Eyes on the Enterprise
Vivek Badrinath, CEO of Orange Business Services, the global enterprise services arm of the French telecoms group, is preoccupied by the concept of change. Demand, technology and geography are shifting all the time, he says, keeping the enterprise space constantly fluid. This might be challenging to address but it is fundamental to his business; operators, he says, “prosper on change”. Equally important is the pace at which that change happens. Appointed to the role two and a half years ago, Badrinath sometimes makes early 2010 seem like a different era, such is the rate of market evolution that he describes.
So it’s interesting that, when asked to paint a picture of the global enterprise services market, he should start with a constant; an observation that’s been made many times. The enterprise sector remains “underweight” in terms of media and public interest, he says, but displays greater resilience than the retail or consumer side of the business. The device has become the embodiment of the communications industry—a physical representation of innovation and the focus of the consumer offering, Badrinath says. But in the enterprise space the service is more important than the device. And while this gives operators greater traction in the value chain than they enjoy today in the consumer space, he observes wryly that the office phone is “not an exciting item that people will discuss for hours”.
Still, in today’s economic climate excitement is probably less desirable than stability. Looking over at the consumer space, Badrinath picks out the familiar problems that exercise his opposite numbers. “There is a big push to commoditisation and there’s a tug of war between OTT players, kit vendors and telcos in the middle. I think we have our own little versions of these same dramas but at a slower pace, and against a backdrop that is a bit more buoyant.”
The retail side of the business is having a positive impact on the enterprise side, though. The growth in trends like Bring Your Own Device (see p22) and the greater familiarity that users have with applications and solutions that they’ve embraced in their personal life is helping to drive uptake of a wider range of services in the enterprise.
“The enterprise market is being driven by the realisation that there are more and more use cases for telecoms in the enterprise,” he says. “And it is pulled forward by the fact that technology is coming down in cost and the opportunities in various sectors to improve the performance of an industry or process by using more ICT.”
In the two and a half years since Badrinath has been leading Orange Business Services, the three clearest trends are the growth in enterprise video services, the expansion into emerging markets and the evolution of the cloud from a marketing concept to a service reality, he says. Video is one of the enterprise services that has benefited from traction in the consumer space, he says. Video conferencing products are much more robust than they were five years ago, there is a far greater drive to cut down on travel for both economic and ecological reasons and the user experience, across a range of devices, has improved significantly. The focus on emerging markets, meanwhile, reflects enterprises’ search for growth in terms of consumer markets and infrastructure projects like transport and construction. “These enterprises have to start reaching pretty deep into a larger number of cities in places like India and China where their customers live or where the contracts are. So they need telecoms services to go into the second-tier cities in these countries,” Badrinath says. It’s a strategy that is more than familiar to operators like OBS, which in 2010 set itself the target of driving e1bn in annual revenue from emerging markets by 2015. Badrinath says the firm is on course to hit the target, growing that segment of its business by 11 per cent in 2011.
In many of the markets that large enterprises are targeting, existing communications infrastructure can be limited. This enhances the opportunity for the likes of OBS, Badrinath says, creating opportunities around the third trend he identifies—the cloud. “If you’re a large European retailer going into China, you’re going to want your branch offices connected throughout the country and maybe a data centre in Singapore, Hong Kong or Shanghai where you can store and run your applications,” he says. “Because you have no way of putting computing power into every one of those mid-sized cities where the power and infrastructure may not be great. “You rely more and more on your ICT in places where you may not have the full infrastructure and you need more services. Since we’re able to manage services remotely, off premises, our relevance increases,” he says. Looking forward Badrinath expects all of these trends to remain prevalent, with the deployment of more Ethernet supporting the continuing growth in demand for bandwidth. But other trends are emerging, which he expects to gather pace over the next two to three years.
Internally, more and more enterprise customers are looking at Unified Communications as a Service (UCaaS), he says. “We’re starting to see that some of the forward-looking CIOs, and those that need to make investments in their email or voice infrastructure, are jumping to UCaaS as a new paradigm,” he says. “This involves a new infrastructure that works across the desktop, the mobile and the smart desk phone and doesn’t require a PBX. We believe this is poised to have a very big role to play in intra-company communication in the next two years, and it’s going to get more challenging for the PBX model in many cases.” In tandem, many enterprises are looking to accelerate the shift to predominantly non-voice means of customer relationship management, placing a greater emphasis on email and web chat sessions. Three years from now, he says, interaction between a customer and an enterprise will be predominantly through an app or a browser.
The third important growth area for OBS is machine to machine communications, and the firm has already made significant inroads into a number of vertical sectors, including health, smart metering and connected cars. This last will gather pace, Badrinath says, as electric vehicles grow in popularity. The logistical challenge of planning a journey in a car that requires specialist refuelling infrastructure cannot be met in isolation from the network, making connectivity as important to future vehicles as their new power solutions.
Orange has been involved in the health sector since it established Orange Healthcare in 2007 and it is one of the firm’s most advanced vertical plays. The increasing maturity of cloud offerings over the last two years have enabled a number of improvements to the offering, Badrinath says.
“It’s an area that’s performed above expectations; the use of cloud for medical imaging storage and medical data storage,” he says. The privacy laws around the storage and access of this kind of data mean that there is even greater expense involved in the creation of facilities to manage it, offering the perfect opportunity for a cloud services provider to secure a stake in the game.
“Nobody wants to invest millions to build a data centre that’s hypersecure, especially given that there are very high penalties if there is any breach in that security,” he says. “We have authorisation from all the privacy organisations which helps us to develop services but, more importantly, it helps third parties to develop services inside our infrastructure. So we can make life easier for healthcare providers by remotely managing all the medical data.”
The construction of these data centres is expensive whichever company is paying, though and cloud services, like other IT and telecom offerings, is a scale game. Badrinath says there are three elements to the heavy investment required to offer the kind of services that OBS offers, each with distinct challenges.
“The first covers the hardware and licences you need to run these systems,” he says. “This is proportional to the business and is quite variable. You do have a bit of sizing—you need to put that first machine in—but beyond that it’s pretty straightforward, and I would say that’s a significant handicap for a telco.”
Beyond that is the hosting space— the datacentres themselves, the physical buildings, the power and energy and cooling solutions. This is another huge expense and Badrinath says that OBS only deploys its own data centres, “when we’re sure of our economies of scale.” If a facility is required in a geography where the firm has only one or two clients it will source datacentre services from a local provider. The third area of investment is IPR, he says, which is straightforward software economics.
The cost of hardware and datacentres can be partly managed by using them for internal processes as well as external services. OBS built a datacentre in France that houses more than ten thousand virtual machines. It made sense to do this because that datacentre runs a large number of Orange functions as well as those of its customers, he says.
There are also opportunities to share the cost of investment with customers, as OBS has done with its largest client, the global ICT provider to the airline industry, SITA. “We’ve decided to build together with them a global infrastructure with the backbone that connects our various sites, as well as seven new data centres [that cover] 30 strategic locations,” he says. “SITA will be using this infrastructure to provide airlines with certain of their specific applications that they use for their industry and we can use it for customers from various sectors to also run their apps.”
Of course economies of scale apply to R&D as well and, where possible, OBS looks to develop core services that can be deployed to customers from a variety of vertical sectors. The network itself is more or less universal, although some specific sectors, such as financial trading institutions, have more stringent requirements around latency (see feature in Broadband Outlook). Internal communication solutions are also “pretty generic”, Badrinath says. Customers want industrial grade service at lowest possible cost.
It is when OBS is delivering solutions for enterprise-to-customer communications or solutions for industrial processes that product development becomes far more vertical, he says.
One of the most important parts of the enterprise offering is mobility and, although the revenues for enterprise mobility services are reported by the individual Orange operations, Badrinath has responsibility for the creation of the products and the marketing. Such is the importance of mobility that Badrinath says “I couldn’t’ be in charge of enterprise without taking care of the mobility. It would be meaningless.” When he took over, mobility was generally handled by an enterprise’s central services division. The handset and airtime were procured by the same team that sourced smart cards for the canteen, the handsets were basic and renewal was every two or three years, he says. In the last two or three years that has begun to change dramatically.
OBS now has smartphone penetration among its enterprise base of more than 50 per cent, with that number jumping to 75 per cent for new additions. Today mobility belongs to the CIO. “Two years ago I was having conversations with CIOs where they said to me: ‘Sourcing told me to tell you that your roaming prices are too high and, by the way, how are handling this BYOD thing’? A year ago the conversation had changed to: ‘Ok, we’ve got it. BYOD is here to stay. What are the tools to do device management and flexible SSL? And, by the way, can you work on the roaming pricing?’,” he says.
One of the most exciting elements of the enterprise sector, Badrinath says, is that while new paradigms can start slowly, CIOs seem to communicate with one another very frequently, meaning that trends can gather pace and momentum in a flash. BYOD is one such trend and is the perfect illustration of the cross-pollination that can exist between an operator’s enterprise and retail functions.
“Data networks started in enterprise long before they even touched retail,” he says. “Mobility started in the enterprise, developed and blossomed in retail, and is now coming back to the enterprise. OBS generates one third of Orange Group revenue, so we do our fair share.”
In order to continue to do his fair share, Badrinath has three priorities. First, he has to continue to drive double digit growth in the emerging markets, “to make sure we are wherever our customers are going, because we need to be in a close listening mode.” Second is the development of the OBS cloud services portfolio, where the firm has a lot of roadmap to cover, he says. Third is the M2M sector, the focus on smart cities that sees a large number of low revenue but long term contracts. “They pave the way for whole new areas of value creation,” he says. “They won’t change my numbers in the next two or three years but, come 2017 and 2018, we’ll need to have that under our belts.”