1. Take 5 with Daniel Ramos

    CEN Feature (Dec 20 2012)

    1. Take 5 with Daniel Ramos

      Daniel Ramos knows a thing or two about Carrier Ethernet, and it’s not just from covering the space as an analyst. Before joining Pyramid Research as senior consultant and practice leader for cloud and enterprise, Ramos’ gigs included working for Bell Canada, where he helped educate small and medium enterprise (SME) customers about why they should migrate to IP.

      Carrier Ethernet News recently spoke with Ramos about the Latin American market, including why he believes Carrier Ethernet will become the dominant network technology there. 


      CEN: How can telcos compete into the cloud computing space?   

      DR: We see a significant demand for advanced business services (i.e., cloud computing services) from businesses in Latin America. In our recent report, “How do Telcos tackle Cloud Services in Latin America?,”we predicted that cloud computing services in Latin America will growth at a CAGR of 35 percent to reach $30 billion by 2017. 

      In order to compete in this field, telcos will need to support the QoS and SLAs that cloud computing customers require. In Latin America, we predict that telcos will be “forced” to partner with cloud service providers and technology vendors to accelerate their time to market and remain competitive in a space where they have almost no experience.  Telcos have come to the realization that their success in the business segment depends on leveraging and capitalizing on their own network connectivity services by optimizing the performance, the security, policy management, etc.

      Telcos in Latin America will be in a strong position to compete against the other cloud service providers (e.g., over-the-top service providers) because they own the network infrastructure.  These telcos will control critical portions of the network infrastructure value chain. The network ownership allows telcos to scale and bundle cloud computing services with their optimized connectivity services more quickly and easily than traditional IT service providers, and this provides solid QoS.

      Pyramid Research monitors the business connectivity services market in 19 countries in Latin America. We predict growth in subscriptions for services such as DSL or coaxial cable for broadband services: Between 2012 and 2017 we predict a CAGR of 11 percent and 9 percent, respectively. The truth of the matter is that in Latin American telcos will continue providing data access solutions such as DSL and coaxial cable, and to some extent legacy ATM, Frame Relay and TDM, to deliver connecting services to the business segment. Therefore we expect telcos to continue investing to capitalize on the legacy infrastructure in support of cloud computing services.   

      Ethernet-type services become the best option for telcos to remain competitive in the cloud computing space by offering connectivity services that are reliable and consistent. Ethernet infrastructure enables telcos to provide to mix different speeds over existing cabling infrastructure and the capacity of aggregation of SLAs into the network. Carrier Ethernet will become the dominant network technology in Latin America. 

      CEN: In your opinion, which business segment represents the highest potential for cloud services for telcos?

      DR: Today, there are about 19 million SMEs in Latin America. We estimate that the size of the Latin American microenterprise and SME (fewer than 99 employees) market for cloud services in 2012 is $1.9 billion. While this segment represents 42 percent of the overall market in dollar terms, it accounts for 99 of every 100 businesses in Latin America. This represents a massive number of companies that telcos will need to deliver cloud services.  

      The truth of the matter is that the SME segment has not been well served by anyone in the market. This represents a tremendous business opportunity for telcos since they own that relationship with the SMEs, and they can leverage existing connectivity services.

      CEN: When it comes to cloud services, what are the main challenges that telcos face in the SME market?

      DR: Broadband and mobile license obligations in Latin America have forced telcos to invest to provide services to metropolitan and rural areas, increasing the geographical coverage and providing services to dispersed branches and remote workers. This geographic dispersal reduces the latency so the telco is nearer to the SME, which in essence is a fundamental requirement for providing satisfactory SLAs and QoS.  

      But proximity does not necessarily trigger demand for cloud services. Connectivity services will need to be optimized in order to meet the QoS and SLAs required for cloud services. These SMEs are all dispersed between metropolitan and rural areas and connected using a combination of optical, copper, coaxial and TDM networks. These legacy networks typically offer “best effort” data access services. Service providers use ATM, Frame Relay and TDM, and they don’t necessarily optimize their networks for voice or data, which can result in inferior quality for cloud applications.  

      By implementing Ethernet services, telcos will gain significant operational efficiencies over their existing infrastructure and create SLAs and QoS creation capabilities. This provides a consistent customer experience regardless of the location of that SME.

      CEN: Which types of services have the best growth outlook among SMEs in Latin America?  

      DR: Today, most business telcom budgets in Latin America are primarily used for voice services. We also keep hearing from service providers that revenue for traditional services such as voice and DSL keeps eroding. That trend is forcing telcos to look for ways to have better control of their own data traffic and to improve the performance, security and management of that traffic.   

      In the coming years, we predict that SMEs will spend a good portion of their budget on services like IP-PBX connectivity, VoIP, IM, email and streaming. The explosive demand of data services from the massive number of SMEs in the region will force telcos to look for ways to continue expanding their networks at a cost-effective way. Let’s not forget that SME employees will also be mobile users, which will have an impact on the traffic load to support cloud services for mobile users as well.  

      CEN: In your opinion, which Latin American countries are best prepared to adopt cloud services?

      DR: Pyramid Research has recently completed the Enterprise Cloud Readiness Global Index, which is the result of an analysis of enterprise cloud readiness in 49 countries worldwide. The countries included in this report account for 75 percent of enterprises worldwide. Countries with the highest rankings in Latin America represent the markets with the best economic, demographic and connectivity penetration levels for the adoption of cloud services.  

      The results of our analysis show that Argentina, Brazil, Chile, Colombia, Costa Rica, Mexico and Venezuela are the countries with the best broadband connectivity conditions to serve the SME market. The next step for telcos in these countries will be to optimize their networks for cloud services, which not only will result in better revenue for their core services, but will also help them acquire new customers for advanced services and remain dominant in the SME space.

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