Hosted IP services growing steadily

As the trend towards converged communications gains momentum, analysts say hosted IP services are becoming an inevitability.

According to research firm Frost & Sullivan, hosted IP services in SA grew at a rate of 6% in 2006 and are set to reach 11% growth by the year 2013.

Frost & Sullivan research analyst Lettitia Nkumbula says this growth is being aided by the low penetration of communications equipment in SA, as well as a shift towards both small and medium enterprises and big business focusing on their core business.

"The increase in end-user mobility is also facilitating the adoption of services that improve work efficiency. Hosted IP services are well suited to meet these requirements."

According to Nkumbula, there are a number of challenges in growing the market. These include the required infrastructure, the ongoing skills shortage, the fluctuating rand exchange rate, as well as high broadband costs.

"However, the various investments currently shaping the telecoms market will eventually lead to a level playing field," she adds.

"Market participants can gain market share by being among the first to provide unique and tailored service features to clients. As competition escalates, distinct services will be just as important as competitive pricing, since customers will expect more economical products without compromising on the value of the service."

Steve Edwards, business and technology advisor for MarketWorks, says the Frost & Sullivan growth trajectory for hosted IP services means the market would have grown by about 6.5% in 2007. This, he says, is "already looking good relative to economic growth".

He says hosted IP services arena is "undoubtedly a healthy market" and, while it is "not exactly a fireball, it is an inevitability as network convergence accelerates the commoditisation of communications into a consolidated basic services utility".

He says while broadband costs are worth noting as an inhibiting factor in the market's growth, the issue at hand should rather be the quality of service related to broadband.

"If any business - from micro-enterprise to large corporate - is to be expected to entrust its communications infrastructure to a third party (not only telecommunications, but access to its data, applications and customer base), it must be guaranteed totally dependable links and predictable quality of service.

"Here we have some real challenges and soon it will be those service providers that can overcome those challenges that will differentiate themselves."