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Telecommunications
Services in Vertical Markets
1996-2001
a market research report
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Buying communications in the era of deregulation means
the user can finally compare apples to
apples––and some of your competitors will
always be able to supply a lower price for those apples. When your sales
team receives a customer spec, they’re only one of a
dozen vendors competing on the basis of cost. But if your
company can collect and sort customer data by vertical
industry, find commonalities, and create unique business
solutions, you’re competing on the basis of value.
That’s the appeal of vertical marketing:
communications as a solution, not a commodity.
With better and faster as the corporate mantra, customers
are turning to telecom as the enabling technology that
improves the bottom line. Systems purchases are easily
justified; these customers measure success in terms of
performance and efficiency. And expansion in healthcare,
entertainment, and financial services is growing
significantly faster than the national average, making
vertical selling more attractive than ever.
Combining multiple technologies into an innovative
package may seem like a no-brainer, but the market
fluctuations and corporate culture of each industry can
differ radically. Telecom Services in Vertical
Markets examines nearly a dozen vertical
industries--from healthcare to utilities--uncovering
their unique problems, growth opportunities, market
trends, and size of their wallets.
Insight then identifies 10 major trends in the corporate,
technology, and economic climate which are making
vertical solutions vital to the success of any
communications vendor. Data from both the carriers and
the largest users of traditional and innovative
communications service presents a thorough, integrated
perspective of the vertical segment
opportunity--estimated in the hundreds of billions of
dollars.
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Report Excerpt
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Introduction
As the growth opportunities in telecommunications shift
from providing commodity services to rolling out
innovations using ATM or a wireless technology, the
business model is also changing from a traditional
horizontal market focus to an industry specific, or
vertical one. The key reason for this shift is that
communications has changed from a utility to a
competitive asset. When corporate customers increasingly
need to differentiate their services and products by
being better or faster, the enabling technology is often
telecommunications.
While this may be obvious to innovative firms like
Federal Express, which can track packages and guarantee
delivery because its system is built around an
information network, it is also becoming clear to firms
in every other industry. From the sleepy utilities that
are facing competition for the first time, to
high-pressure securities firms that fight to save two
tenths of a second per transaction, to hospitals facing
cost reductions, companies need to employ communications
technology to improve their bottom
lines.
Benefits of Vertical Market Segmentation
Vertical industries present very attractive markets for
leading edge services because in them performance is
carefully measured, something that cannot be said of,
say, a consumer market or horizontal market such as
generic T-1 lines. In contrast to many horizontal
applications, the performances of nurses in hospitals,
police, and field salespeople are all measured very
carefully. Thus the return on new investments in
communications can be calculated and systems purchases
most easily justified in vertical markets.
Carriers and communications service suppliers have added
reason to focus on vertical markets, since they present
an opportunity to provide high-margin value-added
services. For example: the 3value bundles2 provided by
AT&T's Advanced Network Solutions unit to insurance,
banking, retail, travel and health care companies; or US
West's federal government applications.
Customers often choose traditional telephone services
such as dial-tone or T-carrier services based largely on
price, since these are commodity services provided by
multiple competitors. Industry-specific solutions,
however, are a different matter. Here opportunities
abound for value added services that not only have higher
profit margins, but also create customer loyalty by
depending on a close involvement in the customer's core
business.
Different Focus with Bundles of Industry Specific
Services
The marketing philosophy behind industry-specific
solution bundles is significantly different from
traditional carrier service selling points. Rather than
focusing on the numbers of T-1 lines or MOU's supplied,
these solution bundles, such as Telemedicine Solutions
from NYNEX, focus on distinct applications or problems of
a targeted industry. Buyers measure the bundles' success
in terms of their cost effectiveness and increased job
efficiency rather than the price per kilobits
transmitted. While traditional carrier networks are of
course utilized, the marketing focus has shifted from
communications as a commodity to communications as a solution for business operation issues.
Scope of Vertical Market Study
This report describes and quantifies the opportunities in
vertical markets in the US. It also provides practical
market recommendations to assist traditional carriers and
those entering segments of the communications business to
succeed in this changing environment. Written in the wake
of the 1996 Telecommunications Reform Act, it outlines
the opportunities in these leading industries and names
the largest customers in each.
In this report, Insight focuses on selected industries
and vertical markets whose communications needs, due to
technical changes or industry expansion, are growing
significantly faster than the national average. The term
'vertical' market, as used here, refers to industry
specific markets defined by unique SIC (Standard
Industrial Codes) issued by the US Dept. of Commerce. In
contrast, 'horizontal' markets refer to occupations or
functions, like Sales and Accounting, that are part of
many different industries.
Vertical Solution Sampler
Examples of industry-specific solutions include:
- Automotive Network Exchange (ANX), the private version
of the
Internet planned by General Motors, Ford, and Chrysler to
interconnect with their many suppliers. By building their
own secure
TCP/IP nodes into the Internet, the auto makers hope to
gain the
features and security needed by their industry at prices
similar to a
public network.
- ExperFind, an agent-based search engine used by Coopers
&
Lybrand over AT&T's Lotus Notes and the World Wide
Web to identify and organize skills needed for client
projects. This is
an example of a key trend to link groupware, remote
computer access, and the Internet. Its goal is to
maximize the
productivity of skilled employees without burning them
out.
- The EDI-enabled LYNX proprietary network of
manufacturer PPG
Industries, Pittsburgh, which improves links to suppliers
and
customers. Using this network, PPG can transmit and
electronically
enter orders to auto insurers and thousands of auto glass
installers.
The result gains the cost-savings benefits of EDI and
public networks,
plus the competitive edge of their proprietary network
with its order
tracking applications.
- In the healthcare industry, Columbia/HCA's use of
remote document
imaging and local wireless voice networks inside
hospitals represents
a shift away from traditional voice and data
applications, whose
communications needs consisted of transport and some
switching.
This type of innovative application requires much greater
service and
offers the potential of greater return on investment.
- Thiokol's accesses to remote databases eliminate over
60 percent of
the 110,000 inspections previously needed for rocket
engine parts.
Before networks made these remote document searches
feasible, it
was quicker and safer to re-inspect a part than to
attempt to find its
original inspection papers.
- AT&T's catalog creation software that runs with
Microsoft FrontPage to
create and update catalogs based on product and inventory
data in
separate databases and remote files. This Advanced
Business
Solution assists retailers like Amway Corp. in Ada,
Mich., to quickly
change their printed or electronic catalog pages to
reflect pricing
changes and product additions/deletions.
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Market Segmentation
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- Service Expenditure
- Communications Budget IS Budget
- Industry
- Healthcare
- Civilian Government
- Financial Services
- Professional Business Services
- Transportation
- Entertainment and Media
- Manufacturing
- All Others
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Table of Contents
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Chapter I
EXECUTIVE SUMMARY
1.1 Introduction
1.2 Benefits of Vertical Market Segmentation
1.2.1 Different Focus with Bundles of Industry Specific
Services
1.3 Scope of Vertical Market Study
1.3.1 Vertical Solution Sample
1.4 Business to Outgrow Residential
1.5 Focus on Eight High-Growth Vertical Industries
1.6 Vertical Markets Create Global Opportunities
Chapter II
INTRODUCTION, SCOPE OF STUDY
2.1 Objectives of Study
2.2 Promoting Vertical Solutions, Not Commodities
2.2.1 Small, Medium & Large Businesses
2.3 Convergent Forecasting Methodology
2.4 Communications Expenditure Categories
2.4.1 Market Sizing Based On US Bureau of Labor
Statistics Data
2.4.2 Opportunities in Establishments
2.4.3 Communications Opportunities Follow Job Growth and
Decline
2.4.3.1 Communications Needs of Growing Occupations
2.5 Forecasts for Traditional and Innovative
Communications Services
2.5.1 Forecasts for Local Services by Industry
2.5.2 Forecast for Long Distance Services by Industry
2.6 Growth of Internet Services
2.6.1 Importance of Internet Public and Internet Services
2.6.2 Internet Trends
2.7 Arrival of ISDN Services
2.8 Wideband Desktop Applications
2.9 Expected Advances in Technology and Standards
Chapter III
SERVICE INDUSTRIES AND GOVERNMENT
3.1 Opportunities in Healthcare
3.1.1 Summary: Changing Industry Needs
3.1.2 Healthcare Industry Range and Telecom Requirements
3.1.2.1 Ameritech’s Regional Health Information
Networking
3.1.2.2 NYNEX Telemedicine Solutions
3.1.2.3 PacBell Helps Healthcare Meet Today’s
Business Challenges
3.1.3 Telecom Forecasts for Healthcare
3.1.4 New Jobs Create Opportunities for Wireless Services
3.1.4.1 Wireless Applications in Healthcare
3.1.5 Treatment Facilities Employ Technology in
Cost-Cutting
3.1.6 Developing Community Healthcenters
3.1.7 Healthcare Firms Outsource Communications Services
3.1.8 Pharmaceutical Firms Seek High-Tech Cost Cutting
3.2 Opportunities in Civilian Gov’t
3.2.1 Summary of Changing Government Needs
3.2.2 Town of Groton CT Mobile Data Terminals
3.2.2.1 Case Study: Groton CT Police Department
3.2.2.2 Network Will Link LAPD Stations
3.3 Opportunities in the Financial Services Industry
3.3.1 Changing Needs in Banking, Brokerage, and Insurance
3.3.1.1 New Competition Prods Banks
3.3.1.2 Key Technology Trends in Banking
3.3.1.3 Case History: Credit Suisse Creates Solution with
ATM
3.3.2 Brokerages, Mutual Funds Reduce Cost, Speed Up Transactions
3.3.2.1 Key Technology Trends for Brokerage Firms
3.3.2.2 Case History: ATM LAN Use by Securities Traders
3.3.3 Insurance Firms’ Legacy Mainframe
Infrastructures
3.3.3.1 Insurance Carriers Empower Field Agents
3.3.3.2 John Hancock Improves Service while Reducing
Staff
3.3.4 Carriers & J.P. Morgan Form Pinnacle Alliance
3.3.4.1 Carrier Resources to Support Vertical Industries
3.3.5 Technology Trends in Insurance
3.3.5.1 Wireless CDPD Reduces IVANS Network Costs
3.4 Professional Business Services
3.4.1 Changing Needs for Professional Service Firms
3.4.2 Groupware and Customer Contact Key for Professional Services Firms
3.4.2.1 Lotus Notes Choice for Groupware
3.4.3 Key Trends in Professional Business Services
Chapter IV
OPPORTUNITIES IN TRANSPORTAION AND MEDIA INDUSTRIES
4.1 Summary of A Contracting Industry’s Needs
4.1.1 Key Information Technology Trends in Transportation
4.1.2 Railroads, Airlines
4.1.3 Parcel Delivery Companies
4.1.3.1 Case History of UPS
4.1.3.1.1 UPS Options Evaluated
4.1.3.1.2 UPS Cellular Solution
4.2 Opportunities in the Entertainment and Media
Industries
4.2.1 Changes in Entertainment Create Communications Opportunities
4.2.1.1 Content Delivery Infrastructure
4.2.1.2 HDTV, Interactive Video to the Home
4.2.2 Key Media & Entertainment Trends
4.2.3 Content Emerging as the Controlling Asset
Chapter V
OPPORTUNITIES IN MANUFACTURING AND RETAIL AND
DISTRIBUTION
5.1 Opportunities in the Manufacturing Industries
5.1.1 Manufacturing Industries Have Diverse Needs
5.1.2 Downsizing in Manufacturing Opens Communications Opportunities
5.1.3 Key Telecommunications and IS Trends in
Manufacturing
5.1.4 Success Depends on Integrating Technology into
Operations
5.1.4.1 Case History: Vermont Teddy Bear Gets New Order
Entry System
5.1.5 Food Processing Sector Uses Technology to Trim Fat
5.1.6 High Technology Sector
5.1.6.1 Key Technology Trends for High-Tech Sectors
5.1.7 BellSouth Offers Surveillance for High Tech
Manufacturer
5.2 Opportunities in the Retail/Distribution Industries
5.2.1 Summary of Changing Industry Needs and Services
5.2.1.1 Case History: How Distributed Computing Saved
Sears
5.2.1.2 Internet, Touch-tone Response, Help MCI Sell
Music
5.2.2 Retailer’s Communications Expenditure Plans
5.2.2.1 Wait-and-See Stance on the Internet
Chapter VI
OTHER IMPORTANT VERTICAL MARKETS
6.1 Consumer Goods Industry
6.1.1 Key Technology Trends in Consumer Goods
6.2 Energy Industry Dominated By Large International
Firms
6.2.1 Networks Are Key to Improved Productivity
6.2.2 Shell Oil Splits Off Information Services into
Separate Business
6.3 Utilities Prepare for Competition
6.3.1 Key Information Technology Trends for Utilities
6.4 Sprint Positions Existing Services to Meet
Vertical’s Needs
6.5 SBC Targets Applications in Education
Chapter VII
NATIONWAIDE OPPORTUNITIES
7.1 Telecom Act Changes Landscape
7.2 Home-based Workers, PC Penetration Add to Changes
7.3 Key Vertical Markets
7.4 Newer Services’ Growth Outpace Traditional
Services
7.5 Local Communications Services
7.6 Early Sales to Vertical Markets
7.7 Additional Opportunities for Specialized Comm.
Services
7.7.1 Internet Outlook
7.7.1.2 Internet Usage Patterns
7.7.2 AT&T’s Internet Services
7.7.3 Popularity of Portable PCs and Multimedia Drive
Services
7.7.4 Importance of Security to Network and Online
Services’ Success
7.7.4.1 Internet Security Solutions
7.7.5 Users’ Needs for Mobile Communications
Services
7.7.5.1 Factors Driving Mobile Data
7.7.6 Narrowband PCS, Paging, and Messaging Services
7.7.7 Enhanced Network Services
Table of Figures
Chapter I
I-1 Business Expenditures for Local & LD Services
I-2 Distribution of Business Communications Expenditures
Chapter II
II-1 Distrib. of US Businesses by Size
II-2 Expected US Job Gains, 1995-2005
II-3 Expected Job Losses, 1995-2005
II-4 Internet Applications for Commercial Users
II-5 Fortune 500 ISDN Implementation
II-6 Wide-Band Desktop Applications
II-7 Adoption of Key Communications Standards
Chapter III
III-1 Fastest Growing Healthcare Professions
Chapter VII
VII-1 Business & Residential Comm. Service Revenues
VII-2 Comparison of Business & Residential Comm.
Expenditures
VII-3 Vertical Markets Lead Growth in Wireless LANs
VII-4 Leading Vertical Industries in Wireless LAN Markets
VII-5 Expected Sources of Internet Revenues in 2001
VII-6 US Mobile Workers by Occupational Category, 1995
VII-7 Variety of PCS Data Services
Table of Tables
Chapter I
I-1 Business & Residential Comm. Service Revenues
I-2 Key Vertical Markets in 1995
Chapter II
II-1 Local Communications Service Expenditures by
Industry
II-2 Long Distance Communications Service Expenditures by Industry
Chapter III
III-1 Leading Sectors of Healthcare
III-2 Forces Changing Healthcare
III-3 Communications Expenditures by Healthcare Industry
III-4 Leaders in Healthcare: Revenue, IS, and Comm
Budgets
III-5 Leading Pharmaceutical Firms: Budgets
III-6 Demographics of Civilian Gov’t
III-7 Leading Sectors and Growth in Financial Services
III-8 Forces Changing the Financial Services Industry
III-9 Leading Banks: Budgets
III-10 Leading Financial Services Firms: Budgets
III-11 Leading Insurance Companies: Budgets
III-12 Leading Sectors of Professional Business Services
III-13 Key Forces Changing Professional Business Services
III-14 Leading Professional Business Services: Budgets
Chapter IV
IV-1 Demographics of the Transportation Industry
IV-2 Key Factors Changing the Transportation Industry
IV-3 Leading Transportation Companies: Budgets
IV-4 Leading Media and Entertainment Industry Segments
IV-5 Factors Changing the Media and Entertainment
Industry
IV-6 Leading Media and Entertainment Firms: Budgets
Chapter V
V-1 Demographics of the Manufacturing Industries
V-2 Key Forces Affecting Manufacturing Industries
V-3 Leading Firms in the Automotive and Discrete
Manufacturing Industries: Budgets
V-4 Leading Food Processing Firms: Budgets
V-5 Leading High Tech Manufacturing Firms: Budgets
V-6 Demographics of the Retail Industry
V-7 Key Factors Changing Retail
V-8 Leading Retail Firms: Budgets
Chapter VI
VI-1 Leading Consumer Goods Firms: Budgets
VI-2 Leading Energy Firms: Budgets
VI-3 Leading Utility Companies: Budgets
Chapter VII
VII-1 Business & Residential Comm. Service Revenues
VII-2 Comparison of Business and Residential Expenditures
VII-3 Distribution of Business Communications
Expenditures 1995
VII-4 Expected Growth of Key Industry Communication Needs 1995-2001
VII-5 Expected Telecom Needs by Service Type
VII-6 US Local Telephone Service Revenues
VII-7 Wireless LAN Market Growth
VII-8 Horizontal Marketing: Mobile Sales Applications
VII-9 Benefits of Mobile Communications to Field Sales
and Service Personnel
VII-10 Estimated Sources of Internet Revenues in 2001
VII-11 US Market for Portable PCs
VII-12 Mobility of US Work Force
VII-13 Installed Base of Mobile Data Communications
Subscribers
VII-14 Four Levels of Narrowband PCS Services
VII-15 Enhanced Data Service Revenues
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Telecom
Market
Research,
