Sprint and AT&T to do battle over enterprise services
Race for multinational integration projects
Comment Sprint CEO Gary Forsee was bullish last week about the prospective merger of AT&T and BellSouth, claiming his company’s challenge to the Bell operators — based on broadband wireless, cable company alliances and mobile multimedia - would be equally strong against three RBOCs as four.
While the race for the mobile triple play will be critical in the medium term, in the immediate future the first battle between these two players, and Verizon, may well be in the enterprise space, where there is increasing interest in managed services and integration projects addressing corporate mobile applications.
Sprint has been a front runner in introducing service level agreements and consulting services to try to rival the traditional integrators such as IBM in the mobile enterprise market; but AT&T and, to a lesser extent, Verizon’s MCI unit, have the advantage of long established presence in the global business of providing network services to large companies.
Sprint has announced a new enterprise mobility unit to offer consulting and deployment support in the US, and is looking to expand internationally, while AT&T will increasingly work more closely with wireless arm Cingular in the large company space. This will be important to retain its lead over other converged wired/wireless integrators, notably Verizon and, in Europe, France Telecom/Orange/Equant, which could well become a major partner of Cingular too.
British Telecom is seeing more of its own successful enterprise services business coming from mobile projects and could well work more closely with Vodafone and even Vodafone partner Verizon in future as the race heats up to secure the multinational dollar in the coming few years, which are likely to see the largest growth yet in mobile enterprise deployments.
Sprint Nextel is being determinedly sanguine about the likely AT&T-BellSouth merger, which could strengthen those companies’ joint wireless venture, Cingular, and widen the gap it already has with Sprint’s cellular activities. It believes, with some justification, that its strategy is highly differentiated from that of the Bell operators and will meet their huge market spread with a more innovative, content driven approach, pivoting on the planned broadband wireless network, an advanced mobile triple play, and Sprint’s joint venture with four major cable operators.
This last gives it access to content and, assuming the alliance holds strong, a wireline platform to address the growing demand for common services over fixed and wireless networks. CEO Gary Forsee said Sprint would not be encumbered by local lines like the Bellcos (it is to sell its own local landline arm, Embarq, later this year) and would, through the cable venture, bring "a whole different paradigm of growth the RBOCs don't have".
This is a battle, though, that will be fought over the coming decade. More immediately, a strengthened AT&T will challenge Sprint in an area where it is targeting major growth in 2006-7, enterprise services.
Converged network services for enterprises
One of the key reasons for Bell operator SBC to buy AT&T last year – and subsequently take its name – was for the venerable operator’s recently upgraded global network and large number of enterprise customers in the US and internationally. Integrating Cingular’s nascent mobile enterprise service activities with AT&T could raise the wireless company’s profile significantly and allow the combined company to target wired/wireless projects – particularly large integration and managed services deals.
Although the largest cellcos are increasingly targeting consulting and integration contracts connected to mobile enterprise strategies, they have little track record here, and many large corporations are looking to turn to a common partner for all their networking needs, as they move to converge wired and wireless with IP.
This gives a major advantage to the wireline carriers that have well established enterprise integration arms, and can introduce wireless to their portfolios on a multinational basis – AT&T is a prime example, as are BT and France Telecom (the leaders in Europe) and to some extent, Verizon/MCI. Though MCI still works in the shadow of its previous financial problems, the Verizon ownership will help it challenge AT&T more effectively and there are already moves to add Verizon Wireless to the mix.
Now rebranded Verizon Business, it last month announced a new line of integrated services, including wireless and wired network access offerings, that will combine MCI's remote access platform with Verizon’s EV-DO cellular system. Key services are secure mobile back-up for times when companies' primary networks are disrupted, outsourcing, data and IP networking, voice over IP and IT services. The converged offering will be launched in the US but is also seen as a way forVerizon to extend its international business, based on MCI’s 75 offices around the world.
Verizon Business combines the enterprise and government customer base of MCI with Verizon's former Enterprise Solutions Group and claims 94 per cent of Fortune 500 companies as customers in some respect. In addition to traditional voice and data services, Verizon Business will offer enterprise customers managed WAN and LANS, VoIP services and telecom equipment.
"Finally Verizon is getting the wireless part of the business and the VPN part of the business talking to each other," Forrester Research analyst Lisa Pierce said. "This is behind what Sprint has been doing and even behind, to some extent, what Cingular has been doing."
AT&T and Cingular
Wireless back-up has also been a strong headline offering for Cingular in its moves to offer converged corporate services – one that will become far simpler should its two parents merge. In November, BellSouth announced the first of a planned string of options for large companies co-developed with Cingular – the Wireless Data Back-up solution, which uses Cingular’s EDGE 2.5G cellular network to back up BellSouth's existing wireline data networks in case of an outage.
The service uses a redundant router equipped with an EDGE-compatible wireless PC modem card at each location that requires wireless data back-up. Cingular had launched its own wireless back-up offering earlier in 2005 and says it has seen strong uptake and has also been developing wired/wireless managed services with SBC/AT&T. This process will be streamlined should all three companies become one, with the common AT&T brand for all corporate offerings.
This increased weight and common brand, plus an $8bn-plus plan to invest in global networks this year, should make AT&T a powerful enterprise services player, although it needs to leverage and market its presence outside the US more effectively, since its progress has slowed there, and it may be distracted by the merger with SBC.
However, the ability to increase its focus on mobile networks will be key. For instance, BT Global Services – with France Telecom/Orange the leading managed networks provider in Europe - said that around 25 per cent of its network outsourcing contracts won in its most recent financial quarter involved running the client's mobile as well as their fixed line networks.
With this in mind, we can expect AT&T to try to build on an important alliance between Cingular and Orange for the European and multinational market, despite the potential clash of interests with Orange owner France Telecom, which has its own services arm, Equant. On the other hand, the two parent companies could benefit from working more closely together outside their core territories, especially as Equant has been losing ground to BT in large enterprise services.
Orange’s agreement with Cingular enables the users of the two operators to have functionality that includes common bid management across US and European accounts, central reporting and some discounts. The operators will coordinate transatlantic mobile services for multinationals and support discounts (starting at 5 per cent) for Cingular customers using Orange services, but there is no reduction in international roaming charges.
This is the closest transatlantic partnership to rival the Vodafone/Verizon Wireless joint venture (though these two partners have different network technology). Vodafone has a 45 per cent stake in Verizon Wireless, and the two work closely together on multinational accounts. To even try to challenge Vodafone in global roaming – often the prerequisite to any more complex mobile integration contract for a multinational customer - Orange and Cingular have hinted they will go further and offer managed roaming services, reduced roaming charges, service level agreements and single contracts.
Orange also brings to the mix its membership of the Freemove alliance of large European operators – also including Telecom Italia Mobile and T-Mobile.
So with this web of alliances building up to address the large enterprise market, where does Sprint fit in? Despite its own international long lines network, it has been less active than AT&T and MCI in the integration services business, although it has been a trend setter in some respects, notably the introduction of service level agreements for international customers.
This showed Sprint starting to think like a real enterprise services organisation, something the cellcos have found difficult – less than 10 per cent of large enterprises with an integrated mobile data system have a comprehensive operator SLA, but this has been one reason why they often turn to an IT integrator or wireline carrier rather than a cellco for high level services, relying on the mobile player only for voice and data minutes. SLAs are starting to become a key differentiator both for mobile network services and managed services, especially when working with or competing with wireline carriers.
Sprint offers wireless data SLAs for its mobile business customers, based on network performance metrics such as dropped data sessions, blocked data sessions and data network availability, and will extend this to managed services, customer response and other key areas.
Another sign that Sprint aims to challenge AT&T’s international network reach by starting to behave like an enterprise integrator, not a cellco, came late last year with the creation of the Sprint Enterprise Mobility (SEM) group, which is pitching itself against the largest telecoms services integrators such as IBM. This unit aims to expand its presence in the consulting business beyond advice and into implementation and to advise large businesses and government agencies on how best to use wireless technology and to implement and manage those systems.
This is a braver step than the company's existing Sprint Mobile Business Assessment, which was itself a ground breaker among cellcos, unveiled in July as the first consulting business dedicated to wireless technology, and now absorbed into Enterprise Mobility.
The move was seen as Sprint's entry into the high margin consulting arena, seeking to play up its in-depth knowledge of wireless systems in order to lure customers from IT consultancies such as IBM, as enterprises become increasingly interested in how to mobilize their workforces and key applications.
The key change is Sprint will now follow through with its advice and help companies set up the systems, managing them and sharing in the risks. "Most businesses recognise the potential that mobility solutions offer, but tell us they don't have the expertise or resources to tackle major deployments across multiple companies and operating systems," Sprint Nextel’s chief operating officer Len Lauer said in a statement at launch.
According to figures from Bain & Co, the managed services market for operators will be worth $40bn-$50bn in the US alone by 2008, but pure consultancy is worth only 10 per cent of that total, making expansion into implementation and management essential.
On the consulting side, Sprint is aiming to strike the difficult balance that IBM had to work towards for many years, focusing on multi-technology integration and asserting its own objectivity while using its consulting contracts to generate interest in its core services. From now, the consultants will focus on integration ofdifferent systems, new and legacy, rather than pure technology choice, and will aim to tailor a unique network for each customer. In particular, it will build up expertise in integrating wireless networks and access with key application suites such as supply chain management.
It will be important to try to work with the major integrators and software houses rather than against them, since IBM, SAP, HP and so on have well established presence in the richest business accounts, and will find it a less dramatic leap to extend their applications knowledge to mobile access platforms, than for Sprint to shift from understanding mobile data networks to becoming a fully fledged enterprise consultancy.
So far, only the cellular operators with wireline parents with existing integration businesses – such as Orange – have really delivered on any of their promises to the large corporate base.
Pragmatic solutions like redundant wireless back-up for wireline data networks will be important to get a foot in the door, and the best introduction to the large enterprise will be any service, however basic, that promises to bring the telecoms bill under control.
So we have seen the big cellcos, behind all their high sounding talk of server-to-handset mobile enterprise integration, introducing more mundane offerings that could well catch the corporate attention. Cingular recently unveiled OfficeReach, an integrated communications management solution that allows businesses to administer their wireline and wireless services as one system to help control telecom costs.
Tools include one-number service, customisable call management, private numbering plan and zone billing and OfficeReach is integrated directly into a company's existing telephone network, requiring no investment in PBX infrastructure. Also focusing on spending control, Sprint has rolled out a voice feature, Mobile to Office, that allows business customers to designate a wireline number for unlimited calling for $8 a month.
Such options may not generate the big revenues that the operators hope from managed services and integration, but they are essential to attract the attention of large potential customers, and to start the cellcos on the difficult climb up the corporate food chain from bit pipe providers to strategic partners.
Their track record has been poor so far, but now there are some more hopeful signs that the three US majors, Vodafone and Orange may change the picture and provide a genuine new option for large companies. Forget mobile television, in the short term, this is where Sprint will have its work cut out to stay ahead of an expanded AT&T.
Copyright © 2006, Wireless Watch
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