|Latin America 2004
|The growth of convergent communications in Brazil’s large and medium enterprises
|Edmilson Toledo and Tiana Marzullo dos Santos
|Vice President and Director
|Global Services, Ericsson Brazil and Ericsson America Consulting and Services Portfolio Management, Brazil
Edmilson Toledo is the Vice-President of Global Services for Ericsson Brazil. Previously, Mr Toledo served as the Key Account Manager for Special Accounts and Solutions at Ericsson. Before Ericsson, Mr Toledo worked as Marketing & Sales Director for Quadrata (France Telecom Group) and Country Manager for Ascom Timeplex in Brazil. Edmilson graduated as an Electrical Engineer from the Federal Technology Centre in Rio de Janeiro and as a Systems Analyst from PUC – Pontifícia Universidade Católica do Rio de Janeiro. Mr Toledo earned his MBA from the ESPM School of Marketing. Tiana Marzullo dos Santos is Director of Ericsson Business Consulting and Services Portfolio Management in Brazil. Ms Marzullo has long experience in business consulting at AT Kearney, Accenture, TIM, Nortel and Real Time Telecom China. Ms Marzullo has worked on projects for the Telecom and Media/Entertainment Industries in Europe, Asia and Latin America. She graduated as an Electrical Engineer, specialised in Telecom and as an Industrial Engineer from Pontifícia Universidade Católica do Rio de Janeiro. Ms Marzullo earned her MBA from the Haas Business School.
Brazilian businesses are adopting convergent solutions, devices and technologies. This will create significant opportunities for operators to offer integrated corporate voice and data solutions that combine mobility, performance, security and cost reduction. However, to understand the corporate market requires a thorough evaluation of the business customer’s needs. Extensive market survey and analysis can identify and focus upon the real value corporate users perceive in, and demand from, convergent services, dimension the potential demand and estimate the return on investment.
Introduction The large and medium-sized corporate market is the preferred target of mobile and fixed operators, as well as of other service providers in Brazil. The spending and usage profiles of business users and the growing investments of Brazilian companies are seen as opportunities for the introduction of new products and services. Enterprise (non-operator) investment in communication services is expected to increase to more than US$ 230 million in 2004, by 11 per cent compared with the previous year. Companies from all sectors of the Brazilian economy are rapidly adopting advanced communication tools. The increasing penetration of both fixed and mobile voice and data services, and the widespread offering of new services and devices, point toward the availability, in the near future, of pervasive connectivity that will make any sort of information available on any device over any network. We know that many enterprises are working on content, applications, and service integration, through devices and access networks. Still, knowing in detail what corporate end-users’ need is crucial to designing and executing successful service introduction strategies. Brazilian corporate market overview Brazil has approximately five million companies. Almost 100 thousand of these are large and medium-sized enterprises, which, according to market surveys, have been investing increasingly in data and voice communications either to gain competitive strategic advantages or to boost operational efficiency. Recent market surveys of medium and large companies showed that fixed telephony penetration levels have reached almost 100% in all of their activities. The surveys also show that the intra-enterprise penetration (number of extensions / number of employees) is around 80 per cent. On average, mobile telephony penetration is around 60 per cent, as shown in the first illustration. Apart from the potential to increase penetration of mobile usage per company, there is a significant opportunity to grow the number of mobile users inside the companies, as intra-company penetration – number of mobile lines vs. number of employees – is, on average, only 25 per cent in medium and large enterprises. Data communication solutions are also increasing their penetration among medium and large companies, where they are used as tools for business integration. Stiff competition between service providers, driven by new licenses and the geographic expansion of current operations, has resulted in substantial tariff reductions, which has encouraged increased use of data communications. Data communications solutions – ATM, IP, and Frame Relay – are currently used by close to 43 per cent of medium and large companies to communicate with customers and suppliers. Among all activity sectors, the manufacturing sector is the one with the highest penetration of data communication usage, due to the sector’s investments in industrial automation systems such as ERP, sales force automation, payment systems and security tools. The growth in the e-business market has fostered the widespread penetration of the Internet as an important communication means. The fact that almost 80 per cent of Brazil’s medium and large companies use the Internet for communication with both suppliers and customers, provides strong evidence of the growth of pervasive connectivity within the Brazilian corporate market. Fixed and mobile network operators in Brazil are focusing their efforts on analysing the value chain of current and potential corporate customers. They hope to identify the key corporate activities that signify operational excellence and superior value to their corporate customers. They want also to identify the telecommunications solutions that will leverage the performance of such activities. Understanding customers’ business, and the factors that differentiate it in their customers’ eyes, is critical to determining how voice and data solutions can boost a company’s performance. Apart from measuring the potential demand of the corporate market, it is very important to identify where this demand is concentrated, that is the total number of potential clients per segment. Geo-marketing tools can be used to indicate the geographical distribution of the potential demand for corporate solutions, thus adding value to marketing and sales efforts and giving valuable inputs towards CAPEX and OPEX (capital expense and operational expense) optimisation. As an example, illustrations 2 and 3 show the geographical market analysis of Brazilian enterprises and the concentration of demand. The Figure 2 shows the concentration of enterprises with high potential for adopting broadband solutions per city in the state of São Paulo. Studies show that 91 per cent of potential corporate users are concentrated in only 41 of the 603 cities, seven per cent of the total, in the state. The figure 3 shows the distribution of corporate broadband demand within the City of São Paulo, the capital of the state. Last but not least, follows another zoom of the City of São Paulo, Figure 4, which shows the distribution of medium-sized companies with bandwidth demand equal to or superior to 512 Kbps – 16 per cent of the total. Mobile scenario and enterprise customers needs On the demand side, Brazilian market surveys and secondary data indicate that mobile solutions and voice-data integration are among the most critical information technology/telecom-related concerns of medium and large companies. Almost 30 per cent of the medium and large companies in Brazil have more than 30 per cent of workers with need for mobile communications. Although still small, the penetration of notebooks is increasing as 10 to 20 per cent of medium and large companies, from all activity sectors, have between 11 to 100 portable computers. The most wanted mobile applications are data synchronisation, update and store data, access to databases, corporate intranet and e-mails with and without files attached. On the supply side, the biggest Brazilian mobile operators –Vivo, Claro and TIM – are investing heavily in the deployment of next-generation cellular technologies. As a way to differentiate themselves, companies have launched 2.5G services based on CDMA 1XRTT and GPRS in the marketplace. The competition is forcing down services tariffs and handset prices. These market developments are helping to lower some of the main barriers mentioned by companies to the adoption of mobile data applications, such as the cost of services and devices, coverage and transmission speed. As prices come down and operators find ways to position and communicate the benefits of mobility to corporate customers, Brazilian companies will gradually perceive the advantages of adopting mobile business solutions as an efficient way to resolve their needs and for the competitive advantages they provide. As a consequence, the demand for the wide range of mobile-enabled services will be strengthened. Multimedia messaging, broadband Internet access and other services are expected to achieve high levels of penetration as part of a variety of attractive service packages. Another relevant development is the coming convergence of fixed and mobile services. Fixed and mobile operators that belong to the same controlling groups are focusing on the corporate market with combined fixed-mobile, voice-data services offerings. The need both for competitive differentiation and to reduce the churn of high-value customers is driving investment in fixed / mobile service bundles. Nevertheless, the market still lacks a leader in fully integrated technology services. Growth in communication solutions that mix services, devices and networks, are driven by existing needs for mobile intra-companies solutions, the advanced stage of fixed voice and data services penetration and growing fixed-mobile convergence. Brazilian operators are investing heavily in integrated platforms for new services. The development of pervasive connectivity solutions is crucial to obtain a higher return on investment from these platforms. Despite the growth of integrated services in the Brazilian corporate market, detailed market studies of customer segmentation, demand drivers and analysis of the geographical distribution of demand, is needed. Such studies can help maximise the results and minimise the risks of new commercial offerings. The following types of market analysis are suggested: – Demand Analysis: demand modeling per market segment, using market survey results; – Service Providers Analysis: market perception of current offerings; – Demand Vs. Offering Gap Analysis: identification of opportunities; – Service Portfolio Definition; – Financial Return Analysis: business case studies to find the most cost efficient ways to optimise return-on-investment; – Roadmap of Service Bundles and Offerings per Segment; – Pricing and Promotions Definition: per service and service bundle per segment, based on customers’ price elasticity and competitors’ positioning; – Service Positioning and Sales Speech: based on the gap analysis of demand vs. market offerings; – Distribution Channels Analysis: sales force optimisation based on geographical demand distribution analysis. Conclusion The Brazilian corporate market has a tremendous demand potential for services based on integrated solutions and technologies, combining fixed, mobile, voice and data as a competitive advantage. Nevertheless, through market analysis is vital to fully map the demand drivers and the market perception of current service providers. This mapping is needed to build successful strategies for market introduction and sales growth.