The Yankee Group Research Notes


 Covering the week of March 19, 2002

The Yankee Group's Weekly Analysis of the Hottest Topics in the Information Technology and Communications Industries
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Table of Contents

1.   BellSouth Strays from the RBOC Model in Home Networking

2.

  T-Mobile and Microsoft Talk Business
3.   Unisys Focuses on Growing Its Services and Outsourcing Businesses

4.

  Limited Mobility in India: Resolution Is Near
5.   Portal Software to Enable First Launch of i-mode Outside Japan
6.   Sprint PCS Announces Plans to Support Inter-Carrier Messaging

7.

  Long Awaited, Alcatel Reveals Its NGN Portfolio

8.

  Brazil Fails to Attract PCS License Bidders, Again

9.

  Pegasystems Announces PegaCARECHAIN Complaint Management Solution

10.

  The First Colombian Certificate Authority Emerges

11.

  Toshiba and Mitsubishi: Happily Ever After?

12.

  Security Industry Predictions 2002: Where the Money Will Go
     
    Publications for the week of March 19, 2002
    Audio Conferences
    Conference Information
    About the Yankee Group

1. BellSouth Strays from the RBOC Model in Home Networking

Consumer Technologies & Services
by Dominic Ainscough

Event Summary

On March 13, BellSouth introduced its FastAccess HomeNetworking service, which offers the 2Wire HomePortal residential gateway to new and existing DSL customers. BellSouth follows the announcements of Verizon and SBC during the second half of 2001 in allowing for shared Internet access and peripherals among multiple PCs with a bundled broadband and home networking offering. FastAccess HomeNetworking service is available for $10 per month in addition to the recurring monthly DSL charge and the upfront networking hardware costs.

Market Impact

BellSouth's previous initiative in home networking focused on the installation of structured wiring in new single-family homes and MDUs. BellSouth's second entry follows the example of RBOC peers in broadening the target consumer base to include DSL subscribers, yet it also departs from the pricing model now employed by the other RBOCs. Similar to cable operators and ISPs, BellSouth is charging for shared broadband rather than offering free access-sharing like Verizon and SBC. However, the recurring fee will not be sustainable until additional applications beyond access are deployed. As the majority of providers do not block multiple IPs, the technologically savvy consumer that is currently leading adoption of home networking can purchase hardware through the retail channel to avoid the monthly charge. While continuing as the preferred channel for mass market consumers, service providers must enhance the value of the offering with further applications to justify the recurring costs to early adopters.

Conclusions/Recommendations

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2. T-Mobile and Microsoft Talk Business

Wireless/Mobile Europe
by Farid Yunus

Event Summary

Deutsche Telekom announced at CeBIT on March 13 that it would launch two mobile portal solutions for its business customers, both products of a lengthy collaboration with Microsoft. The German telco's mobile division, T-Mobile, will also co-develop a customized version of Microsoft's Smartphone 2002 operating system (formerly Stinger) for use in its future branded devices.

Market Impact

By the summer, T-Mobile will be offering a Mobile Access Portal, allowing GPRS access to corporate networks, and a Mobile Service Portal, which will initially mobilize Microsoft Exchange but will also support other enterprise applications. The two companies have developed a Service Integration Platform based on Microsoft's .NET framework (T.NET), which has been optimized for T-Mobile's current and future packet data networks. A key element of the .NET mantra, remote provisioning can reduce costs for businesses wishing to mobilize their business applications, and allows easier scalability and centralized management. With these portal solutions and their lower entry barriers, T-Mobile is hoping to accelerate takeup of mobile data services among German businesses, generating additional revenue streams to boost flagging ARPU.

Conclusions

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3. Unisys Focuses on Growing Its Services and Outsourcing Businesses

Technology Management Strategies
by Carrie Lewis

Trend

Last year was a rough year for technology companies, but smart vendors spent the year refocusing their businesses to provide customers value going forward. One example of a firm that bit the bullet and restructured is Unisys. Unisys is focusing on two key areas: 1) growing key high-value services and 2) growing its outsourcing business. In 2001, the worst year for the technology industry in decades, Unisys' services revenue grew 5.1%, propelled by large increases in its outsourcing business. Its business process outsourcing revenues grew 10% to $600 million.

Analysis

In 2001, Unisys got nearly 75% of its revenue from services ($4.5 billion) while its technology (hardware and software) revenue—down from $2.5 billion in 2000—delivered only $1.9 billion. A similar scenario rang true for IBM Global Services where revenue grew by 5.4% while hardware revenues declined 11.6%. Established product firms must move into services, smart product firms are making that move.

To make inroads toward growing its services business Unisys has focused on re-skilling its workforce, starting initially with the hiring of new business leaders. Over the past several months Unisys has recruited talent from leading U.S. consulting firms (KPMG, Accenture, IBM Global Services, and others) to form the senior management team that heads up its global industry practices. Most recently, the company has also hired senior level consultants with expertise in industry verticals Unisys is targeting: higher education and government.

To grow its outsourcing business Unisys has focused on strengthening a current area of expertise (processing payments remittances and insurance claims) and extending its IT infrastructure management-focused services offering through the development of e-business initiatives. Unisys' recently announced an agreement with Internet Access Technologies (a software development company) that will enable Unisys to deliver via the ASP model a suite Web-based productivity applications (SimDesk) to customers—specifically in government and education verticals.

Recommendations

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4. Limited Mobility in India: Resolution Is Near

Wireless/Mobile Asia-Pacific
by Shiv Putcha

Event Summary

On March 14, the Telecom Dispute Settlement and Appellate Tribunal (TDSAT) of India was expected to deliver its long-awaited verdict on the legality and future of the previously touted limited mobility over wireless local loop (WLL) services.

Market Impact

This verdict will have significant ramifications for the India telecom industry, not just for the collective success of the cellular segment, but also for basic service providers. Probably among the most contentious issues to crop up in the Indian telecom sector, limited mobility was originally introduced by the erstwhile communications minister Ram Vilas Paswan as the "poor man's mobile service." Since that time, there has been a storm of protests relating to irregularities in the licensing procedure as well as vociferous protests about the lack of a level playing field and the potential competitive threat to the cellular operator domain.

The announcement of an impending verdict is timely, as it potentially heads off another looming controversy over the choice of call-traffic switching architecture. Last year, the high-level Group on Telecom and IT Convergence (GoT-IT) decreed that the network technology choice would have to truly contain "limited mobility" services so as not to encroach on the cellular operator domain. On March 5, however, the Department of Telecommunications (DoT) effectively ignored the recommendations of the regulator, the Telecom Regulatory Authority of India (TRAI), by announcing that basic service providers could use the A+ interface or any other interface based on the public line mobile network (PLMN) architecture, instead of the V5.2 interface based on public switched telephone network (PSTN) architecture. The A+ interface could allow basic providers to use mobile switching centers and provide a complete code division multiple access (CDMA) mobile system instead of limited mobility.

TDSAT has pushed the hearing on this subject back to March 18, and the indication is that it might be addressed in the expected announcement on March 14 regarding whether limited mobility will ever take off.

Conclusions/Recommendations

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5. Portal Software to Enable First Launch of i-mode Outside Japan

Billing & Payment Application Strategies
by Lisa Cebollero

Event

On March 14, Portal Software announced the implementation of its Infranet billing software platform in one of Germany's largest mobile operators, E-Plus Mobilfunk Gmbh & Co. KG. Portal's Infranet will be used to bill for i-mode services, which E-Plus launched at the CeBit 2002 conference in Germany the week of March 11.

Market Impact

The launch of i-mode services by E-Plus, developed by NTT DoCoMo, in Germany marks its first release for this content aggregator outside of Japan. E-Plus plans to offer i-mode subscriptions for a range of content. Agreements that E-Plus has with information/content providers will be handled and serviced by Infranet. Infranet will also be responsible for subscription tracking, value chain settlement, premium content charging, as well as support for event-based billing and value pricing for new i-mode services. In addition, Portal is providing E-Plus with a wide range of support services for its i-mode services.


Conclusions/Recommendations

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6. Sprint PCS Announces Plans to Support Inter-Carrier Messaging

Wireless/Mobile Services
by Linda Barrabee

Event Summary

On March 14, Sprint PCS announced that it plans to launch inter-carrier messaging for customers of Short Mail, its Web-based, two-way text messaging service, beginning in April. This will allow its customers the ability to send text messages to any wireless phone just by inputting the 10-digit phone number, regardless of carrier network. Sprint PCS's inter-carrier solution is being provided jointly by MobileSpring and Illuminet. Currently Sprint PCS is in the final stages of testing the system with other carriers to ensure a smooth transition to full commercialization over the next couple of weeks.

Market Impact

As predicted in the Yankee Group's November 21, 2001 Research Note "AT&T Wireless Makes Unilateral Declaration of SMS Interoperability," Sprint PCS has now joined a growing list of carriers, including VoiceStream and Cingular (and Verizon Wireless expected shortly), that have recently announced their plans to support inter-carrier-messaging, spurred-on by AT&T Wireless' announcement of last November. By hurdling one of the biggest barriers to text messaging—interoperability—the carriers are looking to jumpstart the market, unleash the true viral nature of texting, and drive messaging growth and revenues.

Analysis

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7. Long Awaited, Alcatel Reveals Its NGN Portfolio

Communications Network Infrastructure
by Mindy Hiebert

Event Summary

On March 11, Alcatel announced its next-generation network (NGN) product portfolio, which includes the flagship 7670 RSP Media Gateway product as well as additional gateways, softswitches, and integrated access device products.

Market Impact

The market has been waiting anxiously to hear Alcatel's packetized voice strategy, but until March 11, has only been teased by discussions about point products and announced partnerships with Telica and Westwave. Alcatel has disclosed that the relationship with Telica to OEM its Plexus 9000 is a tactical decision to provide the high-density IP and ATM media gateway functionality for customer solutions today, which is now under development for the Alcatel 7510 and scheduled for release in the second half of 2002. The relationship with Westwave provides call control solutions for Alcatel's Litespan 2000 NGDLC product, otherwise known as Litespan 2000/2012.

Alcatel's widespread customer base, in terms of international penetration as well as diversity in wireline and wireless carriers, provides an extensive target market for its new product portfolio. Furthermore, Alcatel introduces more international competition for softswitch and media gateway vendors, including incumbent vendors such as Ericsson. Ericsson, for instance, has announced at least seven international wins with its Engine portfolio in 2002 with carriers such as Transtel in South America and Telnor in Sweden.

Recommendation/Conclusion

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8. Brazil Fails to Attract PCS License Bidders, Again

Brazil Market Strategies, Wireless/Mobile Latin America
by Andy Castonguay

Market Event

Despite early confidence in its ability to auction the remaining PCS licenses, Brazil's regulator Anatel announced on March 5 that it had received no bids for the March 12 auction. The announcement is the last in a series of thwarted Anatel attempts to sell off PCS licenses in the 1,800-MHz band throughout the Brazilian territory, following a series of changes aimed at making the licenses more attractive.

Market Impact

The dissolution of the March 12 auction seriously jeopardizes Anatel's plan to introduce multiple carrier competition into every operating region in Brazil. While the regulator succeeded in selling a national license to TIM and a regional license to Telemar in 2001, the remaining licenses and areas returned by TIM (TIM was forced to sell back geographic portions of the license in the states where it already had cellular operations) leave the competitive map spotted with uneven levels of competition. While most of the country will theoretically have at least three operators in service by the middle of 2002, this reality will fall far short of Anatel's original plan of having at least five competitors in each region. Even if Anatel can repackage the PCS licenses in an attractive way, the actual entrance of new competitors wouldn't occur until well into 2003. By 2003, the market will have already matured to a three-operator level in most of the country (four operators in Region I), making the entrance of a fourth or fifth operator all the more difficult.

Recommendations/Conclusions

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9. Pegasystems Announces PegaCARECHAIN Complaint Management Solution

Customer Relationship Management Strategies
by Brian Jones

Event Summary

On March 18, Pegasystems announced the availability of its PegaCARECHAIN solution for complaint management. PegaCARECHAIN—currently available for the retail industry, with versions tailored to financial services, health care, and insurance to follow—is designed to enable companies to track and respond to customer complaints across the entire enterprise. Built on Pegasystems' rules-based architecture, the system aims to improve efficiency and consistency by automating much of the complaint-handling process. Additionally, reporting functionality is designed to enable companies to leverage the knowledge gained from customer complaints in order to correct defects, improve products, and avoid potential liability associated with failure to respond adequately to product deficiencies.

Market Impact/Analysis

Complaint management is a vital function for large corporations, which must interact with customers across multiple business units, sales channels, and geographical areas. At its most basic level, complaint management is the process of resolving individual customers’ complaints, so that those customers are left satisfied, and ideally continue doing business with the company. However, a sophisticated complaint management system serves additional key functions by providing organizations with an accurate picture of trends and patterns in customer complaints. This visibility helps the enterprise recognize inconsistencies or problem areas across the distribution and selling chain. It also gives a company the opportunity to fix problems with products or services at the source, rather than merely reacting and treating the symptoms. Finally, a complaint management system can provide an early warning that enables the enterprise to avoid the significant legal, financial, and public relations liabilities that can arise when companies fail to detect and remedy product defects in a timely manner. In addition to retail, complaint management systems are well suited to several other verticals—in particular, those such as health care and insurance, where liability issues and regulatory compliance are key concerns.

Standard customer-service CRM systems have some of the functionality needed for complaint management—specifically, the basic tools enabling incident creation and resolution—however, these solutions generally are not designed to carry out the specific analysis and reporting needed to provide an understanding of complaint trends. Pegasystems is entering this relatively undefined market space with the intention of providing functionality that is complementary to rather than competing against traditional contact center CRM vendors.

Implications/Conclusions

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10. The First Colombian Certificate Authority Emerges

Internet Strategies Latin America
by Grant Smith

Market Event

The Bogotá Chamber of Commerce formed Certicámara as a new certification authority (CA) in Colombia. Colombia's pioneering 1999 e-commerce law (Ley 527) legislated the formation of domestic entities that would be exclusive legally recognized authorities for administering public key infrastructure (PKI) in Colombia.

Market Impact

Colombia's 1999 e-commerce legislation was written after exhaustive benchmarking to create a legal foundation for electronic commerce in Colombia. Latin American legal systems predominantly rely heavily on legal codes. This differs from the case law– and precedent-oriented U.S. legal system that has successfully avoided e-commerce laws and considers regulation an e-commerce threat rather than an enabler.

The success or failure of Colombia's new certificate authority will serve as a barometer for evaluating e-commerce laws passed in other Latin American countries since 1999. As nonprofit organizations already dedicated to serving corporations in Colombia, Chambers of Commerce are logical entities to manage some aspects of PKI. Colombia's Chambers of Commerce are already efficient registrars of corporate charters and business necessities such as taxpayer IDs. Ley 527 stipulated that CAs in Colombia must have registered capital of US$1 million. No for-profit entity found it attractive to enter the market as a CA in the three years since the law was passed. Transactions enabled by legally binding digital signatures are vital for the growth of e-business in Colombia and other countries in the region.

Recommendations

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11. Toshiba and Mitsubishi: Happily Ever After?

Wireless/Mobile Technologies
by Sarah Kim

Event Summary

On March 13, Toshiba Corp. and Mitsubishi Electric Corp. announced their plans to form a joint venture to co-develop and market 3G handsets. Their joint products are expected to reach the market in the spring of 2004.

Market Impact

This is the second "wireless marriage" for Toshiba, which in November 2000 entered into a long-term alliance with Siemens to develop W-CDMA handsets for the European and Asian markets. In December, however, Toshiba terminated the agreement, leaving both parties in search of a new partner.
Mitsubishi, for its part, has seen limited success with its wireless initiatives in both Europe and the United States. Mitsubishi Wireless Communication Corp. announced last year that it would cease its U.S. wireless handset operations by the end of March 2002. More recently, its European wireless operation, Mitsubishi Electric Telecom Europe, decided to cease operations by the end of December 2002.

Conclusions

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12. Security Industry Predictions 2002: Where the Money Will Go

Security Solutions & Services
by Anil Phull

Event Summary

The Yankee Group's March Report titled, "Security Industry Predictions 2002: Where the Money Will Go" revisits expectations and results for 2001 and predicts information security product industry market trends for 2002. The implosion of the technology economy in 2001 excluded much of the booming information security product industry.

Market Impact

According to Yankee Group research, enterprises will continue spending on security products and solutions to help them gain greater visibility into their overall network risks, improve control over users and systems, harden and lock down networks, provide system- and network-wide management, and improve ROI on security investments. For 2002, the Yankee Group identifies the following specific market trends:

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Publications for the week of March 19, 2002

Securing the Cable Infrastructure
enbav3n3, Report, March 2002, by Lindsay Schroth and Zeus Kerravala

The Role of Web Single Sign-On Services as Revenue and ROI Drivers
ibsv1n9, Report, March 2002, by Robert Lancaster

Internet VOD: Bringing the Box Office to the PC and Beyond
mesv6n3, Report, March 2002, by Michael Goodman

Putting the Past Behind: The CLEC Outlook for 2002 and Beyond
tsv1n4/smbtv1n5 Report, March 2002, by Courtney Quinn, Nicholas Maynard, and Michael Lauricella

"Secret Agent" Software for Network Elements: There's a Mole in Your Router
tssv1n4, Report, March 2002, by Nancee Ruzicka and Sanjay Mewada

Wholesale Services Forecast
wcsv2n2, Report, March 2002, by Nancy Bedard

Wireless Competition in Hong Kong: Further Consolidation Is Coming
wmapv3n2, Report, March 2002, by Christopher Slaughter

Unlocking Mobile Content Services: Marketing Is the Key
wmev6n2, Report, March 2002, by Philip Taylor

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Audio Conferences

March 22, 2002

An Internet Strategies Latin America Audio Conference
Latin America Internet Subscriber Forecast 2001–2006

March 26, 2002

A Wholesale Communications Services Audio Conference
The Evolving Landscape in Utility Communications

March 27, 2002

A Canadian Market Strategies Audio Conference
Canadian Wireless/SMS Review

March 28, 2002

A Convergent Communications Asia-Pacific Audio Conference
Must Broadband Languish in Australia?

Please Check Our Web Page for the 2002 Audio Conference Schedule

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Conferences

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