Techno Telecom

Published on May 2016 | Categories: Documents | Downloads: 46 | Comments: 0 | Views: 266
of 36
Download PDF   Embed   Report

Comments

Content

Technology, Media & Telecommunications India Predictions 2012

TMT India Predictions 2012 www.deloitte.com/in

Contents

Foreword Technology A glance at the Technology Industry in India Ascent of the cloud: Adoption of cloud computing to accelerate “Banking the unbanked”: Mobile banking set to gain momentum e-commerce 2.0: Theme-based specialists to drive the next wave Medical Industry: Technology providers to act as the anchor for collaboration Beyond the digital curtain: Emergence of tier 2 cities Media A glance at the Media Industry in India Print media: The “regional” trend Radio: A resurgence journey Television: The star of the show Digital media: Dawn of the internet economy Telecommunications A glance at the Telecom Industry in India The $100 “Smartphone” to go mass market Low cost tablets war begins and accelerates Low cost (devices & data plans) to induce data explosion m-Health, m-Learning, m-Banking: No longer a pipe dream Endnotes Contacts

5 6 7 8 10 12 14 15 16 17 18 19 20 21 22 23 25 27 29 30 33 34

Technology, Media & Telecommunications India Predictions 2012 | 3

4

Foreword

We are pleased to present the second edition of Deloitte’s Technology, Media and Telecommunications (TMT) Predictions for India. This report is released in conjunction with Deloitte’s global TMT Predictions report and presents our view of the key developments over the next 12-18 months that are likely to have significant medium- to long-term impacts for companies in TMT and other industries in India. We would like to stress that latter point this year - across every global industry, knowing what will come next in TMT trends has become a key competitive differentiator. As in 2011, this year’s report is published as a single report rather than separate ones for each of the sectors. Deloitte’s view is that developments in each sector are now so inter-linked and interdependent that TMT executives need to be cognizant of key trends across all the sectors. The goal of our report is to catalyze discussions around significant developments that may require companies or government to respond. We provide a view on what we think will happen, what will occur as a consequence, and what the implications are for various types of companies. We never however presume that ours is the last word on any given topic our intent is to kindle the debate.

Our methodology which is reviewed and updated every year is predicated on: • Rigorous Research: We use both primary and secondary sources, fusing both quantitative and qualitative analysis, based on in-depth discussions, polling of individuals and reading of hundreds of articles. • Robust Testing: Globally, we test out the emerging hypothesis with Deloitte’s clients, analysts and at conferences throughout the year. • Innovation: We publish only perspectives that we think are new or counter to existing consensus. • Accountability: Our aim is to provide clear endpoints so that our accuracy can be evaluated annually. Today, the TMT industry is one of the most dynamic industries in India. Advances in technology have resulted in disruptive changes in the way businesses function. From colossal changes caused by digital convergence to a rapidly changing mass media landscape, companies in the TMT sector confront a swiftly changing marketplace. We hope you and your colleagues find this year’s Predictions relevant, and our analyses insightful. We thank you for your interest and as always, welcome your feedback.

Technology, Media & Telecommunications India Predictions 2012 | 5

Technology

6

A glance at the Technology Industry in India
The Information Technology (IT) industry is one of the fastest growing industries across the globe. For over a decade, India has gained a special position and made significant advances in the IT sector with the advantage of strong demand and multi-service delivery capability.
IT-BPO services – hallmark of technology industry The Information Technology-Business Process Outsourcing (IT-BPO) industry has become the hallmark of the Indian technology sector. For over a decade, the IT-BPO services sector has been a major engine for economic growth in India, contributing directly through rapid growth in revenue, foreign exchange earnings and employment, as well as indirectly – as a key driver of development of urban infrastructure beyond existing city limits in key hubs across the country. The report, IT-BPO Sector in India: Strategic Review 2011, published by the National Association of Software and Service Companies (NASSCOM), –– states that the IT-BPO industry in India crossed USD 88 billion in revenues in FY2011 (ending March 31, 2011), with IT software and services contributing USD 76.1 billion and hardware accounting for the balance. Direct employment reached about 2.5 million in FY2011, an addition of 240,000 employees, while indirect job creation was estimated at 8.3 million. As a proportion of national GDP, the sector revenues have grown from 1.2 per cent in FY1998 to an estimated 6.4 per cent in FY2011. The share of IT-BPO industry in the total Indian exports (merchandise plus services) increased from less than 4 per cent in FY1998 to 26 per cent in FY20111. For FY2012 (ending March 31, 2012), NASSCOM expects the industry to grow by 15-18 per cent, with software and services export revenues expected to grow by 16-18 per cent and domestic revenues to grow by 15-17 per cent2,3. Despite the steep appreciation of the dollar during the second half of 2011, which will downplay the FY2012 numbers for the domestic market (when translated to dollars), the optimistic (albeit cautious) business outlook for the industry should see its revenue aggregate cross the USD 100 billion milestone in the subsequent quarters in 2012. The industry is projected to hire about 300,000 professionals over the next year4. Gartner Inc. expects global IT spending to increase in 2012 by a modest 3.8 per cent over the projected IT related spending of USD 3.7 trillion in 20115. The U.S. market, which accounts for over half of the revenues of the Indian IT industry, is expected to grow moderately. Management at leading Indian outsourcers have indicated that while client IT budgets are flattish or lower, offshore spends are likely to increase. Domestic market spends are expected to report a steady growth, despite the recent concerns about slower economic growth. Outsourcing and managed services will continue to be a key growth driver. According to IDC, the India Data Center Services (Third Party) market is estimated to reach USD 671 million by the end of 2012, registering an annual growth of around 37 per cent6.

Technology, Media & Telecommunications India Predictions 2012 | 7

Ascent of the cloud: Adoption of cloud computing to accelerate
Deloitte predicts that the adoption of cloud computing environments and applications will accelerate over 2012-15, which would be dominated by large enterprises. Cloud computing has become a subject of interest for a few years now, but user adoption in India is yet nascent. This is expected to change over the next 2-3 years, driven by increasing uptake across a broad base of large enterprise, Small and Medium Businesses (SMB) as well as individual (non-corporate) technology users7. In a study undertaken with NASSCOM in 2011, Deloitte estimates that cloud computing in India could become a USD15-18B market by 2020 – more than 30 times its current size8. Large enterprises – likely growth accelerators Large enterprises are expected to lead this growth, with an increasing share of their computing resources being sourced off to a cloud. It is estimated that by 2020, 20-40 per cent of corporate IT workloads will migrate to a cloud-based model. Telecom, financial services, media and organised retail will be the key vertical markets driving this trend. Each of these sectors is characterised by a large, distributed consumer-base and/or a complex supply chain; and multiple interactions/transaction activities that generate significant amounts of data9. As early adopters of technology, large enterprises in these sectors are already leveraging IT to drive process efficiency. However, many are still in the growth phase of their technology investment cycle and need to continue investing. Cloud-based models offer them greater flexibility and cost-efficiency in scaling-up their computing resources. The government is also expected to be a significant adopter of cloud computing in India10. The 27 missionmode projects being developed under the National eGovernance Plan (NeGP), aim to deliver a wide range of citizen services over a technology backbone. All the projects require large scale technology infrastructure to be available across the country. Cloud computing will enable greater flexibility in provisioning and sharing of this infrastructure. Key end users of cloud computing Both large enterprises and the government have indicated a strong preference for private-cloud models – primarily citing concerns about security and reliability in a public-cloud approach. While private-cloud deployments will continue to garner a leading share in the near-term, large enterprises will also explore hybrid strategies in a meaningful way as the public cloud supplier base matures. The Indian media and entertainment sector is a significant cloud opportunity, expected to unfold over the next 2-3 years. India has more than 600 television channels, 100 million pay-television households, 70,000 newspapers and produces more than 1,000 films annually – across 20+ key languages11. While much of the distribution currently relies on the analog cable channel, the penetration of digital distribution systems is increasing rapidly. In fact, digital subscribers are expected to surpass the analog subscribers by 2013. Consequently, all content and platforms are being oriented towards virtual hosting and delivery. Published content (newspapers, magazines, etc.) has already moved online in a big way. Online hosting and delivery of video content (television as well as movie) is also being explored. While broad-based delivery is a challenge, due to limited broadband penetration, content producers are exploring alternative means to increase their reach12. While most TVs in the country need an external device (set-top box) to access online content, and internet ready TVs are still a few years away from hitting noticeable scale, the mobilesubscriber base in the country is a comparably large segment that is hungry for video content. Cloud-based technology architecture will form the core of this evolution. Other sectors such as healthcare and utilities also offer significant potential for cloud adoption. Indian healthcare has a relatively poor IT legacy. However, the recent thrust on improving healthcare services and coverage in India by the government as well as the private sector is driving rapid IT investment in healthcare. Investments are being made in hospital management systems, disease and drug record analysis and reporting, patient medical record management, and so on. Along with delivering the benefits of cost and flexibility, a cloud-based approach can help drive standards as well as research based improvements in the industry in a more focused manner. Similarly, the adoption of

8

technology to isolate and plug leakages in the utilities industry by transitioning to smart-grids is another potentially large application for cloud computing in India. Historically, Indian SMBs have been relatively slower in technology adoption. This has been largely attributed to the high upfront capital costs, which is a significant barrier to IT adoption. The “on-tap” nature of cloudbased models squarely addresses this issue, and SMB adoption is growing on the cloud. Indian SMB cloud services market overview The Indian SMB cloud services market, which includes hosted infrastructure and web presence services, is estimated at INR 5.5Billion (USD 123mn) in 201113. Of this total, hosted infrastructure has the largest share, with INR 4.3Billion (USD 97mn), and web presence has the remaining INR 1.2Billion (USD 26mn). While these numbers are not very large in absolute terms, they highlight that SMB adoption is growing and SMB spends now account for 20-25 per cent of the total cloud market in India. Currently only eight per cent of Indian SMBs have hosted the business e-mail setup; they are predominantly using free e-mail services. This factor

presents a significant scope for the large SMB segment to benefit from transitioning to hosted business email. We expect a growing number of SMBs to graduate to hosted PBX systems and online applications. Key segments of SMB users with noticeable traction on the cloud include manufacturing and a wide range of internet based businesses. Other SMB segments with significant untapped cloud computing potential include the education sector and independent professionals (lawyers, CA’s, consultants, etc.). In contrast to the trend in large enterprises, SMB users are more likely to explore public-cloud strategies. Public cloud usage is also expected to become more pervasive on the back of an increasing base of individual (non-corporate) internet users. The total number of internet users in India has crossed 100M14. While connectivity is still not ubiquitous, the large and growing mobile subscriber-base in India coupled with the proliferation of internet ready devices (at declining price-points) and increased operator emphasis on data services is driving rapid growth. Over the next 3 years, the number of internet users in India is projected to cross 300M, with over 100M accessing the internet on their mobile phones15.

Bottom line Cloud computing adoption in India is poised for an accelerated growth. While there is broad-based potential in the near term, it would be the large enterprises that will dominate this growth segment for some time at least. Customers have a growing number of options to choose from, allowing them to match the complexity of their cloud solutions with their own IT maturity/comfort levels. It will help to have strong internal champions who understand the business needs as well as the strengths and weaknesses of the cloud solutions offered to drive an efficient transition. Cloud vendors need to demonstrate reliability and sustainable economics of their cloud offerings, to reinforce the decisions made by early adopters and convert skeptics. Vendors will also need to adopt a consultative approach while working with customers exploring the cloud, to guide them through the process.

Technology, Media & Telecommunications India Predictions 2012 | 9

“Banking the unbanked”: Mobile banking set to gain momentum
India aims at achieving its goal of development by “banking the unbanked” to address gaps in social participation. The Reserve Bank of India (RBI) has accorded top priority to “banking the unbanked”, stipulating all banks to allocate at least 25 per cent of the total branches that they plan to open during a year to unbanked rural areas in the country16. Despite all the efforts, over 50 per cent of Indian households still do not have bank accounts17. On the other hand, the total mobile subscriber base in India is approaching 900 million (of a total population of 1.25 billion), with over 300 million subscribers from rural areas18.Combining the two, we expect the drive towards financial inclusion of the unbanked populace to leverage upon India’s mobile telephony infrastructure. Online banking safe in India Online banking has served as a precursor to mobile banking in India, demonstrating the benefits of virtual/ remote banking. However, its impact and growth has been constrained by low levels of computer literacy, access to a PC and internet penetration. Mobile telephony is much more pervasive and offers a scaled platform to drive wider access to banking services across the country. Telecom operators have successfully established a dealer network to drive customer acquisition, activation and service (charging/recharging) in a cost effective manner. Further, key security procedures in the customer enrollment process can also be aligned (KYC) without significant additional costs. Similarly, billing and collection could also be aligned with mobile-wallet deposits, without significant changes to the existing system. Till recently, the potential has been capped by the regulations governing banking in India. India has adopted a bank-led approach to mobile banking that requires the bank to be the core provider of the services, in conjunction with the telecom operators. To encourage greater usage, the RBI has also relaxed the operative guidelines for mobile banking in India. These include: Increased transaction limits • Removal of the daily cap of INR 50,000 per customer for both funds transfer and transactions involving purchase of goods/services. However, it has been left to the banks to place per transaction limits based on their own risk perception with the approval of their Board.
10

Rationalising technology and security standards • Transactions up to INR 5,000 (enhanced from INR 1,000 to INR 5,000) can be facilitated by banks without end-to-end encryption. The risk aspects involved in such transactions may be addressed by banks through adequate security measures. Easing of procedures related to transfer of funds for disbursement in cash • Liberalising the cash pay-out arrangements for amounts being transferred out of bank accounts to beneficiaries not having a bank account and enhancing the transaction cap from the existing limit of INR 5,000 to INR 10,000 subject to an overall monthly cap of INR 25,000 per beneficiary. • Enabling walk in customers not having bank accounts (for instance migrant workers) to transfer funds to bank accounts (of say family members or others) subject to a transaction limit of INR 5,000 and a monthly cap of INR 25,000 per remitter. • Enabling transfer of funds among domestic debit/ credit/pre-paid cards subject to the same transaction/ monthly cap as at the previous point mentioned above. Mobile banking to gear up in rural areas Most major banks operating in India have also stepped-up their mobile banking services. While early adoption has been slow, increased customer education and promotions by the banks are expected to help drive greater adoption of these services. However, these efforts are more likely to influence urban demand for mobile services. The real potential of mobile banking in India lies in driving access to financial services across the rural landscape. Several ventures have emerged which include ventures by large corporations like Bharti-SBI and the Vodafone-ICICI JV. Other platforms/initiatives spearheaded by certain banks include mobile-enabled Kisan Credit Card promoted by several Indian banks and initiatives by various microfinance institutions (MFI). But alongside have also emerged certain other players in the ecosystem, providing technology platforms and managed services suited to the needs of rural mobile banking. These companies include Atyati that enables branchless expansion of banks and also mobile based micro credit delivery. EkGaon Technologies uses image and voice recognition to authorise transactions whereas A Little World uses Near Field Communications (NFC) for

banking transactions. The handset makers along with the corresponding application developers would also play a role in creating a conducive ecosystem. It is projected that mobile banking usage in India will grow from 10 million active users in 2009 to over 53 million active users in 2013, representing a compound annual growth rate of 51.8 per cent19. Once this reaches the tipping point, it could further accelerate to span the ~ 900 million mobile subscribers in the country. According to a recent study by BCG, it is estimated that by 2020, 29 per cent of all Indian adults could be users of mobile financial services; thereby reducing the

unbanked in India by 12 per cent. While the current financial inclusion rate of 45 per cent should gradually increase to 53 per cent by 2020, driven by overall development and economic growth, the additional 12 per cent inclusion from MFS means financial inclusion in the country could instead reach 65 per cent by that year. With wider MFS adoption, the number of people with formal savings accounts could increase by 142 million by 2020, increasing transaction volume by 32 per cent. In addition, 123 million can be added to the number of people using formal bill payment products, increasing payment transaction volume by 31 per cent20.

Bottom line Strong fundamentals and a supportive regulatory environment have set the stage for wider adoption of mobile banking in India. Innovative technology applications will help further accelerate adoption and drive access to financial services to the unbanked rural population in the country. The relatively slow take off of the concept has been primarily due to the lack of clarity on which party in the value chain would act as the hub. With the coming together of many of the large banks and large telecom service providers, we believe that India is at the cusp of a growth in Mobile Banking services.

Technology, Media & Telecommunications India Predictions 2012 | 11

e-commerce 2.0: Theme-based specialists to drive the next wave
Deloitte predicts that theme-based specialists will lead the next wave of e-commerce growth in India. In an eerily reminiscent optimism that held the markets captive in the early 2000s, a second wave of consumer focussed internet companies have invaded the shores of the Indian market. The message that they give is loud and clear. There is a vast territory of uncharted water in the Indian consumption story that technology is yet to touch, and these companies are ready to exploit this gap. The Indian consumers on the other hand, especially in the urban areas, have become hungry for being serviced better and being judicious at the same time. The fundamentals for e-commerce success include: • It has a value for money proposition • It ensures a good customer interface and pre- and post-sales service • e-commerce deploys unerring logistics E-commerce vendors, however, will need to contend with high benchmarks, a discerning and fickle customer base that could shift loyalties at the click of a button. Nonetheless, vendors are equipping themselves both technically and functionally to face the global competition. Coupon and deal sites – favourable investments so far Direct e-tailing and Coupon/Deal sites are two e-commerce segments with re-engineered models that have been successful in the west and are being customised for the Indian market. Coupon and deal sites have seen significant financial investments in the past one year, and the confidence has to an extent been well corroborated by the growing surge in traffic in these sites. As per a leading internet research agency, the top three sites together have attracted around 3.5 million visitors in June 2011. Hence, an increased competition for generating inventory and a cut-throat price war for wooing the consumer. The only differentiators so far in a deal site, valued by the consumers, are the quantum of deal/ discount and the nature of inventory. Many deal sites in India like their counterparts in the world have started bleeding heavily though their customer base has been rising. This is primarily owing to the strategy of acquiring customers in the midst of a raging price war that affects the bottom line.

12

In the near term, we can expect many such sites to go through a few levels of step changes in their business model. The first as already witnessed is a wave of more exclusive deal sites; sites that were into flash deals, moving onto a more generic “deals for everyone” model. The next level would be that the difference between standalone deal sites and group deal sites is blurred as they move into each other’s territory. The third would be deals only sites moving into the space of aggregation or pure e-tailing. The e-tailing success story In the last three years, the number of e-tailing sites has grown exponentially in India. Most of these companies either provide a wide range of products (clothes, electronics, books etc., at one site), or cater to specific niche products (leather accessories, books), or focus on specific segments like childcare, lifestyle, etc. Historically, Indian sites with broad-based product portfolios have been relatively more successful against their global contemporaries. This may be attributed to

the fact that the online buying comfort index can yet be best described as fledgling; the consumer tends to stick to a select few sites for their purchases, which in turn impedes traffic to product specific sites vis-à-vis their broader counterparts. The segment specific websites are trying to blend the best of both and develop a loyal customer base. Given that shopping is often centred around a specific theme where the shopper tends to buy a set of related items, a segment based shopping arcade has a lot of appeal. Such an approach would also address the issue of redundancy in the broad based sites. A segment focussed site is more likely to attract such customers who have a set of connected needs. We expect many new companies to emerge addressing such specific customer segments or those which have a broader portfolio, adopt the concept of shop within a shop and venture in segment specific e-tailing. Many product specific e-tailing stores would also try to get into this logical extension of their business.

Bottom line E-commerce 2.0 in India is set to become bigger and better. In the Deal/Coupon segment, we expect transformational changes to happen among the ones which can survive the intense price war. While difference between exclusive deals, standalone deals and group deal sites will disappear, most of the survivors would evolve to become sites offering direct e-tailing along with the deals. Competition will drive consolidation among players in the broad based segments. The product specific players would have to find a niche where scale, recurrence of transaction and customer loyalty can be achieved. The theme based players would strike a balance between the two existing models presenting customers with a more effective online shopping experience and, hence, would be dominant amongst the new set of players.

Technology, Media & Telecommunications India Predictions 2012 | 13

Medical Industry: Technology providers to be anchor for collaboration
In 2012, Deloitte believes that the medical devices technology industry can play the role of a disruptive innovator both in terms of product and service delivery and become the anchor to create an appropriate ecosystem. There is tremendous scope in the healthcare sector in India. Basic medical care is still to reach the rural populace due to several factors; among them are dearth of medical professionals and high cost of medical equipment. Investments in the sector have been sporadic and geographically skewed for both the investor and the consumer. It has not been able to reach the scale that would have made a visible difference in healthcare facilities even in the remotest corner of the city. Trends in Indian medical sector The concept of Telemedicine in India should have taken off soon after the Telecom revolution. Unfortunately, evolution in this space has been confined to the concept of “consultation over video”, and its actual reach in itself has been abysmally low. Similarly, though we have witnessed significant private sector investments in specialty hospitals, specialised diagnostic centres and to a certain extent in medical devices segment as well – most of these investments have so far been limited to a few urban pockets. The government has also been instrumental in investing in the healthcare sector especially in rural areas through the National Rural Health Mission. However, we believe that its real impact is still a few years away – by when demand would already outstrip the capacity added. This is not only a cause for concern from the perspective of social inclusion, but is also a significant loss of opportunity for manifold growth in the business of service/technology provider. We believe that the medical devices technology industry can play the role of a disruptive innovator both in terms of product and service delivery and become the anchor to create an appropriate ecosystem. Two areas where medical devices companies can play a key role are: promoting “frugal innovation” or performing significant re-engineering on high cost product to come up with a low-frill version. We have seen the phenomena happening in consumer electronics sector and we believe that both – big MNCs and local companies – would foster such development. In its quest for frugal innovation, especially in areas like diagnostics and patient monitoring, the industry will significantly borrow from or collaborate with their counterparts in consumer electronics segment which incidentally have been able to access and service the same masses more efficiently. Need of a viable business model The second aspect that we believe would be fostered by the medical technology firms would be to usher in a different business model wherein they would no longer confine themselves as a standalone technology provider. Instead, they would collaborate with the hospitals, telecom and internet service providers, diagnostic centres, local pharmacies and the government to provide a managed services model in which a network of their devices would play a central role. This would significantly reduce the cost of infrastructure acquisition by the smaller and semi-urban/rural-hospitals and diagnostic centres and would also offer their urban and richer peers to reach out to a larger set of patients without the need to significantly invest in additional capital. Under this model a greater number of the rural population can gain access to quality medical care. Most importantly, it will leave the management of technology and infrastructure to those who know them the best (namely, device manufacturers and communications service providers) and would leave the medical professionals to focus on their core competence in providing quality healthcare to all. Bottom line There is a dire need for greater access to healthcare and given that Telemedicine and Remote Diagnostics as concepts have a compelling case. We have proven technology capability in building and delivering the technology infrastructure to promote such concepts. Further, the government also looks supportive of initiatives that aim at providing quality healthcare to the masses by being both affordable and accessible. With all the key pieces falling in place, the technology providers are poised to act as the key facilitators to transform this sector.

14

Beyond the digital curtain: Emergence of tier 2 cities
One of the striking insights that emerged from the Deloitte Technology Fast 50 programme 2011 for India is the emergence of tier 2 cities. Of the 50 top ranking companies, about 7 were from non-metro cities or cities that have a limited presence in technology landscape. We believe that this is not a one off phenomenon, but an indicator to a larger trend that we have already witnessed in the global technology industry. If outsourcing was the reason for shrinking distance between Santa Clara and Bangalore, there are a number of reasons that led to the same between Bangalore and Guwahati. The reasons that compelled a number of technology companies to outsource to India are not the only ones that are driving business to the tier 2 cities in India. Why tier 2 cities Jobs that brought companies or delivery centres from tier 2 cities in the reckoning were the ones which were at the lower end of the value spectrum. Specifically in the ITeS segment, a significant amount of data entry, collections and basic accounting work are getting moved to tier 2 cities and this trend will continue in the coming years. From the supply side perspective, a growing pool of undergraduates who could be employed at a significantly lower cost than their tier 1 counterparts, combined with the increasing availability of quality infrastructure to deliver these processes, has added to the attractiveness of these locations. The traditional IT hubs are witnessing a scramble to retain talent across many sectors. Thus IT and ITeS, which had till date ruled the roost in terms of capturing talent at a mass scale, are competing with other burgeoning sectors like Retail, Telecom and Financial Services in the tier 1 cities. This is compelling them to look towards the hinterland for talent sourcing. However, it’s not the supply side factor alone that has contributed to this surge. Post the 2008-09 downturn in the global economy, many Indian service providers especially in the ITeS segment looked homeward for getting new business. Domestic ITeS business is becoming an increasingly significant component of many providers’ revenue mix. For domestic clients, accent neutralisation is not an issue; instead fluency in regional languages is a big plus. Also, like many companies in the western countries, a number of customers prefer near-shoring as the customer representatives have the knowledge of the local culture and business. Such factors will, in fact, make it imperative for many service providers to deliver their services out of regional hubs. Technology segment follows the suit The core technology segment is also mirroring this trend, but at a slower pace than their ITeS peers. These companies are founded on the basis of functional and vertical knowledge and the spirit of innovation. Consequently, the quality and experience level of the talent required is higher for this segment. Such talent often gravitates towards the larger cities. For the technology segment, the model is relatively straightforward wherein the founders with a vision for their firm build a practice around their area of expertise. In the services space, these companies primarily thrive by sourcing piecemeal IT development and maintenance work from domestic enterprises or engineering services work from captive centres of various MNCs; several companies are also engaged in application development and maintenance for domestic enterprises. This set of companies need to invest more in innovating their offerings, making their services more process efficient and accruing enough marketing firepower to target international clients. Without such a strategy, growth would be limited for such companies, at least in the short term. Bottom line What makes the overall trend of emergence of Tier 2 cities more heartening is the fact that it is not only the existing players based in tier 1 cities who are pushing work to their business units or subcontractors in tier 2 locations, but as Deloitte Technology Fast 50 pointed out, there are many homegrown companies who directly work with the end customer/ enterprise clients. This trend has been accentuated by the return of the Indian diaspora to their home location. In the IT bastions of Bangalore, Pune and Gurgaon, a substantial section of the knowledge workers come from other parts of the country. The hunger to replicate the success of India’s IT hubs in other regional hubs is pretty evident among a new wave of techpreneurs. The financial investment community has also started evincing interest in nurturing such ventures or hand-holding them to generate the required funding for their business. Though so far we have not seen many organised financial investment houses tapping onto this opportunity, but we can perceive a growing sense of excitement among them to do so. We feel that with the growth of the supporting ecosystem, the IT/ITeS industry in tier 2 cities will receive a further boost to their growth.

Technology, Media & Telecommunications India Predictions 2012 | 15

Media

16

A glance at the Media Industry in India
The Media industry in India is a multi-dimensional and diverse industry that predominantly follows the global trends of digitisation and convergence. With the world moving towards usage of digital devices, this industry has kept pace with the advent of technology and change in consumer tastes.
With an estimated size of USD 2.7 billion 21,it is clearly an industry that can be considered a “front runner” in any economy. In fact, some of the creative campaigns produced in the country are considered masterpieces and have been developed into case studies of “brand emergence”. The advertising industry in India continues to evolve from what once was recognised as a “small-scale” business to an important contributor to the Indian economy. It is not just the advertising field, but even mainstream cinema that has catapulted to the world stage. A number of bollywood movies have been nominated for the Oscars or at other international film festivals. Presently, the sub-sectors in the industry are more than a handful, with the digital platform taking more dominance in the recent years. Among the mediums, the print industry retains its stronghold despite the global trend towards digitisation. In India, the print industry still continues to hold sway as the medium of communication with the masses. The number of newspapers launched in the country (4853 during the year 2010-11)22 may have reduced over the years, but newer publications continue to hit the newsstands doing decent numbers of circulation. Furthermore, increased regionalisation of content is a new trend that has picked up over the past few years. As satellite television -- better known as DTH (Direct to Home) -- makes inroads to the remotest corners of the country, television has become the daily staple for Indians across the country. Expectedly, the future of this sector is bright with the medium being looked upon as a vehicle to launch new channels or to promote new products in terms of programmes. Radio is the “new-old kid” on the block. Traditionally, radio, through the medium wave band, was the device to listen to and know what was happening in the country and in the world. As transistors gave way to the “television, the radio set was sidelined. With the advent of the Frequency Modulation (FM) band, the ears are back to the speakers. The government will soon be announcing the next wave of auction of licenses for transmission on the FM band. These will be for the tier 2 and 3 cities in the country. The growth in this age old medium is once again set to peak with more than 800 new channels23 expected to clutter the airwaves. With many other subsets of the Media and Entertainment industry in India, including “Bollywood”, that at times churns out more successful films than Hollywood, the prospects for this sector are more than bright. Double digit growth figures will be the norm, and progress of the country will be mirrored in every channel of business in this medium.

Technology, Media & Telecommunications India Predictions 2012 | 17

Print media: The “regional” trend
In 2012, Deloitte predicts that the traditional print media in India will still hold strong, and newspapers will continue to be broadly consumed and highly regarded as reliable sources of information, entertainment and other general content. Newspapers rate at par with television in terms of overall advertising influence, and are considered a top influencer of web site traffic (along with search engine results and television advertising). Newspapers – still going strong Unlike in the western countries and in some of the other Asian countries, the newspaper in India is still eagerly awaited every morning and is consumed with the morning cup of tea! People of all ages have preferences as regards newspapers and discussion topics at social gatherings still involve articles or advertisements in newspapers. The sheer size of the small scale businesses in India ensures that the classifieds and other pages of the newspaper are never short of matter. Advertisements will remain the dominant source of revenue for the newspaper and a powerful tool for businesses, as ad copy is almost sure to be seen by the target audiences either in the mass English language newspaper or in one of the numerous regional language ones. The growth rate of newspapers in India (new newspapers being published) during 2010-11 is around 6%24, and the trend is expected to continue in the coming years with a regional thrust. A similar trend can be expected in the coming year/s. This trend will however have more regional focus. There could be more regional newspapers being launched as opposed to National dailies. This has more to do with the cost involved, but regional preferences of readers also result in decisions being taken to go more regional than national. Regional newspapers are planning multiple editions within the region or state to cater to the semi-urban population. The next step is to build the brand and launch further editions in neighbouring regions/states and expand its reach. It is interesting to see how regional newspapers which have small/medium levels of circulation bring out multi-town editions on a daily basis. The share of regional newspapers is around 46%25 in India. The advent of the broadband and technologies is no doubt helping this happen. There is still time and space for more such newspapers in India, spoiling the reader for choice, until the other digital mediums take their share of the readership pie. Even though digital mediums like the tablet could be the next piece of hardware to replace the feel of paper in one’s hands, its prohibitive cost ensures that it will be several years before this becomes a reality. At present, less than 10% of the population has access to e-papers and even here the preference is for the print version over the online one. Bottom line The newspaper business remains viable as readership is sustained and growth is based on brand and acceptance. What is expected is increased regionalisation of this media, with focus on regional content and regional editions. The digitisation of daily news although evident is preferred only in niche pockets of the urban populace and the scenario is likely to remain the same until related devices like hardware and connectivity become more effective and affordable to provide an enriched experience.

18

Radio: A resurgence journey

In 2012, Deloitte predicts that regulatory reforms by way of replacement of fixed license fee regime with a revenue-sharing regime, transparency in allotment of licenses by way of auctions etc., will help in the resurgence of the radio. The radio segment in India has taken approximately 50 years to grow from infancy to adolescence. In 2010, the total size of the radio sector was estimated to be about USD 0.22 billion. It is expected to grow at a CAGR of about 20% to USD 0.44 billion26. The expected Phase-III of radio licenses, which are planned to be auctioned, would open up newer markets for private FM players. The tier 2 and 3 cities in India have huge potential for such players. More than 800 new stations could hit the airwaves following the roll out of new licenses in the near future. The sheer number of newer stations that have come up gives an idea of the potential reach of the medium. The ad and marketing world will need to rethink strategies while finalising campaigns for their clients. The new stations will have newer audiences and newer opportunities await all – the broadcasters and all the businesses which operate in these regions. The Phase-III policy involves extending FM radio services to about 227 new cities, in addition to the present 86 cities, with a total of 839 new FM radio channels in 294 cities. The private FM broadcasters will need funding for the expansion or launch and can now look at attracting

foreign capital. Liberalisation of the cap on foreign holding, in the form of Foreign Direct Investment (FDI) and investments by Foreign Institutional Investors (FII), has been enhanced to 26% from the previous 20%. With the advent of the radio chip on the mobile phones, the penetration of the radio has increased from 59% in 2007 to 77% in 2011 in the four metro cities of Mumbai, Delhi, Kolkata and Chennai. FM listenership averages more than 60%27 in the mega cities, and this phenomenon could well be repeated in the semi-urban areas. Since India has one of the fastest growing mobile handset market in the world, listening to the radio on the mobile is a new and popular method for the youth. With expansion on the anvil, the ad spends too should rise. However, the trend of the earlier years will continue and no drastic upswing in spending is expected. The ad spends using this medium will grow around 20% annually. This again depends on the general state of the country’s economy. Given the FM’s inherent transmission limitations, the regional flavour to ads will predominate. Bottom line Just as new players explore different and unique fields of doing business in the media world, the new age of radio will most certainly attract them. The established broadcasters have an opportunity to expand their reach and business when the new FM channels will ride the airwaves. Growth for the broadcasters could be in the region of 10-15% on an annual basis, depending upon the business model and availability of funds with the players.

Technology, Media & Telecommunications India Predictions 2012 | 19

Television: The star of the show

In 2012, Deloitte believes that television will continue to dominate as a media source. It will still remain the most popular way to consume videos, television content and films in spite of the content being increasingly available on other mediums like tablets and smartphones. The television industry in India has gained momentum due to liberalisation and enhanced enthusiasm of the broadcasters who are increasingly looking at innovative ways to cash on the success of the entertainment and media sub-sectors. The television industry is projected to grow at a CAGR of 16% to USD 13.9 billion by 201528. Television – digitised with new distribution technologies. Television – digitized with new distribution technologies There are nearly 138 million households in India who own a television. Cable penetration has reached 80% with the help of the Direct to Home (DTH) platform. The DTH segment itself comprises 28 million homes29. Digital television with pay channels will soon outdo the analog and become the platform to stay. New distribution technologies like DTH, Conditional Access System (CAS) and IPTV hold the future of this industry as increasing digitisation will radically alter the way in which consumers receive channels. Also, these distribution platforms will give broadcasters direct access to consumers providing not just routine content but also customised value added services (like video on demand). As a result, the average revenue per user may increase significantly. The other stream of revenue for broadcasters, namely, ad revenue may see some stagnation as compared to the past couple of years. This is more due to the general health of the Indian economy and financial climate. As the cost of borrowing increases, it affects the general sentiment; in such situations, it is advertisement spends on television that is “first axed”, as it is an expensive medium. By an estimate, the television advertisement segment will be the third largest in Asia by 2016, after Japan and China30, with the growth of ad spends on television expected to be in the range of 12-16%. With cricket still dominating the sports in India, the business of telecasting these events still has some value in it though the same has declined in the past few

months due to the recent performances of the home team. Telecasts of cricket matches will continue to be popular with the masses and will ring-in the revenues for the channels. HD broadcast – the future beckons The advance in technology by way of telecasts in High Definition (HD) has given a boost to the distribution segment, including DTH. As broadcasters move more and more channels on the HD platform, a case of derived demand is set to be played out once more. Given that flat screen television is the recognised name for hardware now, cashing in on HD broadcast seems likely in the next few years. 3D television is still like a new born babe, yet to take its first step. As with the print medium, regional television channels are also on the upswing. Given our cultural and regional diversity, the content of these channels is just as diverse, ranging from news to music to general entertainment. Another development among broadcasters is packaging channels to target niche audience like teenagers. The success of such channels remains to be seen as all viewers are spoilt for choice with more than 150 channels available on each set on an average. Language diversity helps monetise content. Producers and distributors are garnering more revenue by dubbing content into regional languages; thereby, ensuring that the product has a wider audience base, and an enduring appeal, especially if it is content rich. Bottom line When watching television the viewer is passive, and smartly produced marketing content works well to create a demand. The more the repetition, the more the desire that builds up in the mind of this passive viewer. It is an established fact that advertising only on the television cannot help in the success of the product or service. A well devised campaign which considers the digital platform and outdoors amongst other mediums is what is required in which the commercial spot of television will be one of the most affective. The broadcasters will continue to be spoilt for content, with general entertainment and films taking the major portion of the schedules. Sports will be close behind and content in HD will be sought after. There may still be some more time to rethink the investments planned for the 3D segment as it is a wait-and-watch game here. The television manufacturers will continue to have steady growth figures with increased sales in semi urban and rural markets as the television set moves from occupying bulky space on the furniture to a sleek hang on the wall.

20

Digital media: Dawn of the internet economy
In 2012, Deloitte predicts that the internet boom in India is likely to continue its growth run. Ecommerce will also continue to be the primary beneficiary of the internet. As mobile connectivity by way of the roll out of 3G services reaches the semi urban and rural areas, the internet story and all the related sub-sectors will witness the growth which they have dreamt of. The internet economy – growing with increasing users The internet in India has taken more than 15 years to cross the 100 million user mark. Now, it is at the cusp of a giant leap. Industry associations like the Internet and Mobile Association of India (IAMAI) to global consultancies like Boston Consulting Group (BCG) in their various reports herald the dawn of the internet economy in India. They also mention a user base of 300 million in the next three years. Another indicator of growth is that close to USD350 million were poured into 57 internet startups in the last one year31. The e-commerce platforms in India have growth figures which can envy any traditional business setup. A case in point is the portal for booking railway tickets on-line. The Indian Railway Catering and Tourism Corporation (IRCTC) launched its portal for booking railway tickets anywhere in India in the year 2002. On the first day of launch only 27 tickets were booked using the portal. In 2011, on an average 400,000 tickets were booked on any given day. Clearly, the success of this on-line e-commerce platform has been phenomenal and outweighs other such success stories. For example, during the month of June 2011 alone, the number of successful bookings done on the site was in excess of 10 million32. This trend of growth in e-commerce is expected to grow in the coming year with e-platforms recording a growth of at least 10% in the number of transactions in a year. Social media – popular and trendy Emailing, networking and chatting with friends is predominantly the activity that the youth engage in on their increasingly sophisticated smart phones. These trends are eagerly watched by the internet businesses that supply and transmit content for these ever hungry users. Internet and social media have become synonymous. In the social media domain, Facebook is an icon itself. The number of users from India which are on Facebook and the numbers who join on a daily basis are nothing but astronomical. Facebook alone has recorded a growth of 132% in India and has around 46 million active users33. The potential which these on-line users have and the potential which can be tapped by the businesses using the platform can be anybody’s guess. With significant adoption across all age cohorts in recent years, social networking is well established as an entertainment and social medium. Since, this platform is on-line and in real time, the information on products, advertisements or services is transmitted at lightening speeds and is also proving to be a medium to push website traffic. In short, the power of the internet is predicted to personify in the social network. It will be a medium in which millions can be reached in “nano-seconds”. Bottom line Businesses and industries cannot ignore the power of the internet, the e-commerce platform and the social network. All these three are the backbone of any successful enterprise. The internet is proving to be the platform where all the concerned – the supplier, the user, the customer, the regulator and even the competitor is on-line and watching every move of the business.

Technology, Media & Telecommunications India Predictions 2012 | 21

Telecommunications

22

A glance at the Telecom Industry in India
The telecommunications sector in India has been one of the fastest growing industries since the last decade and is likely to continue to be on the growth path in the coming years. An important characteristic of the telecom industry in India is its relative high penetration into urban areas versus rural areas. The delta spells opportunities for both telecom operators and regulators to capitalise on the truly transformational potential of the telecom sector.
Wireless subscriber base grew by more than 27% in 2011 in urban India34. With tele-density reaching over 166% in the urban markets, the telecom industry is now eyeing to tap the rural market. The tele-density in rural India is less than 36%. Wireless data subscribers showed a growth rate of 116% in 201035 while only 36% last year.34 The net broadband addition per month was just around 0.2 million in contrast to around 7 million mobile connections per month. The high level of growth in the Indian wireless telecom sector, due to low rural penetration, would continue to drive huge investments in building the telecom infrastructure. Telecommunications as a means of social change The lack of physical infrastructure and skilled specialists in social sectors like healthcare, banking and education in rural areas makes the need for mobile based solutions all the more attractive. These sectors can be made accessible to the rural areas through telecom enabled mobile services such as m-Health, m-Commerce and m-Learning, respectively. Therefore, telecom can be a major enabler of economic growth and social modernisation in rural India. These possibilities bring to light the importance of building a modern and robust telecom infrastructure in a vast country like India. The vision of National Telecom Policy (NTP) 2011 Using the power of telecommunication networks and infrastructure, the draft NTP 2011 envisages empowering citizens and businesses alike in an attempt to create an equitable and an inclusive growth of the nation. The policy’s focus on broadband could be catalytic in integrating rural and urban India. This will help place India in a leadership position not merely in the telecom sector, but also in other sectors that rely on it. Lag in technology development Although India has made good headway on the telecom front, it significantly lags behind in technology development. Most of the equipment required for expansion of the telecom network is imported by telecom operators from other countries. This has led to an outflow of foreign currency to other countries and, consequently, affects the Indian economy from utilising the full benefit from telecommunications. With 3G services being rolled out and 4G on the anvil of, the demand for telecom equipment is already a clear need. As per IT Task Force, India’s demand for electronic products will be USD 400 billion36 by 2020. Some of the major electronics such as smartphones, tablets are part of the telecom umbrella. Diminishing tariffs would push operators to seek new revenue streams from services Presently, there are about 12-14 licensees in each service area compared to the earlier average of 6-7 service providers in one licensed area. There is a compelling need for consolidation in the telecom space to create a sustainable ecosystem for operators in line with the global trend of 4-5 operators. Private operators hold 88% of the wireless market shares where as BSNL and MTNL, two PSU operators, dominate the wire line market with 81%34 share. A reverse trend in cellular

Technology, Media & Telecommunications India Predictions 2012 | 23

tariffs is shaping up whereby leading operators are raising voice tariffs -- worn out by price wars over the last 2 years, reducing margins and high 3G and BWA spectrum costs. India has predominantly been a voice market with the lowest tariff rates in the world. Reducing revenues from voice services is forcing operators to concentrate on data services for better margins. At present, data services in the country account for an approximate of

15%37 of wireless revenue; thereby creating enough room for expansion. The next wave of telecom growth is likely to emerge from rural India where 3G enabled VAS services could be the biggest contributor. Operators would increasingly use the voice platform as well as localised content to ensure relevance and widespread adoption in the rural zones. Operators could gain alternative revenue streams and differentiate themselves through VAS services as voice has become significantly commoditised.

24

The $100 “Smartphone” to go mass market
Deloitte predicts that by the end of year 2012, over 500 million smartphones with a retail price of $100 or less will be in use worldwide and significantly high proportion of it will come from India. India’s share of the total mobile market is expected to grow, and it should enjoy solid increases in shipments. The definition of a smartphone for this prediction is based on consumer perceptions of what a smartphone is, rather than the standard industry definition, which pivots on the type of operating system (OS) used. Many consumers, particularly middle majority adopters, are likely to consider phones as smart if they have touch screens or full keyboards and not based upon what sort of an intangible OS is under the hood. Consumers may regard $100 smartphones as superior to feature phones from the same manufacturer, even though the two form factors might well share many components. According to IBEF38, handset volumes in India reached 210 million last year of which low cost handsets dominated with 75 per cent and smartphones accounted for only 6 per cent of the sales. Global players such as Nokia, Sony Ericsson, Samsung, Motorola and LG have dominated the Indian mobile handset market for several years. But in the recent years, home-grown mobile brands such as Micromax, Spice, Lava, Zen and Fly, amongst others, have established a notable footprint in the entry level handsets. Not to be left behind, foreign multinationals are also launching low cost handsets and regaining their market share, leveraging on the brand loyalty. The $100 smartphone is likely to appeal to many different market segments and its share is set to increase in the overall handset market. Smartphones to find demand as an alternative to existing phones and computers The $100 smartphone could be considered an alternative to the Personal Computer (PC) in certain segments (browsing, gaming, email, etc.) and could serve the needs of millions of individuals who do not actually own a computer. Consumers in smaller cities and rural areas may consider the $100 smartphone as their first trade-up, having previously owned a feature phone. The largest segment of people may also be attracted towards $100 smartphone as a status symbol. Since penetration of personal computers and home Internet access is very low and with demand for communication and information rising everywhere, the $100 smartphone may offer the easiest, most affordable way to satisfy these needs. Smartphones will keep evolving in features to accommodate more data usage patterns As for connectivity, most $100 smartphones that are expected to be sold in 2012 are likely to have GPRS and 3G. A key upgrade in the $100 smartphone between 2011 and 2012 will be the incorporation of Wi-Fi and/or 3G as a standard part of the feature set. This is due to the unsatisfactory user experience on 2G network for data usage and hence less data subscribers. Furthermore, telecom operators will continue launching their own 3G smartphones bundling with data plans at affordable rates to boost penetration of 3G data services and internet in the country. Major share of the $100 smartphone will be of Android family (Samsung, Huawei, LG, Sony Ericsson, Motorola, HTC, etc.). These devices are likely to support e-mail and instant messaging (IM) services and feature a selection of pre-loaded apps and widgets including a Web browser that works best with, but is not restricted to, mobile specific sites and apps. In many $100 smartphones, the

Technology, Media & Telecommunications India Predictions 2012 | 25

OS may be closed, curtailing the ability to download apps; however, this may not matter to customers interested in low-end smartphones. What is possible on these devices is still far superior to what most feature phones offer. The $100 smartphone will also likely include a basic camera with at a minimum 2 megapixel resolution that is just about enough for basic snapshots in natural light and ad hoc videos.

Likely features of $100 smartphone e-mail Instant messaging Bluetooth Web browser 3G / Wi-Fi Social media apps MP3 player Camera

Touchscreen

FM Radio

Due to the lack of widespread 3G data network coverage in some target areas, $100 smartphones will often come preloaded with a suite of apps around astrology, bollywood, cricket, stock prices, devotional content that a typical Indian user would be most likely to use and value. Mapping and navigation features may also be included to drive sales, but weaker digital mapping data may limit utility.

Bottom line Handset vendors are likely to continuously revise their $100 smartphone offering; a specification that was perceived as market leading at the start of 2012 may well be considered market trailing by year-end. The price of many components is steadily falling – for example the cost of touch screens has dropped by about 30 per cent annually in the recent past. This will enable the specifications/features of the $100 smartphone to continue to rise in coming years. App developers should note that $100 smartphone users might not download a lot of content and may be even less likely to pay for it. Some users will have less technical ability than existing smartphone owners and could find downloading apps over the air more mystifying than magical. And some may not have data network access. In addition, app developers may need to create variants of their apps that are suitable for lower priced smartphones that come with relatively low-powered processors and localised regional content. Growing sales of $100 smartphones are likely to cause downward pressure on prices for the whole supply chain. Component manufacturers may come under growing pressure to lower their prices; this could give component suppliers an opportunity to break into the smartphone market.

26

Low cost tablets war begins and accelerates
Deloitte predicts that in 2012 consumer demand for tablets is forecast to be strong; however, enterprise demand is likely to grow even faster, albeit from a lower base. Most common low and mid-range tablets39 Aakash (UbiSlate) Magiq Stamp Spice Mi-720 mTab IdeaPad ME Reliance 3G Tab MiTab Enjoy 7 iBall Binatone Datawind `2999 Beetel Teletech `9999 AllGo Embedded Systems `5000 Spice `11990 Mercury `9499 Lenovo `10990 HCL Infosystems `10490 Reliance `12999 S Mobility `13990 MSI `13999 Best IT World `13995 HomeSurf `8999 The low-cost tablet category that has products priced between INR 5,000 and INR 15,000 has been dominated mostly by homegrown companies such as Reliance, Olive, Spice, HCL InfoSystems and S Mobility, many of them fresh entrants in the personal computing industry. But off late there has been a spurt in the number of lower priced tablets with even leading telecom operators like Reliance, Bharti (Beetel TeleTech) plunging into this space. However the enterprise users have been enticed by high end tablets from Samsung, Apple, and HTC. Apple iPad 2, Samsung Galaxy Tab and HTC Flyer are the market leaders in high-end tablet segment in India. Such multi-media tablets present a variety of new opportunities for enterprise users in terms of content consumption, while supplementing traditional uses of laptops and smartphones for content creation. High end tablets popular in India39
Apple iPad 2 `39500 Samsung Galaxy Tab `24000 HTC Flyer `37999 Blackberry PlayBook `37990 Motorola Xoom `32990

Competition in the low-cost tablet space is set to intensify even further in the next few months, as global brands such as Lenovo, Huawei, etc., also introduce inexpensive models priced at as low as `10000. New entrants in the tablet markets will have to prove worth of the product quality over price value Consumers may prefer established brands over local ones considering that the specifications are identical with the same price point, making it tougher for new companies to sell their products. Mostly all the tablets in low cost price range, run on operating system (OS) Android, have a seven-inch screen and support 3G and/ or Wi-Fi connectivity. Drivers of tablets in 2012 could be greater penetration of 3G services, likely launch of 4G, usage of email, availability of information on the go, useful apps, etc. Indian consumers are price sensitive but at the same time they look for value for money. The defining line for the success of any tablet in the cluttered market will depend not only on the price point that it offers, but also on the services and applications that come along with the device. Another important success factor for the success of any low cost tablet will be the usability and the user experience. For example, although the Aakash40 tablet secured -heavy orders, but the user

Technology, Media & Telecommunications India Predictions 2012 | 27

experience does not appear to be worthwhile. Tablet makers should aim at a set of features and applications for the target audience; a bulk of features/applications usually results in poor user experience due to limitations of the low-cost hardware and hardly any customisation of the underlying OS. As with other consumer markets, key success factors for tablets in India will be extendable memory support, USB connectivity and a considerably long battery life. Companies need to achieve a fine balance between cost and features of the tablets and educate the consumer about the availability of the same. Common features available in most of the tablets 7-inch display 1.2 GHz processor 512MB RAM USB ports Front & rear camera Expandable memory Android 2.3 OS TFT WVGA touch display 4GB internal memory

bundling offers could drive sales of tablets in India as telecom operators subsidise the hardware costs. In India, where PC penetration41 is very low, cost effective tablets might be a good solution to connect people to internet and in turn increase internet and broadband penetration. The only way of taking a step forward in this direction is by putting in India specific content, including local language newspapers, music, astrology, health books, etc. Although enterprises in India are exploring to adopt the (bring your own device) BYOD model, it is extremely unlikely to pick up in 2012. This will likely affect the adoption of tablets in enterprise domain and hence tablets will continue to work alongside computers and smartphones. Three main factors are driving tablet adoption in the enterprise market: The most apparent factor driving tablet adoption is that many consumers initially buy tablet computers as personal media devices, but quickly discover they are also useful for work. Second, certain industry verticals seem poised to start using tablets in fairly large numbers over the course of the year; in fact, trials are already underway. The education, retail, manufacturing, and healthcare industries are considered the most likely early adopters, primarily owing to the tablet’s ease of use, long battery life, lack of moving parts, minimal need for training and rapid application development environment. Third, the tablet form factor itself is driving adoption in the boardroom and in the industries like healthcare and retail. Unlike laptops and smartphones, both of which create an obvious physical barrier between the user and others in the room, a tablet can be placed flat on a conference table and accessed unobtrusively.

3G

Wi-Fi

Bluetooth

3G adoption to work as an impetus for tablet demand in urban markets 3G enabled tablets might see a greater adoption in urban and semi-urban areas due to the availability of 3G services in these areas and bundled data plans available from leading telecom operators. This will likely lead to a price war as leading telecom operators gear up to offer cheaper data plans bundled with tablets for building long term relationship. On the positive side, these

Bottom line The revolution in android tablet market will continue in 2012 as many Indian and global companies will compete to produce cheaper tablets. Vendors should ensure that applications and whole ecosystems help increase the overall user experience on the tablet for increasing the market size. The high-end tablet market will continue to be dominated by the global leaders and might also see reduction in tablet price for higher adoption among the niche customer base in 2012.

28

Low cost (devices & data plans) to induce data explosion
In 2012, Deloitte predicts that data consumption would go up substantially aided by competition, technological advancement and reduction in per gigabyte prices. Drivers that promote data usage There are several factors that will push the data usage to extraordinary levels in 2012: First, there has been a steady increase in the number and type of mobile devices such as smartphones, tablets, eReaders and high capacity dongles. Smartphones sale in India shows three digit growth rate42. Wireless broadband traffic is growing exponentially with proliferation of a new and powerful generation of mobile and multimedia handheld devices with several competing operating systems. Opportunity to connect more devices is boosting the number of subscribers and devices connected to internet. Secondly, the availability of 3G services in all likelihood will become more widespread in 2012, covering most of the tier 2 and 3 cities, and possibly, 4G services would see the light of day at affordable prices in 2012. The third driver is the falling prices of mobile devices like smartphones, tablets, etc., and rapid launch of low cost devices. Smartphone and tablet prices are reducing due to increasing competition in the low cost device space and launch of 3G services. The modern age smartphones with attractive features at affordable prices have grabbed the attention of the young generation. This is increasing the opportunity for youth and upper middle class users to use interactive applications like BB messenger, GTalk, Skype, etc., and social networking applications like Facebook, Twitter, LinkedIn, and others, beyond video and voice. Fourth, the growing demand on mobile devices for bandwidth rich applications such as HDTV, video-ondemand, video-telephony, gaming, etc. The adoption of these multimedia applications of voice, video, and data is dramatically increasing per-user bandwidth. Fifth, the soaring need of upwardly mobile citizens to be always online and access data on the move. There was a speedy increase in wireless data subscribers at 34% year-on-year (Sept 2010 – Sept 2011) growth rate43. Wireless network in need of scaling up to keep pace with demand On account of the above, the wireless networks need to be scaled up to handle higher capacity in the future. However, most of the operators are yet to convert the investment in 3G into a profitable story and are being forced to compete for ever-shrinking profit margins. They are facing the challenge to invest in infrastructure to handle the increased demand, as well as to provide innovative regional applications and services to increase revenue from data services and to attract users from smaller cities. However, the business driver is the increased revenue expected from 3G services due to growing middle and upper class wireless customers willing to pay more for the new mobile services. Internet access through data cards and USB dongles compared to smartphones is unique in India. Due to relatively lower speed on wireline broadband, people increasingly use USB dongles to connect to internet. These dongles not only provide users with high speed data access but also fulfil the need of mobility. Deloitte predicts that the use of these dongles will continue to rise in 2012 due to expanding 3G services and possible launch of 4G services initially on these dongles (since currently Indian regulations do not allow transmitting voice on data networks). Operators should consider how best to ease these customers into using data. With voice service, there is a relatively simple relationship between time spent and cost, but with data the bill for watching a few minutes of video could deliver a “bill shock” to a new data user – causing them to shy away from all future data services. Bottom line Service providers will continue aggressively bundling devices with subscriptions for a few free months of data access as they push 3G data services across an increasing number of cities and towns. These bundling offers (low cost smartphones/dongles with free data usage for few months) might turn out to be the primary motivator for customers towards data usage initially and later the low cost data plans will drive the usage of data exponentially. The introduction of LTE networks as well as the on-going launch of 3G networks will boost the speeds available for cellular broadband. The focus and attention of operators, manufacturers and others in the value chain might strengthen after the release of NTP 2011 from urban to rural-centric. Government’s focus on the development of the rural broadband infrastructure, through optic fibre and wireless, will continue. However, Deloitte believes the explosion of data will most likely happen in the urban markets at least in 2012.

Technology, Media & Telecommunications India Predictions 2012 | 29

m-Health, m-Learning, m-Banking: No longer a pipe dream
In 2012, Deloitte believes that efforts from industry verticals like healthcare, banking, and education will intensify to adopt mobile as a service delivery mechanism in the remote areas. Rural India to be the next growth hotbed Although the Indian telecom industry was not severely affected by the economic downturn, service providers are increasingly concerned about the eroding profit margins in the light of intense competition. The increased pressure on profitability is forcing operators to focus on reducing internal costs to strengthen their market position and to differentiate constantly through value added services. Some of the biggest challenges faced by service providers include: • Rock-bottom voice ARPUs • Disparity between data traffic and data revenue increasing rapidly • Extreme competition • Security and data protection requirements • Massive investment required to increase the network capacity • Uncertain regulatory environment • Continuously evolving technology Given the rapid increase in the number of telecom subscribers and tele-density, the industry presents huge growth potential for players to expand network coverage and telecom services. There is a huge market opportunity to cater to the rural areas where the tele-density is 36.444. Opportune time for partnership between telecom and telecom dependent industry sectors Most players in the value chain of industry sectors such as healthcare, banking, education find it difficult to incur the high costs to serve the rural areas. It makes perfect business sense for these business sectors to form strategic partnerships with the telecom operators and work out win-win business models. Also following developments indicate that mobile usage is likely to grow further in 2012: • Younger generation has a healthy appetite for • • • • • mobile services and are tech-savvy (65% of country’s population is still below the age of 30) Increased mobile internet usage Smartphone ownership has room to grow Native apps and faster data speeds drive higher volume NFC-enabled phones are slowly entering the market Open software platforms are becoming common

Leading IT companies, mobile device manufacturers, telecom service providers, and government have acknowledged education, healthcare and banking as the priority sectors. Recognising that technology would be a pivotal enabler in enhancing access to these sectors, the companies are looking to update product compatibility with a tablet and smartphone based solutions, e.g., smartphone ultrasound device45. The NTP 201146 envisages connecting all the village panchayats with high speed broadband through optical fibre network. The fundamental need for realising tele-diagnosis, tele-consultancy and tele-education is this high speed broadband. It could empower the rural beneficiaries by expanding their use of e-government. Healthcare Around 80% of India’s medical specialists cater to 20% of the population. This leaves about 750 million Indians in semi-urban and rural India without direct access to specialist care47. Technology would aid delivery of healthcare services at the patient’s doorstep in remote rural areas. Mobile phone manufacturers are now keen to power their glossy gadgets to deliver healthcare solutions. The clarity in voice and video can make a huge difference while providing healthcare consultancy over mobile. With more than 850 million mobile users, healthcare applications are also becoming popular in the application stores. There are around 17,000 health apps available on smartphones, but how many are useful and are actually downloaded is questionable.

Healthcare providers

Medical insurance

Telecom service providers

Technology providers

Mobile device manufacturers

Network device manufacturers

Government

30

Mobile health apps and services will not take off without the involvement of various players from healthcare and insurance companies to governments and the patients themselves. The concept of the handset as a health diagnostic tool is closer to reality than ever as the healthcare sector itself undergoes a major shift from being hospital-centric to patient-centric in 2012. Several leading hospitals have embarked on this journey to deliver healthcare services to millions in the remote areas through mobile devices and high speed broadband and Deloitte believes that these efforts will further intensify in 2012. However, the growth of telemedicine and its ability to bridge the urban-rural divide in healthcare delivery has been hampered by the high cost of information and communication technologies. Banking The financial institutions, private and public are struggling to provide banking infrastructure in all the regions of a vast country like India. They face several challenges such as geographic dispersion, consumer identification, management of costs per transaction, consumer awareness and education. Banks, which are being pushed by the regulator to become ambassadors of financial inclusion, are also grappling with how to look beyond the conventional branch model to penetrate deeper in a viable manner. Banks increasingly need to find innovative ways of on-boarding new customers and servicing existing ones.

Cheaper

Convenience Remote payments

Simplicity

Accessibility

Efficiency

Mobile banking has the potential to bring banking services to a whole host of unbanked people having access to mobile. Regulators like RBI and TRAI, several banks, mobile service providers and phone manufacturers have collaborated to take m-commerce to the “unbanked” population. 2011 saw numerous strategic partnerships between banks and telecom companies. Mobile banking would create win-win situation for all parties in the value-chain by creating an interoperable ecosystem and profitable business models. Deloitte believes mobile phones48 provide enough obvious value that customers will decide to start using mobile banking. The favorable regulation, unique identification initiative, consumer readiness to accept

Banks

Telecom service providers

Technology providers

Distributors/ Retailers

Mobile device manufacturers

POS terminal makers

Card networks

Government

Technology, Media & Telecommunications India Predictions 2012 | 31

technology, electronification of payments would augur well for the mobile money payment. The mobile payments market has gained traction in recent years, owing to higher penetration of handsets in comparison to coverage of population with banking services and benign regulatory environments. The acceleration of mobile remittance services alongside new mobile payment49 scenarios highlights the range of opportunities for the mobile phone to redefine the movement of money by lowering costs, increasing convenience and reducing fraud through Business Correspondent model. Education India has the third largest education system globally, with a network of 1 million schools and 18,000 higher education institutes.50 Yet these are not enough to meet the demand of the education in the country, both in terms of quality and quantity. Also the employability of the Indian youth is often questioned by experts due to lack of vocational training. The education sector is definitely viewed as the most important sector for socio-economic development of the nation. It is a sector that is under the spotlight of government, educational institutes, service and manufacturing companies to undergo complete transformation. It is this vision that is attracting huge investments from foreign and domestic players who might not be even connected with education segment per se. Connecting 1,500 knowledge institutions51 (educational and research) across the country would mean that

the National Knowledge Network of the government should be riding on an ultra-high speed network. Only then can participating institutions seamlessly connect to it at speeds of 1 gigabyte or higher. This will enable distance learning where teachers and students are able to interact in real time. 2012 is likely to see several European and American universities tying up with Indian institutes to offer high quality distance education and also making significant attempts to develop vocational skills. Companies will continue to make efforts to create specialised low-cost tablets aimed at the education sector. Bottom line All the parties in the healthcare, banking, education and telecom industry value chains have to drive deeper into rural markets to keep the growth coming. The common challenge faced by all these sectors is the lack of infrastructure to provide quality services to the classes and masses. This is where the telecom industry can help to bridge this gap and act as the carrier of these services. It’s time for banking offerings to make the same evolutionary progress that automobiles, entertainment devices or mobile phones have made. This means offering choice, becoming smarter, better packaged, cheaper and easier to use. Through alliances with the right partners from the device, telecom, network, applications and retail space, Indian banks could turn this vision into reality. Greater health awareness, insurance awareness, patient age profile, lifestyle changes, and so forth, will all drive growth in the healthcare sector, which is likely to witness more and more private-public partnership mode in 2012 as leading hospitals expand to the semi-urban and smaller cities to fulfil the growing demand for specialty care in these areas. There is a huge potential in the education sector that is waiting to be tapped. The year 2012 is likely to gain more traction in m-Learning in terms of content, device, applications, and delivery methods. Increasingly more companies are likely to venture into this market and provide high quality learning experience for all age groups from building a strong foundation in kindergarten to energising intellect in higher education.

32

Endnotes

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.

16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35.

http://www.nasscom.in/indian-itbpo-industry FY 2011-12 Outlook: Software and services export revenues expected to grow by 16-18 per cent and domestic revenues to grow by 15-17 per cent; NASSCOM Press Release http://www.microsourcing.com/news/201111/nasscom-predicts-significant-growth-for-indias-it-bpo-industry.asp The IT/ITeS sector alone will generate as many as around 3 lakh jobs in 2012; http://timesofindia.indiatimes.com/ business/india-business/Happy-new-year-for-hiring-5-lakh-jobs-likely-in-2012/articleshow/11332538.cms IT-BPO in India: Bracing for a tough year ahead; http://www.brecorder.com/home/br-research/ single/421/44:44/2129:it-bpo-in-india-bracing-for-a-tough-year-ahead/?date=2011-11-24 India’s third party data center services market to reach US$671 million by 2012-end; http://www.datacentres. com/news/indias-third-party-data-centre-services-market-reach-us671-million-2012-end China, India and Malaysia are experiencing the most rapid adoption of SaaS-based enterprise applications in the Asia/Pacific region; http://softwarestrategiesblog.com Deconstructing the “CLOUD”: The New Growth Frontier for Indian IT-BPO Sector; NASSCOM-Deloitte Study 2011 Transactions and Complex Selling: Strong Catalysts of Cloud Computing Growth; http://softwarestrategiesblog. com “That we shall adopt the Cloud in a huge manner is a certainty” Shankar Aggarwal, Additional Secretary, DIT; http://www.expresscomputeronline.com/20110615/interview01.shtm India has more than 600 television channels, 100 million pay-television households, 70,000 newspapers and produces more than 1,000 films annually. http://www.ibef.org/industry/mediaentertainment.aspx Is India ready for cloud TV?; http://thegadgetfan.com/mobile-smartphones/is-india-ready-for-cloud-tv.html Parallels’ Survey Results On INR 5.5 Billion Cloud Services Market: http://efytimes.com/e1/74088/fullnews.htm Internet in India 2011, Study by IAMAI The Indian internet user base crossed the 100 million mark in November. In the next three years the number of internet users will be in excess of 300 million. Interestingly, about a 100 million of these users will access internet on mobile phones. http://economictimes.indiatimes.com/opinion/interviews/next-airtel-will-be-born-out-of-datak-srinivas-president-consumer-business-bharti-airtel/articleshow/11290797.cms http://rbiguidelinesinda.blogspot.com/2011/07/rbi-mandate-banks-to-open-branches-in.html http://www.cgap.org/gm/document-1.9.49435/Access_to_Financial_Services_and_the_Financial_Inclusion_ Agenda_Around_the_World.pdf http://www.trai.gov.in/WriteReadData/trai/upload/PressReleases/849/Press_Release-Oct-11.pdf http://www.imediaconnection.in/article/457/Digital/Mobile/mobile-banking-in-india-the-next-big-thing.html The Socio-Economic Impact of Mobile Financial Services; BCG 2011 Exchange4media Registrar of newspaper Press Information Bureau Registar of newspapers Equitymaster.com www.indianbusiness.nic.in Radio Establishment Survey - Universe Update 2011 (RAM) www.indianbusiness.nic.in Equity master.com The TV India TV Industry Report – Act Two, by Media Partners Asia Ltd. VCCEdge Irctc Facebook Telecom Regulatory Authority of India - The Indian Telecom Services Performance Indicators for the period July September 2011 released on 9th January 2012 Telecom Regulatory Authority of India - The Indian Telecom Services Performance Indicators for the period July September 2010 released on 12th January 2011
Technology, Media & Telecommunications India Predictions 2012 | 33

36. India Electronics demand in country to be $500 bn in 10 yrs: Pilot, http://www.indiasemiconductorforum.com/ showthread.php?1824-India-Electronics-demand-in-country-to-be-500-bn-in-10-yrs-Pilot 37. 3G fails to impress subscribers – Times of India on Nov 14, 2011 http://timesofindia.indiatimes.com/tech/news/ telecom/3G-fails-to-impress-subscribers/articleshow/10724987.cms 38. India Brand Equity Foundation (IBEF) http://www.ibef.org/industry/telecommunications.aspx accessed on 22 January 2012 39. Android News Hub - http://androidos.in/android-tablets-in-india/ 40. India Today Review: Aakash tablet http://indiatoday.intoday.in/story/aakash-tablet-review/1/164487.html 41. Internet penetration expected to rise with 3G services roll-out http://www.livemint.com/2011/02/23223924/ Internet-penetration-expected.html 42. Smartphone sales jumped by 34 per cent in third quarter of 2010: IDC India on December 30, 2010 http://www. afaqs.com/news/story.html?sid=29216 43. Telecom Regulatory Authority of India - The Indian Telecom Services Performance Indicators for the period July September 2011 released on 9th January 2012 44. Telecom Regulatory Authority of India - The Indian Telecom Services Performance Indicators for the period July September 2011 released on 9th January 2012 45. A real look inside the body by GE Healthcare, http://www.ge.com/innovation/vscan/index.html 46. Draft NTP 2011- A triad of policies to drive a national agenda for ICTE by TRAI 47. Healthcare providers eye 3G tech for the next leap in telemedicine on 2nd May 2011 http://www.livemint. com/2011/05/01215605/Healthcare-providers-eye-3G-te.html?atype=tp 48. India can leapfrog cheques to move straight into electronic banking http://articles.economictimes.indiatimes. com/2012-01-26/news/30666847_1_internet-banking-electronic-transactions-electronic-banking 49. RBI removes Rs 50,000 cap on mobile payment transaction http://articles.economictimes.indiatimes. com/2011-12-23/news/30550983_1_national-payment-corporation-reserve-bank-rbi 50. Indian Brand Equity Foundation http://www.ibef.org/industry/educationtraining.aspx 51. National Knowledge Network http://nkn.in/connectedinstitutes.php accessed on 25th January 2012

34

Contacts

TMT V Srikumar +91 80 6627 6106 Telecom Hemant Joshi +91 20 6624 4704 Media Ashesh Jani +91 22 6667 9105 Technology PN Sudarshan +91 80 6627 6116

Technology, Media & Telecommunications India Predictions 2012 | 35

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. This material and the information contained herein prepared by Deloitte Touche Tohmatsu India Private Limited (DTTIPL) is intended to provide general information on a particular subject or subjects and is not an exhaustive treatment of such subject(s). None of DTTIPL, Deloitte Touche Tohmatsu Limited, its member firms, or their related entities (collectively, the “Deloitte Network”) is, by means of this material, rendering professional advice or services. The information is not intended to be relied upon as the sole basis for any decision which may affect you or your business. Before making any decision or taking any action that might affect your personal finances or business, you should consult a qualified professional adviser. No entity in the Deloitte Network shall be responsible for any loss whatsoever sustained by any person who relies on this material. ©2012 Deloitte Touche Tohmatsu India Private Limited. Member of Deloitte Touche Tohmatsu Limited.

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close