Enterprise Mobility Services Market Opportunity for … Mobility Services Market Opportunity for Mobile Service Providers!!!! Prepared by: Greg Collins Founder & Principal Analyst

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Enterprise Mobility Services

Market Opportunity for Mobile Service Providers !!!! Prepared by: Greg Collins Founder & Principal Analyst Exact Ventures, Inc. www.exactventures.com January 2013

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© Exact Ventures, Inc. Exact Ventures Confidential Information. www.exactventures.com For Licensee Access and Use Only. Page 2

TABLE OF CONTENTS Page Executive Summary .................................................................................................................................... 3

Scope ........................................................................................................................................................... 3

Cumulative Revenue and Cost Savings Opportunity .................................................................................. 4

Focus on Mid-Tier Enterprises ................................................................................................................... 5

Descriptions of Potential Services to be Offered by Service Providers ...................................................... 7

Services Penetration Rate Assumptions ...................................................................................................... 9

Monthly ARPU of Select Enterprise Mobility Services Assumptions ....................................................... 10

Monthly Enterprise Cost per Employee of Select Enterprise Mobility Services Assumptions .................. 11

Annual Enterprise Mobility Services Revenue Opportunity in $ Millions ................................................. 12

Annual Enterprise Cost Savings per Year in $ Millions ............................................................................. 13

Cumulative Enterprise Mobility Services Revenue and Enterprise Cost Savings in $ Millions ................ 13

About Exact Ventures ................................................................................................................................. 14

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Executive Summary

• A cumulative hundred-billion-dollar enterprise mobility services market opportunity is arising as a result of several key trends in computing and telecommunications, namely: small cells, mobility and the need for ‘bring your own device’ (BYOD) policies and control, and cloud computing.

• The technologies underlying these trends will enable mobile operators to offer a variety of

services to mid-sized enterprises that can save enterprises an estimated 35% per year on common telecommunications services like unified communications (UC), web filtering, and security; and they will also enable new services like WiFi-as-a-service and context- or location-based services.

• Six of these services are considered in the analysis

described below, but many more services are possible for mobile services providers to begin offering their enterprise customers.

• The business market is vital for mobile service providers. Mobile service providers have

gradually been losing the consumer in terms of revenue and profitability. Wireless operators are under constant pressure on their voice and messaging revenues from over-the-top providers, and are continually looking at ways to construct data plans (tiered services, family sharing plans, etc.) that maximize profitability. Competition is driving these prices lower. Increasingly, wireless operators are looking at the large- and small-to-medium-sized enterprise (SME) markets for profitable growth.

Scope In order to assess the market opportunity created by the convergence of three trends mentioned above (small cells, mobility and BYOD, and cloud computing), we considered businesses with a select number of employees, and we analyzed the services they could potentially adopt under given penetration assumptions. Specifically, the middle-tier business market, consisting of businesses of between 100 and 4,999 employees in the United States and European Union, was considered because network operators have had difficultly in selling cost-effective solutions to these customers: often, wireless solutions were either too expensive or too basic for their needs. This middle-market accounts for just one-third of the total number of employees in the U.S. and E.U. Expanding the scope of the analysis to employees in firms either greater-than 5,000 employees or less than 100 employees would show significantly increased market opportunity.

Enterprise Mobility Services—enabled by Enterprise Small Cells and Cloud-based applications and

Services—offer Mobile Operators a Cumulative $100 Billion Market

Opportunity

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Cumulative Revenue and Cost Savings Opportunity

In our analysis, we have assumed that the enterprise mobility services market will begin in 2014, with 2013 serving as a period for trials and evaluations. The cumulative revenue opportunity between 2014 and 2020 for mobile service providers in the United States and European Union for selling select mobility services to enterprises with between 100 and 4,999 employees will exceed $100 billion. The associated cumulative cost savings (via cost avoidance) to enterprises for adopting these select mobility services from a service provider would exceed $160 billion over the same timeframe. Therefore, enterprises would save approximately $60 billion between 2014 and 2020 by outsourcing many of their telecommunication services. These resources can be re-allocated to IT

activities that can focus on differentiation and competitive advantage, or alternatively, the cost savings can fall to the bottom line, to increasing profitability, or some combination thereof.

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Focus on Mid-Tier Enterprises Total Employees in Firms With Between 100 and 4,999 Employees, in Millions

2014 2015 2016 2017 2018 2019 2020

United States 39.6 40.6 41.6 42.6 43.7 44.8 45.9 European Union (EU-27) 33.5 34.1 34.8 35.4 36.1 36.7 37.4 Total 73.1 74.7 76.3 78.0 79.7 81.5 83.3

Sources: United States Department of Commerce, Bureau of Census, EuroStat, Exact Ventures estimates. European figures include employment in the non-financial business economy for the 27 EU member nations.

Only approximately half of the employees included above currently have mobile devices that are supported by the enterprise, either through direct corporate billing or though expense reporting. As the applications described below begin to be offered, we expect the fraction of corporate sponsoring of mobile devices will increase to 80% by 2020, due to the substantial costs savings of replacing premises-based telephony and data communications applications with applications being offered by service providers, hosted in their cloud-based datacenters.

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After factoring in the adoption rate described above to the number of employees available for enterprise mobility services, the target employee base amounts to 33 M in 2014, rising to 66 M in 2020, an average annual increase of 13%. The significant increase in 2018 shown in the graph at left is due to the anticipated inclusion of former CDMA-based subscribers in the United States being added to the pool of potential enterprise mobility service customers.

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Descriptions of Potential Services to be Offered by Service Providers We describe below some of the potential services that can be offered by service providers as part of the enterprise mobility services market. Hosted Unified Communications ‘Unified communications’ (UC) refers to a set of real-time communications services such as instant messaging, presence information, telephony, and video conferencing, as well as non-real-time communication services like e-mail, SMS, voicemail, and fax. UC is not necessarily a single product, but rather is often a set of products that provides a consistent unified user interface and user experience across multiple devices and media types. WiFi-as-a-Service WiFi-as-a-service for enterprises means that service providers purchase, install, manage, and support WiFi access points, controllers, and other networking equipment within an enterprise. If an operator is already installing small cells, the incremental installation costs for deploying WiFi access points would be significantly reduced. Service providers would then charge their business customers to use the WiFi network potentially on a per-user basis. The network would also (along with the small cell network) provide a platform for offering the more advanced services described below, like context-based services, mobile device management, and cloud-based filtering. Service providers could then offer added features like guest access for certain areas and WiFi roaming. Many wireless operators are also investing in public area WiFi and hotspot WiFi access. Context Aware (or Location-Based) Services Context-aware, or location-based, services can offer enterprises a variety of benefits. In retail settings, knowing the precise location of a customer can indicate interest in a particular product or class of products. Using this knowledge, retailers can advertise sponsored product information or special promotions to the interested consumer. There are also potential employee tracking and related security services that may be beneficial for enterprises. Mobile Device Management (MDM) Mobile device management entails registering and enrolling a variety of mobile devices that are used in enterprise environments. Typical functionality includes: - Configure and update device settings over-the-air (OTA) - Enforce security policies and compliance - Remotely lock and wipe managed devices - Secure mobile access to corporate resources

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Cloud-based Web Filtering Enterprises increasingly employ cloud-based web filtering as a way to monitor and control website access and usage. Such control can enhance productivity, improve security by protecting against malware and spyware, and protect corporate bandwidth by limiting unnecessary video downloads. Compliance Services Many industries adhere to required regulatory or voluntary best-practices-based record keeping. These efforts often require documentation of all communications (telephony, email, messaging, etc.) within an organization. In conjunction with other cloud-based telecommunications services, operators can centralize the collection and storage of such data, providing both cost relief and regulatory or best-practices compliance to their customers. By hosting much of the communications infrastructure and applications themselves, service providers are in a strong position to offer compliance services. We estimate that operators will be able to charge enterprise customers $1 per user per month for compliance services when the enterprise is also purchasing more basic hosted communications and networking services.

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Services Penetration Rate Assumptions The assumed penetration rates of various telecommunication services into the target market of enterprises or SME with between 100 and 4,999 employees are outlined below. We have assumed an aggressive adoption of managed telecommunications services, driven by the additional functionality and cost savings associated with outsourcing a number of more basic telecommunications services and applications to mobile service providers.

2014 2015 2016 2017 2018 2019 2020 Hosted UC 35% 45% 55% 65% 70% 75% 80% WiFi-as-a-Service 35% 45% 55% 65% 70% 75% 80% Context-Aware Services 15% 20% 25% 30% 40% 45% 50% Mobile Device Management 50% 55% 60% 65% 70% 75% 80% Cloud Web Filtering 50% 55% 60% 65% 70% 75% 80% Compliance 50% 55% 60% 65% 70% 75% 80%

Sources: Exact Ventures and SCW estimates

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The assumed monthly average revenue per user (ARPU) to mobile network operators for select enterprise mobility services used in our analysis is outlined below. Monthly ARPU of Select Enterprise Mobility Services Assumptions

2014 2015 2016 2017 2018 2019 2020

Hosted UC $25 $25 $25 $25 $25 $25 $25 WiFi-as-a-Service $5 $5 $5 $5 $5 $5 $5 Context-Aware Services $3 $3 $3 $3 $3 $3 $3 Mobile Device Management $4 $4 $4 $4 $4 $4 $4 Cloud Web Filtering $3 $3 $3 $3 $3 $3 $3 Compliance $1 $1 $1 $1 $1 $1 $1

Sources: Exact Ventures and SCW estimates For purposes of this analysis, the monthly ARPU for operators is kept constant over time under the assumption that feature additions will offset any price erosion due to competition. Multi-year contracts will also help to keep prices relatively stable. The figures above aggregate to $41 per user per month, or $492 per year, for the basket of six mobility services. This compares to an enterprise cost of $63 per month, or $756 per year, to provide the separate services outlined above. Therefore, moving to enterprise mobility services provided by a mobile service provider would save $264 per user per year, or 35%.

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The assumed monthly average costs per user to enterprises for select enterprise mobility services used in our analysis are outlined below. Monthly Enterprise Cost per Employee of Select Enterprise Mobility Services Assumptions

2014 2015 2016 2017 2018 2019 2020

Hosted UC $38 $38 $38 $38 $38 $38 $38 WiFi-as-a-Service $9 $9 $9 $9 $9 $9 $9 Context-Aware Services n/a n/a n/a n/a n/a n/a n/a Mobile Device Management $9 $9 $9 $9 $9 $9 $9 Cloud Web Filtering $7 $7 $7 $7 $7 $7 $7 Compliance n/a n/a n/a n/a n/a n/a n/a

Sources: Exact Ventures and SCW estimates The adoption of hosted and service-provider-sponsored Applications-as-a-Service and Network-as-a-Service (NaaS) can offer enterprises substantial cost savings. We calculate that it costs the target market an average of $38 per month per user to providing a UC seat. This includes the following costs: depreciation of the capitalized hardware (desk phone, LAN & WAN upgrades, installation) and software (UC licenses fees), plus the operational costs of software maintenance, systems cost, and training. WiFi-as-a-Service costs enterprises approximately $9 per month per user in the form of acquisition, installation, maintenance and support of wireless access points, controllers, and other networking equipment. We have assumed that these rates do not change over the course of the analysis and that there is no corresponding cost savings for context-aware and compliance services.

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Annual Enterprise Mobility Services Revenue Opportunity in $ Millions

2014 2015 2016 2017 2018 2019 2020

Hosted UC $3,419 $4,842 $6,484 $8,357 $11,932 $13,846 $15,945 WiFi-as-a-Service $684 $968 $1,297 $1,671 $2,386 $2,769 $3,189 Context-Aware Services $176 $258 $354 $463 $818 $997 $1,196 Mobile Device Management $782 $947 $1,132 $1,337 $1,909 $2,215 $2,551 Cloud Web Filtering $586 $710 $849 $1,003 $1,432 $1,661 $1,913 Compliance $195 $237 $283 $334 $477 $554 $638 Total $5,842 $7,962 $10,397 $13,165 $18,954 $22,043 $25,433

Sources: Exact Ventures and SCW estimates Using many of the assumptions described above, the service provider revenue opportunity for providing the six identified mobility services amounts to $5.8 billion in 2014 and would grow to $25.4 billion in 2020, an compounded annual growth rate of CAGR of 28%. Hosted UC is expected to be the single largest enterprise mobility service, amounting to nearly $16 billion in 2020, with many of the other services acting as complements to hosted UC. In other words, UC would typically act as an anchor application with several of the other services being sold as “add-ons.”

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Annual Enterprise Cost Savings per Year in $ Millions

!2014 2015 2016 2017 2018 2019 2020

Hosted UC $5,197 $7,360 $9,855 $12,702 $18,136 $21,046 $24,237 WiFi-as-a-Service $1,231 $1,743 $2,334 $3,008 $4,295 $4,984 $5,740 Context-Aware Services $0 $0 $0 $0 $0 $0 $0 Mobile Device Management $1,669 $2,022 $2,416 $2,855 $4,076 $4,730 $5,447 Cloud Web Filtering $1,272 $1,541 $1,842 $2,176 $3,107 $3,605 $4,152 Compliance $0 $0 $0 $0 $0 $0 $0 Total $9,369 $12,665 $16,447 $20,741 $29,614 $34,365 $39,576

Given that enterprises will need to devote fewer resources to maintaining and providing basic telephony network and server equipment and applications, enterprises can either reduce the amount they spend, thereby increasing profitability, or can re-allocate those resources to activities that will promise differentiation and competitive advantage. Cumulative Enterprise Mobility Services Revenue and Enterprise Cost Savings in $ Millions

2014 2015 2016 2017 2018 2019 2020

Mobility Services Revenue $5,842 $13,804 $24,201 $37,366 $56,321 $78,363 $103,796 Enterprise Cost Savings $9,369 $22,034 $38,481 $59,222 $88,836 $123,202 $162,778 Value Created/Enterprise Profits $3,527 $8,230 $14,280 $21,856 $32,516 $44,839 $58,982 Using the assumptions described above—focusing on the United States and European Union and on firms with between 100 and 4,999 employees—the cumulative enterprise mobility service revenue over the seven-year period between 2014 and 2020 is over $100 billion. By purchasing these services, these firms would be reducing their expenses by more than $160 billion over the same timeframe. The net effect is that approximately $60 billion would become available for investment in activities designed to help differentiation or competitive advantage, or to improve profitability, or some combination.

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About Exact Ventures Exact Ventures is an independent market intelligence firm that creates unbiased, enduring benchmarks for measuring market shares and understanding and quantifying market transitions and market opportunities within its coverage areas. Exact Ventures offers market intelligence with greater depth and context than traditional, static silos of market data. Exact Ventures’ research combines both supply- and demand-side market intelligence and highlights the economics underlying emerging and transitioning markets and technologies. Greg Collins Founder & Principal Analyst Greg Collins is a technology analyst and strategist with extensive experience in creating innovative, highly analytical and enduring market segmentation and research practices in technical networking, telecommunications, and wireless markets. Greg founded Exact Ventures in 2011, in order to provide market intelligence and analytics for emerging and transitioning technology markets. Greg was an industry analyst with Dell’Oro Group from 1998 to 2011, during which time he created and/or managed approximately half of the company’s research. He created the company’s coverage of the Layer 3, Layer 4/7, and 10-Gigabit Ethernet markets, and created market research practices covering the Wireless LAN, Mobile Infrastructure, IP Multimedia Subsystems (IMS), and Wireless Packet Core markets. All of these programs were at the forefront of market research and have become standards for quantifying market shares and understanding technology shifts. Greg is a frequent speaker at industry events worldwide, contributes articles to various industry publications, and is often quoted in leading trade and business publications. Greg holds a BS in Economics from Carnegie Mellon University and an MBA in Finance and Marketing from Washington University in St. Louis. --- © Exact Ventures, Inc. All rights reserved. All Exact Ventures materials are used with Exact Ventures’ permission. The use or publication of Exact Ventures research does not indicate Exact Ventures' endorsement of any vendors’ products and/or strategies. Reproduction or distribution of this publication in any form without prior written permission from Exact Ventures is forbidden. The information contained herein has been obtained from sources believed to be reliable. Exact Ventures disclaims all warranties as to the accuracy, completeness or adequacy of such information. Exact Ventures shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The information and opinions expressed herein are subject to change without notice.

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Enterprise Mobility Services Market Opportunity for … Mobility Services Market Opportunity for Mobile Service Providers!!!! Prepared by: Greg Collins Founder & Principal Analyst