business value & ICT - Telecommunications - Green IT - Orange Business Live blog

If you want to learn anything about the special challenges global organizations expect to face in 2010, follow the money. At last year's Orange Business Live event, overall cost reduction was one of the themes, and budgetary trends are pointing the way to crucial areas to watch as cuts in IT spending begin to subside. According to IDC, IT spending in 2010 will increase by 3%, reaching US$1.48 trillion in 2010, behind the $1.5 trillion recorded in 2008.

Trends in spending show that global IT departments have different priorities on their minds this year. Industry analyst Forrester points out that instead of there being a general trend towards outsourcing as there was during the last recession in 2001 to 2002, IT directors have mixed thoughts on the way forward. Roughly one-third of companies expect to increase spending on systems integration and projects, one-third increase spending on applications outsourcing and a third want to spend more on infrastructure outsourcing. These spend increases seem to be at the expense of contractors and IT consultancy, which will experience a decline. Even though about 40% of organizations say that they are still undergoing IT security consultancy projects, there's nothing to suggest that budget cuts would translate into greater network security problems or risk management breakdowns.

Risky business

In fact, a refocusing on risk management brought about by terrorist attacks and flu viruses, seems to be the order of the day. IDC says that the usual beneficiaries of offshoring such as Bangalore and New Delhi could be superseded by Shanghai and Beijing as global delivery locations. These Chinese locations are being considered more secure against the threat of terrorism than historical favorites Mumbai or Jakarta. While for many firms that means spending money on diversifying their risk management facilities - primarily data centers - it should be well spent, considering the increasing amount of data that is vital to enterprise profitability. In fact, the desire to offshore data centers has even a rather literal turn in some quarters, with Google filing a patent to build floating data centers.

The latest report from Datamonitor shows that global firms are seeking more traditional locations for their outsourcing, although not the locations widely believed to be best. Datamonitor takes into account a wide number of factors such as the political stability, legal structure and national infrastructure when compiling its results. That's why the BRIC countries, thought to be among the world's best locations, rated distinctly below Ireland and Canada, even though those two countries have higher wage costs. Good alternative locations were provided by Eastern European countries like Poland and the Czech Republic and Hungary, although the usual rules about not underestimating the cultural differences in new locations still apply in 2010.

Optimizing or transforming?

'Transformation' has been such a buzzword in IT outsourcing it's hard to imagine any organization undertaking a project that isn't going to 'transform' their business. Unless, that is, it's going to be 'optimize' it. CIO magazine says that the top outsourcing trend for 2010 is a refocusing by organizations on projects that deliver value, remain within budget, and which get the job done, rather than offering aspirational goals such as transforming how business is done. This suggests that businesses have gone back to the drawing board, thrown away the transformational roadmaps (perhaps drawn up by the consultants they used to employ) and have redefined goals based on how much it costs to get them done.

That's just as well, as Gartner predicts that IT budgets this year will be back to 2005 levels. The analyst firm predicts that times will still be challenging during 2010, but that there will at least be a change from "cost-cutting efficiency to value-creating productivity." That may mean that there is less focus on the wage bill of outsourced staff and more scrutiny of the infrastructure and stability of the country where operations are outsourced. The biggest surprise of all in this scenario, if you follow the money, is that the dollar has slipped so much on international markets that some firms may even consider the US - the inventor of outsourcing - ripe in 2010 as such a country.

Access to high-speed communications has become a prerequisite for any company hoping to do business internationally. For enterprises located in the more remote parts of the globe where conventional terrestrial-based infrastructure is not viable, satellite broadband services provide a vital link with the wider world.

The absence of reliable terrestrial communications infrastructure presents an obstacle to economic development; and connecting under-developed regions has been described as one of the biggest challenges facing the global communications industry. Broadband IP services over satellite fill this gap and provide worldwide connectivity to enterprises, while extending enterprise applications globally enables companies to successfully pursue their business anywhere.

The continuous growth of the satellite broadband market has prompted satellite operators to launch new satellites at an accelerated rate to increase capacity for growing regions like Africa.

Satellite operators in Europe believe they can play a vital role in bringing broadband to areas not covered by fixed-line services. According to the European Satellite Operators Association, some parts of Europe will probably remain unconnected to terrestrial broadband and European Commissioner for Information Society and Media, Viviane Reding, has stated that satellite broadband can provide a medium term solution in areas where terrestrial roll out is uncertain.

taking advantage of satellite broadband

Satellite is an attractive option for businesses that cannot access other communications services, normally due to their remote location. Compared with terrestrial installations, remote sites can be deployed very quickly with satellite access and are independent of any terrestrial infrastructure. Satellite broadband services allow organizations to extend their enterprise VPNs, but also facilitate highly secure, private networks where the satellite network is dedicated to a single enterprise customer.

Satellite broadband enables new applications, such as communications-on-the-move (COTM), which provides services to mobile sites - for example, ships, trains, planes and vehicles - for both commercial and military applications.

Satellite broadband also introduces a new level of availability and reliability, providing business continuity to terrestrial IP VPN services. Diverse technologies and infrastructure protect against natural disasters and man-made outages and provide always-on enterprise connectivity.

satellite transmission bands

Satellite communications uses microwave frequencies, which require direct line of sight between the receiving and transmission equipment. The following frequency ranges are commonly used:

• C Band (4-8GHz). These lower frequencies have longer wavelengths and require larger dishes (1.8-2.4m, 6-8 feet) for reception, but are not affected by "rain fade."
• X band (8-12GHz) is largely reserved for military purposes.
• Ku band or "under K band" (12-18GHz). A shorter wavelength permits smaller dishes. Precipitation causes "rain fade," which reduces signal levels, especially at higher frequencies. Most domestic satellite systems use this waveband, including television and broadband.
• K band (18-26.5GHz) is entirely absorbed by water in the atmosphere, making it unsuitable for long-range communications.
• Ka band or "above K band" (26.5-40GHz).  Ka-Band is a relatively new frequency band for satellite broadband and will provide additional transmission capacity. Its sensitivity to rain fade makes it particularly interesting for dry regions and will support the use of small antennas (<1.2m).

technology advances

Early satellite links were dedicated SCPC (single circuit per channel), point-to-point links similar to leased lines. Now the satellite industry uses a more efficient, shared broadband IP architecture to minimize satellite space segment cost. Most enterprise networks are therefore built using a shared, hub-based infrastructure that can be centrally managed and controlled.

Advanced bandwidth, traffic and congestion management technologies allow sharing of bandwidth across multiple customer networks, remotes sites, applications and time zones.

The satellite broadband infrastructure supports all IP-based voice, data, video or audio enterprise applications efficiently. Data broadcasts and video multicasts are transported reliably and can be delivered simultaneously to an unlimited number of remote sites.Time-sensitive and mission-critical applications are prioritized for predictable service levels.

Latency (the time it takes to send and receive a message) is higher with satellite than on terrestrial networks. However, data and web-based applications can be delivered with fast response times through technological advances such as TCP acceleration.

Satellite broadband services are available from traditional telecoms providers which obtain their capacity from network operators that own and operate the satellites, ground stations and network operations centers. Enterprises typically subscribe to services using geostationary satellites, rather than the low-earth-orbit (LEO) satellites used for consumer applications such as satellite television.

Among the major sources of demand for satellite broadband are businesses looking to integrate their remote global sites with the corporate IP VPN so these sites have access to email, supply chain management, enterprise resource planning applications and other internal applications, like the rest of the corporate sites connected via terrestrial infrastructure.

To overcome issues of bandwidth contention, service providers use a technique known as class of service to distinguish between information that has to be sent immediately; critical information that is not time sensitive; and non-essential communication such as personal email.

VSAT increasing in popularity

Increasingly, two-way satellite broadband systems are based on very small aperture terminals (VSATs), which consist of a small dish - typically between 60 and 240cm - outdoor electronics mounted on the dish and an indoor satellite router. Signals from the satellite can be concentrated into "spot beams," permitting re-use of the same frequency over the satellite's broadcast area and return transmissions combine multiple channels to maximize the number of simultaneous users.

Advances in antenna technology and satellite coverage have combined to make VSAT Ku Band satellite services a practical option for international maritime companies. Previously, C Band and Inmarsat were the only options for deep ocean routes, but the size of the antenna was prohibitive for many vessels. According to telecommunications consultancy Comsys, there are already thousands of vessels using VSAT and tens of thousands of potential customers.

With VSAT, bandwidth is shared among vessels at rates up to 256 kbps with bandwidth busting at higher speeds when required. Maritime satellite broadband service providers can integrate the various vessels in a fleet to the corporate IP VPN, which enables no-cost communication between vessels and terrestrial sites and between different ships.

No market is immune from the effects of the wider economy, but the satellite broadband market has proved more resilient than most. Northern Sky Research suggests that broadband satellite market revenues could more than double from USD 3.3 billion in 2008 to USD $7.6 billion by 2018.

Continual research is undertaken into new technologies that will improve the satellite broadband experience for users. For example, the new DVB-S2 standard introduces more efficient and flexible coding and modulation technologies through its adaptive coding and modulation (ACM) specifications. ACM can dynamically maximize the IP throughput of the satellite broadband network taking into account changeable link attenuation based on weather conditions. This breaks ground for new, innovative and cost-effective broadband services and service level agreements between the network operator and enterprise customer.

The Economist Intelligence Unit (EIU) said that "the financial crisis has forced governments in Central and Eastern Europe to make tough decisions about their information and communications technology spending priorities", causing concern over whether the region can maintain its lead over other emerging markets in the "international e-readiness rankings".

The study said that the economy in the region is expected to contract by 5.7% in 2009, being affected more than the 4.1% decline anticipated in the Euro region, and the 2.5% contraction expected worldwide. Most CEE countries have also been cautious when it comes to the initiation of stimulus spending packages, and where they do exist, these are unlikely to include significant ICT elements.

With this in mind, few CEE governments can now afford to fund large ICT development projects, and are instead turning their attention to programmes with lower up-front costs and shorter payback terms, for example seeking improvements in the way government agencies manage information flows. This includes governments looking to the issuing of electronic ID cards to enable online access to government services, which can cut paperwork and other administrative costs.

The EIU said that although budget funds are scarce, governments are not losing sight of the long-term goal of making digital access availability universally, including to citizens in remote areas. However, the funding for these projects often comes from the European Union's regional development funds, rather than from national budgets.

According to the study, the approach of CEE governments fall in to three categories:

• Go full steam ahead: Bulgaria, Croatia, Estonia, Poland, Romania, Russia, Slovakia, Slovenia and Turkey.
• Change tack, to focus on projects with shorter payback times: Czech Republic, Greece, Hungary, Latvia, Lithuania.
• Throw out the anchor, and wait for better times to return: Albania, Bosnia and Herzegovina, Ukraine.

The Economist Intelligence Unit's whitepaper can be found here.

Telepresence is being hailed as the next generation of video conferencing, enabling people to interact with remote colleagues and clients in other parts of the world as if they were in the same room. Businesses are increasingly turning to telepresence solutions to reduce travel time and costs, build better relationships across distances and help them meet environmental targets for reduced carbon emissions. According to recent research from market analyst house ABI Research, the worldwide telepresence market, including network services and managed services, is forecast to grow from a 2007 level of just under $126 million to nearly $2.5 billion in 2013.

To read more, go to sister blog MEA Briefing: http://www.blogs.orange-business.com/meabriefing/

In June's Orange Business Live event, the "special challenges of global IT organizations" buzz session looked at Orange's experience of offshoring. Despite the recession, outsourcing and offshoring has remained a growth industry. Canadian research firm XMG Global reckons that the industry has grown nearly 15% this year - far outstripping general economic growth - resulting in a $373 billion market.

In the offshoring business, it's no surprise that India and China were the major players. Despite the accounting adjustments at Satyam and some clients shifting to cheaper locations, India has performed well again. With $48 billion in revenues, it accounts for 45% of the world's offshoring activity. With $28 billion, China is number two in the market, followed in third by the Philippines with $7.3 billion, having grown 21.7% in the last year.

XMG believes that an economic recovery in the US and Europe during 2010 will create a shift for BPO, with IT services, application development and support being absorbed into BPO deals. It also believes Egypt, South Africa, and Mexico will emerge as strong players on the global stage particularly as the costs of offshoring to India rise. "In an industry where double digit growth is not ordinarily seen during a global recession proves that offshoring and outsourcing is part of a natural ongoing economic revolution notwithstanding a financial crisis", said XMG analyst Vincent Altez.

Research house IDC published a white paper which states that in 52 countries surveyed, employment in the IT industry and IT functions in other organisation will grow by 3% per year in the period to 2013, creating 5.8 million jobs and outpacing the total growth in employment by more than three times.

The surveyed countries account for 98% of the forecasted $1.41 trillion IT spend in 2009, a figure which is anticipated to grow to $1.7 trillion in 2013. Growth in the IT market will lead to the creation of 75,000 new businesses before the end of the study period, with most of these being "small and locally owned organisations". Currently, more than 13 million people are employed directly by the IT industry, with another 22 million IT professionals working in IT-using businesses.

Unsurprisingly, much of the Microsoft-sponsored paper, titled "Aid to recovery: the economic impact of IT, software, and the Microsoft ecosystem on the global economy", had a software focus. It was noted that while spending on packaged software in the 52 countries will account for 21% of total spending in 2009, some 51% of IT employment will be software-related. This was attributed to the fact that software is "more complex to sell, service and support than hardware", meaning that more downstream economic activity is generated.

Software spend is also growing faster than the IT sector as a whole, increasing by 4.8% and 3.3% respectively. During 2009, despite total IT employment dropping by "a fraction of a percentage point", software-related employment grew by 4%.

The survey noted that the advantages of the growing IT sector are "more extensive than the raw numbers alone suggest". IT jobs tend to be more highly-skilled than most others, particularly in emerging economies, and increased levels of computerisation can enable countries to be more competitive in the global marketplace.

IDC has also prepared regional breakdowns alongside its global analysis. These can be found here.

APAC will overtake Europe to become home to the most laptop or netbook mobile broadband subscribers during 2011, with these markets remaining some way ahead of North America, Central and South America, and the Middle East and Africa in the immediate future, according to forecasts from Coda Research Consultancy.

During the period to 2017, Asia Pacific will record the highest compound annual growth rate (CAGR) of 21%, followed by Central and South America and MEA, both on 18%, and North America at 17%. By this time, 418 million people will be using mobile broadband-enabled portables, a three-fold increase over 2009 levels.

A ramp-up in LTE (Long Term Evolution) deployments from 2012 will drive growth, with half of mobile broadband laptop/netbook users connected using this technology in 2017. Although APAC will have the most LTE users, Europe will dominate in terms of the proportion of users with LTE accounts (75%), followed by North America (65%).

Mobile broadband traffic from portable computers will grow 40-fold by 2017, to 1.8 exabytes per month. LTE users will punch above their weight in terms of data volumes, accounting for 1.1 exabytes of the total.

A number of drivers have been identified, including competition between operators, declining subscription costs, increased speeds and availability, low cost dongles, and the increased use of mobile broadband as an alternative to fixed deployments. The last of these is especially true of developing markets, where fixed line deployments lag and mobile broadband provides the only viable option to provide internet connectivity.

Coda did not split how mobile broadband-enabled computer use would be split between businesses and consumers, although its forecasts predict that video traffic and peer-to-peer will be the most popular APAC applications, indicating a strong consumer market base. The fact that mobile broadband will be the only connectivity option for some users comes into play here, as in developed markets customers will have greater access to other broadband connections.

More details are available here.

Interesting keynote from Mike Cansfield, principal analyst at Forrester Research, to kick off this years Orange Business Live. Mike reckons that all companies should now be focussed on planning their way out of the recession (and yes, it is a recession, not a depression as the doom mongers are proclaiming.) Not all sectors and all markets are recessed, so look for areas of growth, he says such as Africa, Middle East and China.

It's also vital to review the underlying cost structures pervading the whole business and recognise how new technologies like Cloud Computing, SaaS, M2M, telepresence, can strip out costs that companies have so far overlooked. For instance, to reduce travel costs, you could use more conferencing and collaboration technologies. To reduce mobile bills, you can look to FMC and getting mobile traffic onto global VPNs as soon as possible.

Cansfield recommends that companies do more to automate and integrate their supply chains upwards and downwards. And supply chains are also the answer to innovation too - work with your partners to develop new products, go-to-market strategies and figure out ways to dramatically remove costs from processes. "A company is only as strong as its ecosystem."

It's all pretty simple stuff but according to Cansfield this was overlooked during the growth years, with chief execs so focussed on sales and the top line that they neglected the bottom line. So the message is: use the downturn to review and revise all processes. Let the problems lead (or solutions to them) and let the technology follow.