IP-VPN to see rapid growth
Traditionally focused on providing products and
communication services to end-users, telecommunications
companies will soon find themselves having to work with their
customers to develop and provide consultancy services and
solutions.
“Telcos have come a long way from 1995 when they
merely provided basic telephone services to Internet Protocol
(IP) telephony. Now they provide broadband connections and
mobile data services as well,” said IDC Market Research (M) Sdn
Bhd analyst Lincoln Lee.
Between 2004 and 2006, telcos worldwide will find
themselves providing enhancements to their core business
including IP solutions like managed virtual private networks
(VPN) including IP-based VPNs (IP-VPN), edge devices, firewalls,
IP voice, video, callcentres, end-to-end monitoring and
management of network capacity, fault, change management
and problem resolution.
Beyond 2006, telcos will find their networks
supporting business processes and IT architectures like
enterprise resource planning (ERP), supply chain management
(SCM), customer relationship management (CRM), consulting,
applications development and integration,” he added.
Meanwhile IDC Malaysia expects the value of the
local IP telephony market to grow year-on-year at a compound
annual growth rate (CAGR) of 17.2% from about RM400mil this year
to slightly over RM700mil in 2008.
“Cheap calls over VoIP (voice over IP) is an
emerging market. Businesses are showing an interest in VoIP for
its cost savings and supporting enhanced applications. And
voice-over-broadband Internet service providers are looking at
VoIP as a possible revenue generator,” said Lee.
IDC expects Malaysia’s IP-based
value-added-services (IP-VAS) like videoconferencing,
webhosting, unified communications and Internet security
applications to grow at 50% CAGR from about RM15mil this year to
over RM50mil in 2008.
Also, Lee sees IP-based VPN or IP-VPN being a
fast emerging service with a vast potential. It is quickly being
adopted by telcos worldwide.
It’s cheaper to implement than ATM (Asynchronous
Transfer Mode) or Frame Relay networks because it creates a
secured “tunnel” through the existing Internet and uses IP to
transport data. However, due to a variety of reasons, its
adoption has been very slow, especially among local telcos.
In a survey of IT managers in 215 local IT
companies, 15% said they used IP-VPN in their companies and
among those which didn’t yet use IP-VPN, 7% said they would use
it within a year, while another 2% said they would use it
between one and two years time.
“This could be due to several reasons, including
a perception that it is costly and a lack of local market
awareness (of the product).
“(Also) the current validity of managed-services
contracts for traditional Frame Relay, ATM and X.25 networks,
could be too costly for these companies to break,” said Lee.
“Another problem is that the adoption of new
technologies is customer-driven in North America, while in Asia
Pacific it’s carrier-driven and users will wait until their
telco offers it before they adopt it,” Lee added.
Nonetheless, despite the fact that IP-VPN
currently comprises a mere 4% share of local managed data
services, IDC sees it as the only managed services segment which
will grow to a 10% share in 2008. The market share of other
managed services – leased circuits, Frame Relay, ATM, X.25 and
ISDN – is expected to decline over the same period.
The total value of IP-VPN services in Malaysia in
2003 was worth RM50.7mil – of which domestic communications
within Malaysia contributed RM25.9mil and international
communications amounted to RM24.7mil.
The total Malaysian IP-VPN market is expected to
grow at a CAGR of 27% between 2003 and 2008 when its total worth
would be around RM170mil with revenue from international
communications being about three times that of domestic
communications.
Malaysia’s contribution to the Asia Pacific
(excluding Japan) IP-VPN market is expected to decline from 21%
in 2003 to 1.6% in 2008, while over the same period, Thailand’s
is expected to grow from 2.7% to 4.7%, China’s from 3.1% to
20.4%, the Philippines’ from 1.0% to 5.1% and India’s from 8.0%
to 9.1%.
However, other countries in the region including
Australia, Hong Kong, South Korea, Singapore and Taiwan would
also see their contributions decline over the same period as
well.
