Telecom has been one of the major contributors to the domestic IT market for the last few years, and FY 2003-04 was no exception. At Rs 4,339 crore, it was the second largest vertical in this market. Its significant position can be ascribed primarily to three factors-the fast pace at which the government deregulated the telecom sector, the advent of the unification regime, and, most importantly, the stupendous growth in subscriber base that every service provider witnessed.

All these factors led to the rapid rollout of wireless networking across the country, generating tremendous demand for telecom software across the physical layer, from switches to the enterprise level. Even on the hardware front, the growth was phenomenal, especially since every kind of telecom equipment requires IT support at the backend for its smooth functioning.

With more and more service providers entering the market and rapidly expanding their services, the demand for OSS/BSS and network management tools has grown exponentially. To sustain themselves in this highly competitive market, service providers had to invest in infrastructure, improve quality of service, network efficiency and billing solutions. And these were precisely the factors driving the adoption of IT in the domestic market.

The Rs 175 crore OSS/BSS market saw in play some interesting dynamics. While Indian vendors like Wipro, Infosys, TCS or Subex were busy catering to foreign service providers, the domestic market was dominated by players like CSG, SchlumbergerSema, ADC, Convergys and Eftia. Mobile and private fixed-line operators accounted for Rs 125 crore of the overall spend, with new service providers like Reliance and Tata Indicom taking a large share of this pie. Billing remained the single largest component, though revenue assurance also gained in importance. Two new demand areas in the OSS space came into the limelight, the first being fixed-line service providers offering broadband and data services, as also GSM service providers who have started managing GPRS networks in tandem. The second flavor of the year, with cases of unpaid dues increasing, was fraud management.

There are 7.6 crore subscribers in the country for the services offered by fixed-line and cellular operators (both GSM + CDMA). In addition to managing a growing customer base, the operators have to deal with issues of customer churn, network optimization, and increasing cross-holdings amongst existing customers. Regulatory changes too have added to the service providers' usage of IT. Most telecom service providers recognized Business Intelligence tools as a strategic IT investment and looked for enterprise BI suites that would serve the needs of several different types of users, with the impetus to purchase BI solutions coming from functionalities like churn management, marketing automation and segmentation management. No wonder then that this entire enterprise software portfolio, including BI, CRM and related applications, made up a market of the size of Rs 1,583 crore.

Customer churn and network optimization are in some ways linked to each other. As far as telecom service providers are concerned, it was imperative to understand the reasons behind consumer churn and prevent it from happening, or at least contain it. One key deterrent to churn is effective customer service, for which it is necessary to have solutions in place for registering customer data, studying and analyzing behavior and spending patterns to predict the propensity to churn, which will enable the providers to effectively address issues and increase customer loyalty and retention. Many service providers like Orange, BPL Mobile and Bharti adopted BI suites from vendors like SAS and Teradata and aligned them with CRM and churn management solutions.

Another catalyst driving IT usage in this sector was the growing realization amongst service providers about the need to provide data services. Eventually data ARPU (Average Realization per Unit) would leave behind a dwindling voice ARPU, and for the development and maintenance of different data applications, the increasing adoption of IT is inevitable. The best examples were Reliance Infocomm and Bharti, both of whom unveiled a slew of enterprise and consumer data applications. Many of these applications were closely integrated with IT applications; besides, their entire development was done solely on IT platforms. For example, the CIO of a carrier has to decide whether to continue to use J2ME as a development platform or whether to go for BREW from Qualcomm.

Networked storage was one area where the telecom vertical witnessed massive upheavals. Most of the bigger telcos implemented SAN solutions during 2003-04, since increases in their subscriber base necessitated migration to a faster and more reliable mode of storage. The entire storage market for telecom was pegged at Rs 184 crore. VSNL went for a SAN solution from Hitachi, while Bharti and Tatas went for EMC solutions. Storage adoption in telecom was not merely restricted to SAN implementation but also involved storage virtualization. The obvious advantage of storage virtualization for telecom service providers is that it simplifies and makes storage administration less expensive.

Managed network services as part of overall network integration at Rs 721 crore was another growth area in telecom. With all service providers busy expanding infrastructure and building capacity, the trend was to offer better SLAs to customers with an eye towards customer retention. As a result, there was increased utilization of fault and performance management tools by the telcos. It was true not only of the voice-based service providers, but also of ISPs; VSNL, Sify and Dishnet, for example, focused hard on the SLA front.

One interesting sidebar: the IT adoption rate in the Indian telecom sector got increasingly skewed towards the service providers. No one, including fixed line carriers and ISPs like Sify and Data Access, not to mention the large cellular carriers, lagged behind in investing in IT. However, the OEMs were increasingly sidelined in terms of their IT usage quota, for carriers were not very excited by new technologies like 3G and GPRS as these are yet to mature to the levels anticipated earlier, and have not at yet been widely deployed at the mass level either. Further, funding for these new technologies was either non-existent or much too small. All these factors contributed to the drying up of cash inflow to OEM vendors and subsequently to IT spending.

Rajneesh De in Mumbai