October 9, 2011

Cashing in on Business: The Enterprise Opportunity for MENA Telecom Operators

The enterprise, or business, segment presents MENA telecom operators with a large potential growth opportunity. In other parts of the worldsuch as Europeenterprises account for an average of 17 percent of telecom operators’ revenues. Although the business segment has yet to contribute that much for operators in the MENA region, the regional enterprise ICT market is sizable, and growing at such a rapid clip that it should come close to doubling within five years. Booz & Company estimates that the number of enterprises in the MENA region will grow at a 10 percent annual rate through 2014: this will add almost 4 million new businesses to the current base of 8.25 million.

The number of enterprises in the MENA region will increase, and so will their spending on ICT, until it approaches that of their peers in Europe and the U.S. Operators can leverage their strengths to grab share in the rapidly growing SME segment, lock in key large accounts and large-scale digitisation projects, and benefit from converging consumer and enterprise offerings.

The spending increase by enterprises is driven by a sea change in mobility and cloud computing needs, as well as the desire for unified and collaborative services such as enterprise social media, as smart phones and tablet PCs have gained popularity. Competition will be intense; business communication equipment vendors, systems integrators, software and online service providers all will seek to grab a share of the MENA region’s fast-growing enterprise ICT opportunity.

Telecom operators can capitalize on core capabilities to secure a share of the enterprise opportunity. Their multiplatform network infrastructure, established relationships, wide reach, reputed brands, and access to capital will be key assets.

“Despite those advantages, MENA operators will not automatically win enterprise customers. Operators will need to approach the business market in a fundamentally new manner and create a new value proposition. They will need to refocus efforts to capture the opportunity presented by the creation of millions of new small and medium-sized enterprises (SMEs) over the next several years. They need to expand their offering to lock in key accounts and leverage their incumbent position with government agencies. If successful, regional MENA operators will tap into a growth area, fuelling substantial gains for years to come,” said Bahjat El-Darwiche, Partner, Booz & Company.

Enterprise Customers: A Growing Opportunity

As many MENA consumer telecom markets approach saturation, MENA operators hope to continue growing by putting new emphasis on their efforts in the enterprise segment. The ICT segment for enterprises in the MENA region is significantly underserved. Although enterprises account for as much as 6.5 percent of all mobile SIMs in some European countries, they average less than 1 percent in the MENA region. Yet, the MENA enterprise ICT market is growing rapidly. It will almost double within five years, from an estimated $14.8 billion market in 2010 to $26.1 billion in 2015.

Increases in both the number of enterprises and the expected ICT spend per enterprise will drive that rapid growth. According to Booz & Company, an expected number of enterprises in the MENA region will grow at a 10 percent annual rate through 2014: this will add almost 4 million new businesses to the current base of 8.25 million. That growth substantially outpaces the growth rate of businesses in both Europe and North America. Nevertheless, ICT spending per MENA enterprise, currently one-fifth that in western Europe and one-tenth that in the US, is bound to increase.

Taking Advantage of Operators’ Strengths

Telecom operators can capitalise on six core capabilities to secure a share of the enterprise opportunity. Each of these six core capabilities provides MENA telecom operators with an edge over competitors in approaching the enterprise business. A combination of some or all of these capabilities adds up to a potent competitive advantage with enterprise customers:

  1. Multi-platform network infrastructure: Telecom operators can use their multi-platform network infrastructure to deliver services on a variety of devices.

  2. Established customer relationships: Through their current offerings and interactions, telecom operators have access to an established enterprise customer base.

  3. Wide reach: Telecom operators use a variety of sales channels and have a strong presence across the geography they serve.

  4. Large-scale programme management experience: Many established telecom operators have broad experience in managing large-scale infrastructure deployment and service delivery programmes with many stakeholders and interdependencies.

  5. Trusted brands: Many telecom operators enjoy established brand recognition, typically in the consumer market where they have ample experience.

  6. Access to capital: Particularly in the MENA region, telecom operators are cash rich and have the means to invest in long-term, capital-intensive projects. 

Preparing to Compete in the Enterprise ICT Market

With stiff competition almost certain to emerge for the enterprise ICT market, MENA telecom operators need to consider the business market in a fundamentally new manner and adopt differentiated approaches to succeed in securing and maintaining clients—whether SMEs, large enterprises, or government agencies. Telecom operators will have the ability not only to gain a foothold in these emerging businesses, but also solidify ties with individuals who work in these organisations, bolstering their consumer business.

Focus on SMEs to Capture Emerging Opportunity

To serve the SME segment effectively, regional telecom operators first will need to group customers based on behavioural characteristics such as telecom expenditures and service sophistication. “Operators need to design bundled and converged solutions that offer SMEs a one-stop-shop experience. Telecom operators could also provide SMEs software-as-a-service (SAAS) cloud applications, allowing them to meet their business needs with minimal up-front investments. To offer SaaS, telecom operators typically partner with application providers.”, explained Hadi Raad, Principal, Booz & Company.

Because SMEs are scattered throughout the region and not clustered in one city, they are hard to reach through retail outlets. As a result, operators might consider using outbound telesales, as well as resellers that have the widespread coverage necessary to reach SMEs.

Lock In Large Accounts with Turnkey Solutions

Large enterprises and key accounts typically have a large number of employees and will likely spend significantly on ICT. These customers increasingly demand turnkey solutions that address their specific business needs, such as increasing productivity, improving customer satisfaction, and cutting costs. They typically prioritise service levels over price. Large enterprises and key accounts also expect a differentiated sales and customer service experience that only dedicated account and service managers can deliver.

“To service large enterprises effectively, regional telecom operators will need to migrate from being providers of basic voice and data services to providing full ICT solutions. That entails initially expanding their product portfolio and service offerings to deliver complete, targeted ICT solutions. The portfolio offerings need to be comprehensive and specific. In targeting large enterprises, telecom operators also need to shift from a typical account manager sales approach to a consulting relationship, acting as partners with the customers and designing turnkey solutions rather than offering off-the-shelf services,” stated El-Darwiche.

Leverage Government Relationships to Capture Digitisation Opportunities

Beyond the traditional enterprise market opportunity, regional incumbent telecom operators should also seek to position themselves as enablers for digital economies by leveraging their privileged government relationships and becoming the provider of choice for government ICT requirements.

Raad commented, “Applications such as smart metering, intelligent transport systems, ehealth, and education are driving transformation in traditional economic sectors. To capture large-scale projects, telecom operators need to build a deep knowledge of the economic sector they would be serving and propose ICT solutions to address their specific needs. To deliver these services, operators will need to have strong solution design, systems integration capabilities, and large-scale operations. Operators in other markets are already using partnerships and acquisitions to build these capabilities.”

Use Enterprise Relationships to Bolster Consumer Offerings

Telecom operators can ride the popularity of some end-user devices (such as iPads or BlackBerrys) and the adoption of services by key decision makers in the enterprise to promote their business applications. For instance, they can provide and promote mobile- or tablet- based applications to monitor sales performance.

“Similarly, operators have a prime opportunity to grow their consumer base through their enterprise business by offering and marketing products directly to the employees of these businesses. A convergence of consumer and enterprise offerings can enable an operator to cross-market products and services, sparking growth throughout its operations,” added Raad.

Get the Service Right

Regardless of the targeted niche within the enterprise segment, operators need to differentiate their value proposition by realigning their service delivery approach. For medium-sized businesses, this might mean access to around-the-clock customer service and a help desk with knowledgeable technical support, proactive maintenance, and short resolution times. Larger enterprise customers will require committed service-level agreements (SLAs) for a comprehensive range of mission-critical services.

Raad further said, “Enterprise customers are increasingly sophisticated in their needs, specific in their requirements, and quick in embracing new communication devices. Mobile and converged communications, as well social media and cloud computing, are driving enterprise ICT demand. Operators need to segment within each of the large enterprises, key accounts, and SMEs markets—and deliver a differentiated raft of services to each segment. They need to extend their portfolio beyond core connectivity services to include tailor-made solutions that address the specific needs of their targeted customers. Strategic acquisitions of providers with geographic or industry expertise is an effective way for operators to gain ground in this business and further penetrate the ICT market.”

“With almost 4 million new businesses over the next 3 years, the enterprise market opportunity in the MENA region could be significant.. Enterprise revenues account as high as 25% of telecom operators revenues in some European markets. Operators should leverage their strengths to grab share in the rapidly growing SME segment, lock in key large accounts and large-scale digitisation projects, and benefit from converging consumer and enterprise offerings,” concluded El-Darwiche.”