Telstra is aiming to leverage its share in the traditional carriage business to offer an increasing number of network integrated applications and services relying on the intelligence it's building into its network.
While there are many challenges ahead, especially in building and managing the ecosystem of partners required to succeed, the strategy appears to have already started to pay off, with significant revenue growth coming from network application and services.
Differentiating in an NBN world
In the post National Broadband Network (NBN) era Telstra will no longer be able to differentiate on the basis of its access network assets. The way to maintain a competitive advantage is by transforming its network into an intelligent and secure platform for delivering applications and services.
Telstra’s plan is to provide a layered approach that separates the services and application layer from the transport layer for better flexibility, allowing services to be device- and access-agnostic. This will give Telstra the flexibility required to build its services proposition independently of the access network, and allow it to use either its own access assets (fixed or mobile) or from the NBN Co.
To deliver on this strategy Telstra has been investing in its IP network core based on IMS, and developing a series of solutions that form a unique proposition of end-to-end managed services. This includes a range of security products, and forms the basis for its cloud services portfolio.
The recently announced Application Assured Networking solution will allow enterprises to pre-define performance metrics for selected applications and allocate bandwidth dynamically on-demand. This online policy control feature, which will be available mid-2012, is a growing customer requirement. Ovum’s recent end-user survey shows that 76 per cent of large enterprises in Australia are interested or very interested in the ability to prioritise the performance of individual business applications and 74 per cent in the ability to instantly change the bandwidth of a connection from a portal.
A growth engine
The recent figures suggest that Telstra is on the right track and the strategy is starting to pay off. Revenues from network applications and services (NAS) grew 11 per cent in FY2011 to $1.1 billion, while the traditional carriage business grew only one per cent.
Managed data networks and unified communications currently account for the bulk of NAS business and should benefit from new product launches. The Telstra IP Telephony (TIPT) solution has reached 125,000 end points and a hosted and managed B2B video conferencing solution has just been announced. We see important synergies between these realtime applications and network services.
However, it is cloud services where expectations are greatest. With the recently announced $800 million investment and an increasing number of customers across business and enterprise Telstra seems to be on track to achieve it’s expected 20 per cent Compound Annual Growth Rate (CAGR) by 2014.
Challenges in developing a new ecosystem
Telstra’s long-term goal is to provide a service delivery framework to service partners and third-party applications. It will build this based on extensive network, hosting, and management services. But it can’t alone exploit the full potential of its platform. Developing and operating the complete partner ecosystem required for this, defining the new business models, and offering a consistent set of services are substantial tasks.
In addition, as Telstra shifts it’s managed services proposition to a more end-to-end management approach it will have to deal with the conflicts that arise when channel partners see Telstra stepping into their traditional business.
The Digital Business solution is a good example. As more services are bought and managed online, traditional channel partners need to develop skills beyond selling and distributing devices and shrink-wrapped software. They will need to move upstream into assisting their clients to integrate the systems and use them effectively to grow their businesses.
As more traditional IT services become embedded into Telstra’s NAS offerings its channel partners will need to both learn how to help their customers take full advantage of Telstra’s services and learn how to grow and develop their own unique sources of added value or risk being left behind.
Claudio Castelli is a senior enterprise telecoms analyst with Ovum.