Telecom Service Provider, Large Enterprise, N. America
TBR
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4% cc
96%
Though a few telecom providers compose the majority of IT spend, vendors should also target the growing budgets of service providers
Planned 2014 IT Budgets
Where Telecom and Service Provider Firms Are Headed
$542M0.5%
$2.7M
$15.5M4.0%
$620K
Firms with 10,000+
employees
Firms with 500 to 9,999
employees
Average 2014 YTY Increase
Average 2014 Total IT budget
Average 2014 IT Budget:
$15.7M
Percentage of 465 firms in segment
Total IT budgets include:• Business Applications• Industry Applications• Productivity Applications
• BI and Analytics• Database and Middleware• Systems Management
• IT Infrastructure
• IT Professional Services• IT Overhead and Personnel
A few firms, large budgets, growing slowly
Many smaller firms, smaller budgets, growing quickly
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE TELECOM AND SERVICE PROVIDERS REPORT, SUMMER 2013
TBR
10 TBR Webinar Series — SourceITSM | 7.25.13 | www.tbri.com ©2013 Technology Business Research Inc.
Cloud migration is driving a new category of spending among telecom vendors, even as service providers enter to capture market share
By necessity, telecom and service providers are investing to enter, scale and stay ahead of market evolution. Both groups see professional services as the key to rapid evolution of offerings and business process capability.
As businesses and consumers shift workloads and interactions to clouds, telecom providers shift their businesses and agile service providers look to gain scale.
Two competing communities require different IT vendor sales messages and tactics. Emphasize the ability to scale to service providers. For telecom providers, communicate adaptation.
Where Telecom and Service Provider Firms Are Headed
TBR
11 TBR Webinar Series — SourceITSM | 7.25.13 | www.tbri.com ©2013 Technology Business Research Inc.
Internal business process improvements are key to helping telecom and service providers monetize cloud delivery investments
Where Telecom and Service Provider Firms Are Headed
2014 TBR SourceIT Large N. American Telecom and Service Providers Model — IT Spending and Key Priorities
What vendors need to know:1. Telecom and service
providers are investing in response to pressure from competitors and shifting consumption by end users.
2. Key criteria for telecom and service providers’ IT purchases are scalability and internal business process improvement.
3. Maintaining networks while readying for next-generation networks are top concerns for telecom and service providers.
Optimize IT:• PC Operating Systems• Collaboration and
Conferencing • Business Process
Management • Email and Messaging
Key Priorities:• OSS/BSS• Testing• Network Function
Virtualization (SDN)• Load Balancing,
Network Management, Administration
Total IT Spend:$17.2billion
Vendor Addressable Spend: 73.3%,$12.6 billion
Personnel and Overhead:26.7%,$4.6 billion
TBR
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Business Applications, $1.5 billion
Industry Applications, $1.3 billion
Productivity Applications, $0.9 billion
BI/Analytics, $0.3 billion
Database and Middleware, $1.3 billionSystems
Management, $0.9 billion
Infrastructure, $2 billion
Professional Services,
$4.4 billion
TSP Organizations: IT Spending in 2014
SOURCE: TBR Large N. American TSP SourceIT Study; N = 198.
12%
11%
7%2%
10%7%16%
35%
SOURCE: TBR LARGE N. AMERICAN TSP SOURCEIT STUDY; N = 198
Telecom and service providers are relying on professional services firms to help guide and implement necessary business changes2014 Vendor Addressable Opportunity Breakdown
Where Telecom and Service Provider Firms Are Headed
Discretionary Spend in 2014 is$5.1 billion
Fixed Spend in 2014 is $7.5 billion Vendor Addressable Opportunity is $12.6 billion
WorkloadsFixed IT Spending in
2014Business Applications $0.9 billionIndustry Applications $0.7 billion
Productivity Applications $0.5 billionBI/Analytics $0.2 billion
Database and Middleware $0.8 billionSystems Management $0.5 billion
Infrastructure $1.1 billionProfessional Services $2.8 billion
WorkloadsDiscretionary IT
Spending in 2014Business Applications $0.6 billionIndustry Applications $0.6 billion
Productivity Applications $0.4 billionBI/Analytics $0.1 billion
Database and Middleware $0.5 billionSystems Management $0.3 billion
Infrastructure $0.9 billionProfessional Services $1.6 billion
-0.3% YTY
-0.8% YTY
2.6% YTY
2% YTY
2.8% YTY
5.6% YTY
2.7% YTY
3.4% YTY
“Since we are looking at big-scale projects, it will not be possible for only the company staff to manage and maintain the complete project. We would like to complete the entire life cycle of the project as early as possible, which can only be done with the support and professional services provided by the vendors.”
— Project Manager, Telecom Service Provider, N. America
TBR
13 TBR Webinar Series — SourceITSM | 7.25.13 | www.tbri.com ©2013 Technology Business Research Inc.
Respondents: 2013–2014 Bridge: IT Spending Growth by Category
Investments in infrastructure upgrades and professional services will experience the largest increases in IT spending in 2014
Where Telecom and Service Provider Firms Are Headed
SOURCE: TBR N. AMERICA, LARGE ENTERPRISE TELECOM AND SERVICE PROVIDERS REPORT, SUMMER 2013
TBR
14 TBR Webinar Series — SourceITSM | 7.25.13 | www.tbri.com ©2013 Technology Business Research Inc.
For new cloud businesses, mainstream vendors in the IT and networking spaces are best positioned to win telecom and service provider projectsRespondents: Hotspots and Top-of-mind Vendors
Top Targeted Workloads: Broadly Driven Largest Budgeted Workloads: Driven by IT
Area Average 2013 Project Budget
Top-of-mind Vendors
Area Average 2013 Project Budget
Top-of-mind Vendors
Operational Support Software /Business Support Software
$773,000 Cisco, IBM, Oracle
PC Operating Systems
$2,376,000 Microsoft, Apple, Oracle
Testing $441,000 Cisco, Oracle, EMC, Microsoft
Collaboration and Conferencing
$2,267,000 Microsoft, Apple, Citrix
Load Balancing, Network Management, Administration
$1,461,000 Cisco, Microsoft, Oracle
Business Process Management
$2,004,000 IBM, Oracle, Adobe
Network Function Virtualization /SDNs
$734,000 Alcatel-Lucent, Huawei, HP, Oracle
Email and Messaging
$1,848,000 Microsoft, Oracle, Xerox
Where Telecom and Service Provider Firms Are Headed
Top Priority Workloads Largest Core IT Workloads
TBR
15 TBR Webinar Series — SourceITSM | 7.25.13 | www.tbri.com ©2013 Technology Business Research Inc.
Cloud migration is driving a new category of spending among telecom vendors, even as service providers enter to capture market share
By necessity, telecom and service providers are investing to enter, scale and stay ahead of market evolution. Both groups see professional services as the key to rapid evolution of offerings and business process capability.
As businesses and consumers shift workloads and interactions to clouds, telecom providers shift their businesses and agile service providers look to gain scale.
Two competing communities require different IT vendor sales messages and tactics. Emphasize the ability to scale to service providers. For telecom providers, communicate adaptation.
Where Telecom and Service Provider Firms Are Headed
TBR
16 TBR Webinar Series — SourceITSM | 7.25.13 | www.tbri.com ©2013 Technology Business Research Inc.
IT vendor opportunity is tied to reducing complexity and increasing value-add services as telecom and service providers build cloud business
Respondents: IT Spending Transitions
Where Telecom and Service Provider Firms Are Headed
Investment Drivers: Increasing Investments in:
Decline in traditional voice
and wireline businesses
Increased data usage and pressure
from customers and competition
• IT professional services and personnel
• Infrastructure and network management solutions
• Value-added services
• Shifting consumption from voice to data
• Declining wireline business• Pressure from competitors
and consumers for consistent network uptime
2.6% YTY vendor addressable market growth
-$
+$
“The fundamental problem faced by telecom organizations worldwide is that IT complexity is increasing faster than IT budgets.”
— IT Manager, Telecom Service Provider, Large Enterprise, N. America
TBR
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Respondents: IT Budgets by Customer Character
Centralization of IT Spending
Where Telecom and Service Provider Firms Are Headed
Vendors should target aggressive, Empowered purchasers that represent the largest share of the segment and have the largest average IT budgets
Average ’13 IT Spend: $13 million
The majority of large telecom and service providers are aggressive adopters of technology and are decentralized in IT purchasing and spending.
6% 73%
20% 1%
Aggr
essi
ve
Highly Centralized with IT
IT A
dopti
on A
ggre
ssiv
enes
s
Highly Distributed Across IT and LOBs
Late
Ado
pter
Structured Go-getters
Laissez-faireBureaucrats
Empowered
Average 2013 IT Spend: $16.6 million
Average 2013 IT Spend:$10.5 million
Average 2013 IT Spend: $17.2 million
Average 2013 IT Spend:$8.1 million
Distribution of Respondents by Character
Empowered Telecom and Service Providers include companies that are highly aggressive adopters and highly distributed in IT spending.Structured Go-getters include companies that are highly aggressive adopters and have a highly centralized approach for IT spending.Laissez-faire Telecom and Service Providers are late adopters of technology, and their IT spending is highly distributed.Bureaucrats include companies that are late adopters and have a highly centralized IT spending approach.
TBR
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EvolutionaryOpe
ratio
nal
Path to Purchasing: Key Decision Makers
While department-level employees influence IT decisions, evolutionary investments are generally handled from the top down
Where Telecom and Service Provider Firms Are Headed
Purchasing Scenarios Buying Criteria Purchase PlansKey Decision Makers Top-of-mind Vendors
Key Decision Makers
CIO, CTO CEO, CFO (and finance department)
IT department headsand line IT employees
LOB managers and LOB employees
Final Decision
Operational IT decisions are generally made at the lower levels, while evolutionary decisions (e.g., SDN, network function virtualization) are generally made from the top down.
“The [decision-making] responsibilities depend on the type of projects that are being handled or carried out. If the project is very big, then all the directors are involved; their input is taken, and the CIO makes the decision. If the scale of the project is small, then IT department drafts the project and present it to the CIO; after his approval, it goes to the finance department, which is responsible for releasing the budget.”— IT Manager, Telecom Service Provider,
Large Enterprise, N. America
TBR
19 TBR Webinar Series — SourceITSM | 7.25.13 | www.tbri.com ©2013 Technology Business Research Inc.
Cloud migration is driving a new category of spending among telecom vendors, even as service providers enter to capture market share
By necessity, telecom and service providers are investing to enter, scale and stay ahead of market evolution. Both groups see professional services as the key to rapid evolution of offerings and business process capability.
As businesses and consumers shift workloads and interactions to clouds, telecom providers shift their businesses and agile service providers look to gain scale.
Two competing communities require different IT vendor sales messages and tactics. Emphasize the ability to scale to service providers. For telecom providers, communicate adaptation.
Where Telecom and Service Provider Firms Are Headed
TBR
20 TBR Webinar Series — SourceITSM | 7.25.13 | www.tbri.com ©2013 Technology Business Research Inc.
Improve go-to-market returns by understanding a segment’s opportunity and the unique needs of buyersCY13
TBR SourceIT℠ Report Overview
SourceIT℠ Reports
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SourceITSM reports are opportunity playbooks on customer segments that help clients improve go-to-market returns
TBR SourceITSM Reports
SourceIT is a syndicated report program, offering clients the benefit of deep primary research at a fraction of the price of custom research.
SourceIT reports use a structured and repeatable research and report framework that enables client organizations to easily consume, compare and leverage the insights across multiple customer segments.
Enable faster and more efficient go to market by understanding a segment’s sourcing and investment decisions.
Compare segments across multiple industries
Understand opportunity by following the money
Leverage a syndicated program
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TBR’s SourceITSM reports enable clients to more effectively capture business across specific customer segments
1. Understand and capture opportunityby comprehending buyer behavior in specific segments.
2. Improve GTM effectivenessby improving sales and marketing investment effectiveness.
3. Improve positioningby effectively targeting customer needs and managing competition.
SourceIT℠ ReportValue
Identify opportunities
Understand key business and IT strategy opportunity
drivers.
Capture sourcing and budgeting opportunities
across the stack.
Target decision makers
Understand purchasing scenarios.
Target key decision makers.
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See your position in a competitive landscape.
Manage positioning; relationships versus
opportunity
SourceIT Reports help vendors better capture opportunity with their large enterprise buyers
Available Now: • Retail• Banking and Financial
Services• Public Sector• Telecom and Service
Providers• Healthcare Payers and
ProvidersPublishing 2H13:• Manufacturing• Energy and Utilities• Transport and Logistics
TBR SourceITSM Reports
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TOC from TBR’s SourceIT℠ Telecom and Service Providers Report
3 SourceIT Methodology and Coverage
9 Executive Summary• Opportunity• Telecom Organizational Behavior• Vendor Selection
17 Market Opportunity• Total Market Opportunity• Average IT Budgets in 2013• Fixed Spending Priorities
25 Discretionary Spending Across Workloads• Workload Priorities• Opportunity by Workloads
51 Telecom IT Purchasing Behavior• Investment Drivers• Paths to Purchasing for Key Priorities
67 Key Workload Case Studies• Operational Support Software/Business
Support Software• Testing• Load Balancing, Network Management,
Administration• Network Function Virtualization• Opportunity Mapping
88 Competitive Landscape• Landscape for Fixed Spend
91 Appendix
100 About TBR
TBR SourceITSM Reports
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The 198 organizations in this report are large telecom and service providers operating in the U.S. and CanadaSourceIT Large N. America Telecom and Service Provider Research Demographics and 2013 IT Spending
Business Size Definitions (Qualifications for Study)
Number of Full-time Employees Revenue Total Annual IT Budget>950 Employees (Telecom/Cable)
>500 Employees (all other segments) >$75 million >$1 million
Telecom and Cable (does not include network budget)
Number of Employees Average IT Budget
1,000–9,999 $12.8 million
10,000+ $19.5 million
Mobile Operators
Number of Employees Average IT Budget
1,000–9,999 $7.3 million
10,000+ $36.9 million
Telecom and Cable, 45%
Mobile Operators, 13%
Internet Service Provider, 11%
Hosting Service Provider, 2%
Cloud Service or Data Center Provider, 5%
Managed Service Provider,
10%
IT Hosting & Outsourcing, 7%
Computing Hardware and
Software Sales, 6% Other, 2%
Respondent by TSP Organization Type
SOURCE: TBR LARGE N. AMERICAN TSP SOURCEIT STUDY; N = 198
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TBR SourceITSM Reports
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Stuart Williams Director, TBR’s Software and Cloud [email protected]@s2_williams
Where Public Sector Agencies Are Headed
Questions?
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Where Public Sector Agencies Are Headed
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Recorded and Upcoming SourceIT Webinars
7/24 Where Public Sector Agencies are headed: How IT Vendors can capture opportunity
7/31 Where large Healthcare Payers and Providers are headed:How IT Vendors can capture opportunity
8/1 Where large Banking and Financial Services Institutions are headed:How IT Vendors can capture opportunity
NMP Webinars
8/7 How Wireless North America operators are investing in LTE and small cells to remain relevant
8/15 Moving Beyond Connectivity: Insight into the enterprise business and strategiesof leading multinational operators
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About TBR
Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators.
Serving a global clientele, TBR provides timely and actionable market research and business intelligence in formats that are tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis.
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