2013 vertical outlook: industry CIOs are your constituents now

OVUM VIEW

Summary

In an end-of-year interview with Marketing magazine, Sir Martin Sorrell, chief executive of WPP and head spokesperson for the global advertising industry, declared that “CIOs are our constituents now.” To media agencies aiming to get their messages to the consumer on behalf of their clients, corporate telecoms networks and delivery technologies are as important as the campaign creative teams that formulate the messages in the first place. The CIO has joined the CMO in viewing the storyboards and helping the direction of the campaign. Ovum believes that the creative media could be one of the next major vertical industry opportunities for telcos. Telcos need to alert businesses to their role in providing the managed services that support enterprise CIOs in their expanding marketing responsibilities. Among the other vertical sectors that global service providers should consider targeting in 2013 are retail, transport and logistics, and banking.

The retail outlook

Telcos have been approaching retailers with their managed services for some time, but so far have either got cold feet or not been encouraged sufficiently by the target customer to make a major sector breakthrough. Mobile marketing, M2M stock tagging, wireless fleet tracking, and in-store video all appear in case studies, but are not deployed widely enough to make this a new anchor vertical yet. Nor was 2012 a year to celebrate, in Europe and the US, anyway, where a combination of tight consumer spending, high street/main street closures, the onslaught from digital and online merchants, and the general rising costs of goods, materials, and distribution have restricted sales numbers and margins. But global retailers have their opportunities, and some of the biggest networking contracts of 2012 were for big fashion goods brands opening new stores in Asia. There is a big opportunity for the likes of NTT Communications and its partners in Asia-Pacific in 2013, and there are similar opportunities for Telefonica in South and Central America.

Transport and logistics

Most telco managed services providers have a trophy airline carrier, railway operator, or fleet management company on their customer logo sheet. One – Orange Business Services – has established itself as a major network provider to the shipping and airline transport industries. Other telcos look on enviously, as this is arguably the next biggest prize after financial services, health care, the public sector, and industry (usually automotive or pharmaceuticals). Telcos have a lot to do to really impress enterprises in this sector, however. Offering smart vehicles is one thing; providing reliable connectivity for rolling stock is another – and is, frankly, more important. Across the board, transport companies are still under-served in telecoms. For example, railway cargo companies could get a lot more value from wireless asset tracking if the coverage actually extended along their routes. Meanwhile sea ferry operators are still ambivalent about on-board Internet connectivity (satellite and Wi-Fi) for passengers, even though there are obvious cost advantages in integrating their corporate data networking with the on-board value-added services.

Is banking due a revival?

The previously familiar theme of financial services (FS) institutions dominating managed network spend changed in 2012, as manufacturing companies overtook banks and insurance companies with their orders for network services. Although banks are generally doing better, as their recent quarterly financials show, they are not placing big network orders like they used to. It feels as though the global economy is forcing the FS sector to shift focus. Regulators’ attention has switched from leveling the playing fields in the trading markets – giving the CIO action points to invest in data transmission, storage, and management – to balance sheets and financial health checks. Liquidations and government rescue packages have inhibited M&A activity, and the sector does not feel like the confident powerhouse it once was. Some consumers are moving their custom away from “big” banks, and that has made institutions nervous about bonus payments. Moreover, social media technology is not revolutionizing the FS sector, and most of the developed world is still waiting for mobile banking.

However, although the retail end of the FS sector is under pressure, the situation is different at the wholesale level. Global service providers, led by BT Global Services and Verizon Enterprise Solutions, will seek FS network opportunities in 2013, and they will likely experience some success. The rule is to follow the money, which in financial markets is currently moving out of bond markets and commodities and into equities. Telco global services account teams could find it efficient to follow the equities trading firms. Product designers should concentrate on those parts of their trading platforms and financial systems architectures that serve the migration between asset classes. Stock markets are on the rise, and that is giving hope to the sector as a whole.

APPENDIX

Author

David Molony, Principal Analyst, Enterprise

david.molony@ovum.com

Further reading

Global Services Deals Analysis 1H12: The Increasing Value of Cloud and Mobility (January 2013)

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