by James Careless
Bullish: That is the word that describes Dr. Arunas Slekys' outlook on private satellite network sales to enterprise customers. As vice president of Hughes Network Systems (HNS), which has more than 750,000 broadband satellite systems shipped or installed worldwide, Slekys is able to speak about this market segment with authority.
So how are sales going? "Excellent, especially in the area of private network service packages for enterprise," he replies. "In this emerging sector, where we provide end-to- end packages for satellite-delivered services such as digital signage [customized in-store video programming/advertising], sales are projected to grow by 16 percent annually. The latest forecasts peg in the next five years, this sector to be worth $2 billion a year or more, and we expect to maintain our 50 percent or more market share position.
"Meanwhile, equipment sales and basic services are forecast to grow at a respectable five to six percent a year, with estimates of 2010 annual value exceeding $500 million," Slekys continues. "Overall, private network sales for enterprise are doing very well indeed." HNS is not the only satellite service provider doing well in the private network space. Many content service providers are steadily growing their enterprise private network business.
Why Service Packages Sell
In itself, the popularity of private network service packages is good news for satellite providers. The even better news, however, is that service packages represent a relatively new revenue stream for them; who historically made their money from hardware sales, installations and bandwidth rental to customers.
"In the past, businesses wanted to buy equipment and spectrum from us, then run their networks themselves," says Jeff Carl, Spacenet's director of marketing. "Today, this has changed: businesses want to concentrate on their core competencies and leave peripherals such as satellite network management to the professionals. In this scenario, they just want the whole thing to work, thus giving carriers like us the chance to sell them end-to-end solutions. The fact that enterprise customers can avoid heavy capital expenditures by using our services at a monthly rate is also a major point in our favor."
"Satellite technology is the enabler for moving enterprise traffic, but technology is not what we are selling," says Steven Corda, SES Americom's vice president of product development. "Instead, we're selling private network services to our enterprise clients, which is a win-win for everyone. Carriers win because they can now sell more than earth stations and spectrum; clients win because they get the services they need without running these services themselves."
Actually, clients who are buying private network service packages are a new breed of customer. "They are the CEOs and marketing VPs; executives who are concerned with the emerging big picture of broadband --unlocking value to uplift sales and improve ROI; rather than just per-unit costs and data rates," says Slekys. "For satellite providers, this allows us to move our sales focus away from per-unit equipment costs and data rates, and onto increasing revenues and profits for our customers."
As an example, Slekys points to digital signage; the customer in-store video feeds sent by satellite to retailers such as the U.K.'s Tesco. With 2,318 stores and 326,000 employees, Tesco is one of the world's three largest retailers. Some of its success is directly attributable to the company's "Tesco TV" video feeds, which guide customers to in- store sales and specials and are supplied via HNS' IP-based Direcway satellite broadband platform.
"According to Tesco, the company is exceeding expectations for sales of certain products and sections advertised in-store on Tesco TV," says Slekys. "This kind of payback makes the business case for private network service packages: The ROI speaks for itself."