Organisations in the region often prefer to keep their IT assets (physical and management) in-house. However, increasingly scrutinised IT budgets, combined with an improved IT services landscape (in terms of the increased number of IT service companies and the new service models that they bring with them), have encouraged organizations to look at supplementing their IT management with external service providers.
Enterprises in the UAE also typically prefer to keep their data within the country, primarily for security and sovereignty reasons. The significant demand that now exists for hosting services, together with the increasing volumes of data being generated by businesses of all sizes and growing interest in business continuity, has spurred numerous investments in new datacentres, particularly by telecom operators, as they look to fully capitalise on the growing potential of hosting and cloud services.
Until recently, the datacentre market had been the domain of traditional IT service providers, both local and international. However, competition is starting to heat up, with major regional telcos already venturing into the market due to the slow growth being seen in traditional communication markets such as fixed and mobile voice. Traditional telcos increasingly realise that they must shed their well-established image as ‘pure telcos’ in order to be seen as datacentre service providers. As such, they are now compelled to invest in acquiring the skill sets typically required by datacentre service providers, which is no easy task as it requires a concerted effort together with considerable re-training and re-skilling of team members.
However, telcos are shrewd enough to refrain from offering all the services that traditional IT vendors provide in the datacentre market. Instead, they are aiming to provide services that complement their core business — connectivity. Most are starting off by using their spare datacentre capacity to offer hosting and cloud services, while others are evaluating ways to host enterprise mobility applications, unified communications, and collaboration applications, as well as platforms required to offer mobile machine-to-machine (M2M) platform and applications. In addition, the seemingly insatiable appetite for content among the region’s increasingly connected Internet users is driving telcos to host Internet exchange hubs and content delivery networks within their datacentre environments. This is also helping them to slowly expand their relationships with content providers and even extend into the digital media space.
However, telcos need the right set of partners to make this possible. Whether it’s investment or expertise that is required, telcos are realising the need to leverage or create partnerships with equipment vendors, software vendors, and systems integrators. That said, the telco must play the anchor role when it comes to developing an ecosystem around new age digital services. They need to design the right kind of business models, manage sales and marketing functions, and offer billing integration activities. Telcos will also look to leverage their existing investments in communication infrastructure, as well as their relationships with existing customers.
Both etisalat and du are currently evaluating ways to leverage datacentres to create alternative revenue channels. This can be achieved either by fully utilising their existing datacentre space or by scaling up their available capacity. The ability to utilize their datacentres not just for hosting and cloud services but also for processing their own operational and billing systems is a unique advantage enjoyed by telcos. And as innovation is rapidly transforming the datacentre landscape around hosting, colocation, and cloud services, telcos are hopeful about their datacentre investments. However, they will continue to face stiff competition from well-established IT companies and international cloud providers.
Telcos will increasingly aim to position themselves as ICT market leaders; however, they will have to anticipate upcoming opportunities and prepare themselves well in advance to capitalize upon these opportunities. They will have to strengthen their partnership ecosystems and invest in the development of infrastructure and professional services teams. At the same time, telcos will need to strengthen their current market share by investing in sales and marketing; this could mean aligning their business segments or organisations with the new service lines. They must also set specific sales targets for the business segments, create the right incentives, and invest in training to sell these new services.
Telcos will also need to invest in generating awareness of their activities around services partnerships, service launches, industry developments, and so forth — for example, through educational roadshows, successful case studies, and newsletters. This will help drive much-needed visibility in the datacentre services space, and could also serve to dispel customer apprehension around the services offered by international third-party managed and cloud providers.
IDC believes that the realisation of datacentre opportunities by telcos is the first step in the right direction, although much remains to be done in order to fully capitalise upon these opportunities. To be successful, telcos will have to acquire new delivery capabilities and skill sets, revamp their business and communication models, and, above all, implement the organisational changes that are required to facilitate this transformation.
The columnist is Group Vice-president and Regional MD for the Middle East, Turkey & Africa at global ICT market intelligence and advisory firm, IDC.