BuddeBlog

Facilities management (FM), combined with aspects of resale (based on proper wholesale products) and outsourcing, will be the single largest growth market for private telecommunication service providers over the next few years.

The outsourcing/FM market – 1996-2001

Year Revenue

1996 $750 million

1997 $1.3 billion

2001 (est) $3.3 billion

(Source: Paul Budde Communication – Telecommunications Strategies Report/www.budde.com.au)

The key, however, is to move away from the technical aspects and concentrate on customer services and applications. FM will have to be based on what must be the ultimate personalised service.

The most successful companies operating in this market have created arms’-length operations from their original companies (for example EDS from General Electric, IBM Global Services Australia and Computer Sciences Corp). Some of the most important elements of the service are independent advice and independent service provision. The company also needs to be freed from bureaucratic structures, since FM and outsourcing often need creative, flexible solutions.

According to a 1995 Yankee Group survey, the single largest problem confronting information technology managers in Australia was network management. The current changes in the communication infrastructure of Australia (data networks and telecommunications networks) is very complex and there is an ongoing shortage of skills. This makes the Australian and New Zealand markets very different from the European and US markets. Changes here are less relevant or have in part already taken place. Companies are generally larger and therefore better equipped to handle the complexity of the changes.

The difference in market situations provides excellent business opportunities for telecommunication service providers in this part of the world.

Corporate down-sizing has brought about the installation of more cost-effective distributed computing in place of centralised data centres and increasing reliance on networking for day-to-day business operations. Despite use of redundant systems on a limited basis, network failures continue to threaten costly disruption of essential services. As networks grow increasingly complex, information services managers will intensify their reliance on outside specialists to provide the needed expertise to offer integrated network management solutions. Buffeted by recession, managers have grown increasingly wary of costly investment in new technologies.

The tangible pay-back that corporations will increasingly demand from network management is a competitive edge via faster customer re-sponse, shorter product development and manufacturing cycles, improved service and support, and overall cost reduction.

Facilities management growth sectors in the USA

According to Frost & Sullivan, the major US growth markets are government, commercial services and medical end-users. They account for 69% of market consumption. Medical users will pace growth, with a 22% compound annual rate, followed by smaller legal, transport, wholesale/retail and utility end-user segments.

The total concept of facilities management based on total customisation will differentiate the winners from the mediocre players in this market.

In the past, 80% of all telecommunications reve-nue generated in Asia came from basic fixed services. This declined to 65% in 1997. Already this region has the highest proportion of its revenues in non-basic services of any world re-gion, even North America. However, rapid basic telecommunications expansion in China would eventually reverse that trend.

· while mobile services did not have as large a share here initially as in other parts of the world, they are experiencing huge growth;

· value-added residential services increased their share from 6.5% in the early ‘90s, to 12% now;

· total annual voice traffic growth in the region is expected to be between 10%-15%;

· value-added business services are expected to grow by 30% and overall data communications by 15%.

The Asian telecommunications market is worth over US$300bill., with international, long-distance and cellular services yielding the highest revenue. Growth in the region is expected to lie in cellular, international and value-added voice services.

China has embarked on a massive modernisation campaign to extend telephone lines. Levels of calling are still extremely low, less than two calls per person nationwide per year. China has several urban cellular systems which are ex-panding, and it is likely that by the end of the decade, the size of China, combined with the high priority being given to telecommunications, will make its growth a central driver to that of the entire region. Together with Japan, these two countries are expected to control more than 60% of fixed line revenues by 2005.

Efforts are being made to secure financing for an FM radio project in East Africa. It is calculated that about US$520,000 will be necessary to get the project off the ground. It is claimed that the financier will have control of the shares during the loan period – estimated to be 18 months – and the loan will be guaranteed by a reputable security or central bank.

mashatj@westminster.ac.u

The development of the Asia Pacific information infrastructure is an essential requirement for the region if growth is to continue at an acceptable rate. By 2003, close to 90% of new connections will be made through optical fibre to the home or kerb, and less than 10% of local access lines will be through copper wire. One of the goals of APEC (Asia Pacific Economic Corporation) is for all APEC nations to work together to build a region-wide information highway which would help Asia overcome geographical and cultural constraints for development and free trade.

It is the optical fibre submarine cabling that will be predominant in the international Asia Pacific telecommunications infrastructure market logical, considering the amount of islands to be connected. The region is receiving about half of the worldwide investment in submarine cabling, and the number of circuits on domestic subma-rine cable systems has increased 30-fold since 1987. With increased investment in hardware for the optical fibre networks, trials of various serv-ices and plans for future information technology projects are underway in most Asian countries.

Between now and 2002, European platform provider (search engines and content aggregators) revenues will grow rapidly on the Internet and online services platform. Advertising will make up a large share of this growth, with revenues increasing from US$38 million in 1997 to US$1.1 billion in 2002. This will lead platform providers to tailor their services in order to attract as much of this revenue as possible.

Platform providers are attractive to advertisers, mainly due to their position as hubs for Internet traffic, as their sites will attract a large number of visitors. Advertisers will also be interested in parameters like the amount of time users spend at the sites and the ability to customise their advertisements to target specific users.

Internet and online services platform provider revenue streams – 1998 and 2002

Revenue source Revenue (US$m) Annual growth

1998

Advertising 130 246%

Shopping 13 158%

Games 10 377%

Training and education <1 203%

Total 153

2002

Advertising 1,140 29%

Shopping 245 55%

Games 50 11%

Training and education 4 50%

Total 1,439

Note: Values to nearest US$million. Rounding errors may occur. (Source: Datamonitor)

Platform providers on the Internet and online services will also gain significant revenues from content providers for hosting their sites by charging a mixture of fixed fees and commissions on net sales. The amount of these revenues depends on the exclusivity of the content and the margins of the content provider.

According to Datamonitor, online shopping will bring in the largest commission revenues, as an increasing number of users will greatly boost the transactional revenues to shopping sites. Games commission revenues will also increase during the period, although growth in consumer spend will not increase at the same rate as transactional spend on shopping services.

Datamonitor forecasts that European platform providers’ revenues from online shopping will grow from US$5 million in 1997 to US$245 million in 2002, and those from games sites from US$2 million to US$50 million. Revenues from training and education sites will also bring in US$4 million in 2002.

The total revenue is US$299 million in 2002, which, although lower than the US$1.1 billion of advertising revenues they will receive, is still a significant source of income for platform