Several new developments suggest the business telecom market may return to growth in the coming quarters. Plans from companies such as Orange, Iliad and QSC point in this direction, although their strategies differ. Long a theoretical concept, 'digital transformation' is starting to become a real growth driver, along with other new services. Threats include the new actors on the market, such as Amazon and challengers like Iliad, while convergence is driving the enterprise segment increasingly towards IT solutions. Focus, investment, cooperations and acquisitions will expand the opportunities, the operators' plans show.
The enterprise market has gone through major changes in recent years, as new services like hosted VoIP replace traditional telecom lines. At the same time, the pie is shrinking due to lower prices. Transparency is also increasing due to growing competition, and certain rates are converging with consumer prices, such as for connectivity.
Over time the (painful) process relents and new opportunities for growth emerge. Relatively new developments such as cloud, security, IT services and software development play a big role. It's an important moment that a number of operators have started to bet on growth again, but competition can still disrupt the outlook.
We look here at the main points of four operators' plans:
- Orange (France, Europe, Africa, Middle East): the five-year plan Engage 2025 was presented 4 December.
- Iliad (France and Italy): four-year Odyssey plan to 2024 unveiled 7 May.
- QSC (Germany): three-year 2020plus plan to 2022 outlined in November and May.
- Amazon: AWS event re:Invent in December.
Orange: telecom and IT convergence
Orange, the fifth-largest European telco in terms of market cap, after Deutsche Telekom, Vodafone, Equinix and Telefonica, has the most comprehensive plan, of which the enterprise market is just a part. Orange is focusing on the convergence of telecom and IT, such as SD-WAN services, as well as cloud and edge computing, digital transformation and data analytics, smart mobility, IoT and cybersecurity.
Security especially is a key area, where Orange is targeting European market leadership by 2023. By the same year, Orange targets half of its enterprise revenues from IT and half from connectivity (SD-WAN, 5G). In addition, EBITDA at Orange Enterprise should return to growth by the end of 2021.
Iliad enters business market
Iliad expects the growth at its business division Scaleway to be driven by the takeover of Jaguar Network earlier in 2019. The company's expansion from the consumer to the business market will support the overall group growth. However, any growth on the French market will have to come at the expense of Orange and SFR, and given Orange's ambitious, Iliad faces a big challenge.
QSC targets IT industry segments
QSC sold earlier this year its telecom division Plusnet and is now focused completely on the IT market. The German company has big ambitions: double-digit revenue growth from 2020. QSC has made some clear choices to achieve this. First the, sale of Plusnet, second a focus on the SME market and third targeting three sectors: retail, manufacturing and energy.
To support scalability, it's working with standardised products, for all sectors. This includes software development, allowing QSC to grab a bigger share of the value chain. Acquisitions are also part of the possibilities, as well as cooperation with SAP, Microsoft and others. QSC sees its strength in IoT, SAP services and the cloud. Everything needs to contribute to improving industrial processes, creating a kind of automation and IT 'Fritzbox for Industry 4.0'.
Amazon takes on enterprise ICT market
We know Amazon as an e-commerce giant, media company, hardware manufacturer and enabler of the digital economy. Amazon Web Services is in the process of expanding its portfolio significantly, targeting the broader enterprise market with cloud and transformation services.
This includes entering the telecom terrain. AWS announced recently a partnership with Verizon, Vodafone Business, SKT and KDDI on mobile edge computing over 5G.
It's also started the consultancy Slalom, with three Launch Centers in the US to help business customers migrate to the cloud and modernise their IT.
The growing number of AWS customers also includes companies like broadcaster Fox. AWS has developed a cloud system for both production and distribution for the company. In Europe, it's working on something similar with ProSieben.
An example of its digital transformation services is a recent deal with Novartis. With such a deal, AWS disintermediates the telecom sector and takes the competition direct to them. AWS is assuming a similar role in other sectors as well, such as product development for Formula 1 and support for the NFL.
