The Evolving International Data and Message Services Marketplace

What we are observing in the international data and message services marketplace can only be described as revolutionary--we're now seeing changes that will offer users major cost savings, improved performance and important new service capabilities. At the same time, these new capabilities will impact the current structure of the message and data services market both in the US and overseas. The ultimate effect of these market shifts is not clear at this time; however, we can make two predictions. First, end users will undoubtedly benefit significantly as these changes occur. Secondly, the ability of US carriers and overseas administrations to respond to the many market changes that lie ahead will be a formidable challenge.

When we look closely at international-service revenues, one basic fact is clear--user expenditures for data transmission via the international telephone network account for more than 55 percent of the total international data services market. Looking at the market estimates more closely (refer to Figure 1), we can identify several key international message and data market segments: international telex service, international leased channels, data via the international telephone network, international packet-switched data services and computer-based message services (that is, electronic mail).

Of the estimated $1.8-billion market in 1983, we see that transmission via the international telephone network accounted for $1.1 billion, or 55 percent of the total market. Traditional international telex services represent about 25 percent of the total international message and data services market, based on current estimates. By contrast, international packet data services, which started about nine years ago, accounted for $32 million, or only about two percent of the total market. International computer-based message services are a relatively new market segment, which today accounts for less than one-half of one percent of the total international message and data services market.

International Message and Data Services Market

Implicit in the above are some key observations about the international message and data services market.

First, as message and data volumes increase for a given application, users traditionally migrate to international data or voice/data leased channels--this market has shown a steady eight-percent growth rate in the 1973-to-1983 period. By contrast, users with low-volume applications or widely distributed communication needs generally use the international telephone netwrok as their primary international message or data-transmission solution. And what about the role of international packet-switched data services? Well, since starting in 1975, international packet-switched data services have grown more than 60 percent annually--this compares to eight percent for leased channels and about 10 percent for data transmission via the international telephone network.

Perhaps even more significant, typical user profiles for international message and packet data services have changed dramatically in recent years. For example, in 1980 about 70 percent of the international packet data services market consisted of information-service providers using the global packet data seas, only 30 percent of the market consisted of internal corporate data applications of US multinationals and overseas firms needing data links between the US and abroad. By 1983, a major change occurred--corporate applications accounted for about 60 percent of the total market versus information-service providers, which accounted for only 40 percent of the total.

Despite the many user benefits offered for message and data communications via the global packet data network, the overall market for these services is still in its infancy, based on the previously noted market estimates.

To fully understand why existing international electronic mail and packet data services represent an opportunity for users, it is helpful to briefly review some fundamentals of how these international services work today.

Let's start with a simple application that illustrates the basics of using international packet-switched data services. Suppose you now have an order-entry installed, whereby outlying regional sales locations use the public telephone network to dial in to a central computer site either daily or on an occasional basis. If traffic volumes justify it, perhaps your US central computer site is linked to a domestic packet data network service to support nationwide access from any of your remote sales locations. Central-computer access for salespeople may be used to enter orders and to check current prices, inventory levels, and so on. Data terminals operating at 300 to 1200 b/s or even communicating personal computers may be used at the remote sites for access--a very typical application that in some form probably exists within virtually every Fortune 500 firm.

Now suppose your firm has overseas sales locations and staff that need to access the same system and enjoy the benefits of real-time information retrieval. What are your options? Well, one approach (which market estimates suggest is the primary alternative) is for overseas users to directly dial your central computer using the international telephone network. This is easy and it works, two reasons that probably account for its popularity. Unfortunately, it's expensive--typical "session" rates could run from $60 to $180 per hour, depending on the overseas point. And since you're using an international network designed for voice rather than data transmission, the connection will be prone to data errors, line hits, noise and disconnections. While this alternative is easy to use, there are obviously major drawbacks.

Another alternative that's also widely used is telex transmission to the central site to get the needed information. This alternative works--and, again, market estimates suggest many users operate this way. There are obviously several drawbacks: the information is not truly realtime; transmission is costly; and the process is labor intensive, requiring more staff resources at the central site. Other options are also possible, such as international mail or courier services; however, their drawbacks should be obvious.

The Solution of the Future

Another solution, employed by an increasing number of organizations, is to use international packet-switched data services to handle this application. As we shall see, this approach is relatively easy to implement and provides performance benefits and substantial cost savings. Let's look at the basics of international packet data services, how they work today, and then review how they could be used for this application.

For example, GTE Telenet currently operates a public data network in the US that interconnects to more than 55 countries around the world. Within each country, the respective overseas administration provides facilities to enable its users to access the global packet data network, generally via two alternatives. First, the overseas user establishes a local telephone call to a data node, enters an appropriate address, and establishes a virtually error-free data connection to any host computer interconnected to our example's public data network in the US. Alternatively, the overseas administration offers the user the option to interconnect user locations with the gateway data node via a dedicated line.

The Capability of the British

The data network capability in each overseas point varies considerably from country to country. For example, in the United Kingdom, British Telecom has installed a nationwide packet-switched data service, PSS offering UK users capabilities with broad geographical coverage. By contrast, many overseas administrations, particularly in Third Worl nations, may offer only a single internationl data gateway node for access to global packet data network services (refer to Figure 2).

Now that we understand the basics, let's look at how the international packet data network could be used to handle the typical application described previously, that is, an overseas sales location requiring access to a central-site computer connected to a US public data network.

First, it should be understood that once a user interconnects the US centralsite computer with, say, Telenet's public data network, global access capability is available immediately via international packet-switched data services now operational with more than 55 countries. For our example, the overseas sales location would simply establish a new data services account with the respective overseas administraion in a particular country. The used would be assigned a unique ID code and password for billing purposes (a nominal minimum monthly billing may be incurred for each new account established). Once the overseas sales offices is "signed up" as a user, overseas sales staff would have instant access to the same information as their US counterparts.

The Cost of the Alternative

Potential cost savings using the international packet-switched data alternative rather than telephone are significant. For example, a typical application requiring about 10 hours of access from the United Kingdom to the US central site would incur total international packet data costs of about $150. By contrast, the same application handled via the international telephone network would cost about $700. Similar dramatic cost savings are also achieved as data volumes increase, as indicated in Figure 3.

Coupled with these dramatic cost savings, other important user benefits are also realized. Minimal implementation time is needed to use international packet data services. A local dial-up terminal is usually all that's needed to provide an overseas user with access to the centralsite computer in the US interconnects using packet-switching technology, users are assured a virtually error-free transmission path to support their application. By contrast, such applications handled by the international telephone network are often prone to hits, errors and disconnections, as noted previously.

What should be clear for the typical application described above is that international packet-switched data services offer users a cost-effective option to handle international data applications. International electronic-mail services are another important application area representing major growth markets for US carriers and overseas administrations. Such services now represent less than one-half of one percent of the total market for international message and data services, as mentioned earlier. Clearly, however, the user benefit and cost savings provided by these international message services promise to r apidly expand this market. To understand how electronic-mail applications are handled via international packet data networks today, let's look at a typical example.

The Calculation of the Savings

Let's suppose your firm establishes an overseas regional office in the United Kingdom, and initial projections are that about 100 messages per month will be exchanged between the UK regional office and your US location. Assuming about 2,000 characters per message and a fifty-fifty split of messages to and from the UK office, you can estimate total international telex charges of about $490 will be incurred to support this application. As an alternative, international electronic-mail services can also meet this application, and offer considerable cost savings. To implement this alternative, your firm would subscribe to an electronic-mail service offering worldwide coverage, such as Telenet's Telemail Service or comparable service offered by the local overseas administration.

For the Telemail example, any of your US or overseas locations would access its respective "mailbow" for message communications (refer to Figure 4). In our example, the UK user would simply establish a new account with British Telecom and enter the appropriate Id code and routing information to access the E-mail service. As indicated in Figure 5, the international electronic-mail service offers cost savings compared to the traditional international telex approach. For the 100-messages-per-month application cited, total international electronic-mail charges are about $264, representing savings of about 46 percent. For message volumes of 1,000 per month, similar cost savings are realized, as indicated in Figure 5.

The international data and message applications described above provide ample evidence of the potential benefits available to users of international E-mail and packet-switched data services. Yet as indicated earlier, only one out of three major US firms currently use these international capabilities. While cost savings were primarily emphasized, other important benefits will also be realized as users move towards international electronic message and packet-switched data services to handle their international communication needs. Such services offer users a wide range of speed, code and protocol conversion and can effectively be used to link the office-automation and data-processing environments within an organization. More importantly, the use of these international data and message services offers users productivity improvements along with, in most cases, the positive bottom-line impact that's often achieved by integrating US and overseas data and message applications.

The Dynamics of the Market Clearly, the market dynamics are changing rapidly in the international data and message communications market. One significant trend we observe is the increased use of the network to handle message and data communications now being routed by the international telephone network. Also, the increased use of international packet data services to handle message traffic now routed via traditional public message services (that is, telex) is another important trend that we foresee will continue and perhaps accelerate in the years ahead.

The global packet data network infrastructure now offers users and resale carriers cost-effective international communications services. The key issue is that internationl carriers both in the US and overseas must adapt to changes in the market environment to more effectively meet user needs. What this implies is the need to develop innovative service offerings and pricing strategies to ensure a competitive position in the market and minimum erosion of traditional services revenues.

The Summation of the Situation

Developments in the international message and packet-switched data services market are occurring at a rapid pace. Based on market projections, two points are clear. First, most users are not fully aware of today's capabilities--this implies considerable opportunities for users and a major challenge for carriers to educate the marketplace. Secondly, the international message and packet-switched data services are embryonic; as we develop new services, the opportunities and challenges for users and carriers alike will be even greater. As we move forward in this dynamic new international market environment, it is important to remember that "... the art of progress is to preserve order amid change and to preserve change amid order."

"The construction business isn't nrmally thought of as being high-tech, but it depends on the efficient handling of information as much as any other industry," says Frank Story, assistant to the president of J.A. Jones Construction Services, the firm that oveseas all building at the US Department of Energy's Hanford Site, near Richland, Washington.

To deal with the mass of information that lies behind JAJ's 2,000-plus construction projects each year, Story has been orchestrating the firm's move into computers. After two years, the results of that controlled move have become evident.

"As an example, we had one of our largest volumes of business ever last year," he says, "but the company handled it with 30 to 40 percent less manpower in the accounting and purchasing departments than we had previously. Other efficiencies besides office automation contributed to the savings, but our data processing played a major role."

Repetitive jobs Get Streamlined

According to Story, the company's big gains have come about because office automation has streamlined many complex or repetitive jobs. "Resource amplificaation" is what he calls it. "By that, I mean we've drastically cut the amount of time it takes to produce a transaction, report or document," he explains. "We now generate purchase orders and many other work documents automatically, and we've automated extensively the reports that are required internally or by our customers." For example, one report that used to take 32 man-hours to produce is now turned out in 14 minutes.

"Another function in which document processing has been helpful," adds Story, "has been in preparing foecasting reports in conjunction with the Department of Energy and contractors such as Westinghouse, Fockwell and Kaiser. We now can take information from a number of sources and easilyu put it into the formats required by each of the different recipients."

Story has managed the introduction of office automation at Jones Construciton services in a progressive fashion. First, he brought in Xerox 860 information processing systems, primarily for document processing. Next, he introduced Xerox 8010 Star professional workstation for creating and manipulating mangement reports and other documents. Because of the efficiencies achieved, the system was expanded to include 20 of the 860 processing units and three of the 8010 workstations.

Workstations Then Interconnected

Story then began interconnecting workstations via a Xerox Ethernet local communications network to facilitate the sharing of information among departments. And, most recently, he has expanded the networking by linking the workstations with Hanford's dual Univac 1100 Model 44 mainframe computers, using third-party software. A Dest optical character reader has also been joined to the processing equipment to further eliminate manual work.

Going into the decision to automate the company, Story laid out a series of master goals, including these:

Position the company ahead of time to take maximum advantage of the explosion in automatic data processing and word processing (ADP-WP) technology.

Build systems that are able to respond quickly and efficiently to severe contractions or expansions of business volume.

Provide systems that strip away the unnecessary and significantly eliminate paper.

Build such "economies of energy and efficiency" into the systems that deep alliances to ADP-WP are developed the ability to pull dissimilar factions together into one concise management tool.

Gain a competitive ADP-WP edge on the rest of the construction-engineering industry.

Phased Approach Considered Best

Story feels that his aggressive but phased approach is better than "those that attempt to automate everything at once and, as a consequence, automate nothing really successfully." Document processing debuted in the contracts and industrial-relations departments first, he says, because their applications offered the most-immediate benefits. The experience there helped to encourage other departments to join in, as they saw the substantial cost savings those pioneers were realizing.

To improve decision making at all levels within the company, Story is going beyond the automation of clerical work, which he considers an incidental by-product. "The real benefit is in the elevated decision makng that automation allows," he explains. "It improves our capacity as a corporation to make decisions and a serve our customers. For example, it frees purchasing, warehouse and expediting people from tedious, repetitive tasks, so they can devote more time to the cost-critical aspects of their jobs."

Story likens their introdution of office automation to mining for gold. "The first thing done is to pick up all the nuggets that are lying loose on the ground. Those are like the obvious productivity gains that are acquired from word and records processing. Then, later, ou sink a shaft to get down to the nots-so-obvious but really high-grade ore. That's what we're doing now, and it has improved our executive decision making."

Al Purtill, president of JAJ, explains one way in which the firm's information-processing system will aid decision making: "We keep close track of coast data," he says, "but, until very recently, the most up-to-data infomation I could get was two weeks old. Now I'll be able to access and analyze the very latest cost information whenever I need it."

To meet this professional productivity objective, Story is providing Purtill and other executives and managers with 8010 Star workstations, which provide several advantages over the 860 units the company relies on for document and records processing. For example, the workstations have a graphics capability--a useful tool for instantly reducing voluminous data to more-readable form, such as pie charts and bar graphs.

"Im my function as manager of management information systems, I'm now able to distill large amounts tabular data into an executives," perspective," Story says. "Because the workstations make it easy to integrate graphics with text, I'm able to take that distillation and from different backgrounds present it in a variety of contexts--in terms taht individual managers can relate to an understand.

In addition to providing graphics and text, the 8010 workstations use a software system that can be operated with little training. These were the first professional workstation to use a "mouse" and "icons" to simplify use. The mouse, a palm-size object the user employs much like a video game "joy sticks," controls the position of the cursor on the video screen, directing it to various parts of the display. Basically, the operator mimics on the screen the actions he or she would take in dealing with paper documents. For example, by pointing the cursor to an icon representing a file cabinet, the user can access that file.

Graphics-Capable Unit Preferred for Professionals

"The 8010's advantages go beyond its graphics capability," Story says. "It's a matter of user friendliness. Our clerks and secretaries like the 860 units and have become very skilled operators. But the 8010 workstations are better for occasional users such as managers and professionals, because the steps they have to follow are mostly self-evident once they understand the concept of the mouse and icons."

As more and more departments are sold on the advantages of office automation. Story is progressively expanding the inter-building Ethernet network to allow users to share more data and programs. "At first," he relates, "if someone in the safety department wanted to generate a report using data from payroll's records, we had to physically move a disk between machines. With networking, all the data in the entire system can be made available to authorized users at almost instantaneous speeds.

"The elimination of paperwork has always been a primary purpose of our systems," adds Story, "and it has been very successful here. For example, in the last several years, we've increased our WP applications literally a hundredfold and ADP processing eightfold, but hard-copy paper consumption is down more than 50 percent. To our analysis, that reduction and the personal growth associated with our staff's learning their new ADP-WP skills have created an atmosphere of excitement, enthusiasm and high morale that legitimately separates us from our competitors."

Microwave System Planned to Expand Networking

While coaxial cable now has been installed to provide networking capabilities for JAJ's main Hanford complex of buildings, Story is now putting tgether plans for a microwave system to carry data at high speeds between sites up to 40 miles apart.

In addition, to help disseminate information and provide processing capability to as many workers as possible, Story has begun a pilot program to evaluate bringing personal computers into the network. This program will involve both IBM PCs and the new Xerox 16/8 personal computer, a combined 16-bit and 8-bit professional processor deisgned to be used as a stand-alone unit or as a workstation on an office-automation network.

Once a large number of workstations are interconnected via both Ethernet and the long-distance microwave links, Story expects that both operations and planning will become even more efficient. As an example, personnel managers will be able to forecast needs for workers in certain specialties, and Jones Construction Services will be able to better fine-tune schedules to assure that large numbers of electricians, plumbers or sheet-metal workers are scheduled and used most effciently.

Story sums it up: "J. A. Jones is an extremely competitive company, and, in construction--as in any other large and complex enterprise--our goal is to base our business decisions on the most-timely and accurate information available. With our extensive use of office automation, we're rapidly moving toward achieving that goal and maintaining a competitive edge." This decade began with the computer age, but the 1990s will be the age of teleconferencing. That's the prediction of one of the world's leading authorities on teleconferencing--Lorne Parker, a Univeristy of Wisconsin professor.

Doctor Parker made the forecast during the first transatlantic press teleconference, linking New York City with London. The hookup was arranged to dramatize the most-extensive market research study of teleconferencing ever undertaken on the North American continent. It was done by the university's Center for interactive Programs, of which Parker is the director.

The February press conference was held in the videoconference room of New York's Barclay Inter-Continental Hotel. Beamed from England and on the video screen was Stephen Connell, managing director of IFC Research, whose firm participated in the Us-Canada research project, a massive 1200-interview, two-year undertaking.

Parker said the study reports that "the North American market for teleconferencing equipment will grow at an annual rate of 54 percent between now and the end of the decade." He added that the teleconferencing market (see pie charts) is now estimated at $279 million and will grow to $3.7 billion by the end of the decade, and declared, "Teleconferencing is now at the same stage that computers were in the early 1970s."

Parker attributed the accelerating growth at the end of this decade to the increasing popularity of videoconferencing in corporate America, government agencies and educational institutions, saying, "Teleconferencing is being used by all major industry types and for all kinds of purposes."

According to the study, transmission companies will continue to garner over half the revenues generated by teleconferencing. Dramatic increases in equipment sales are forecast: Parker said they will grow from $67 million today to $1.4 billion by the end of the decade, and would reflect the importance of teleconferencing in the office-automation and managerial workstation markets. He said that workstations with teleconferencing capabilities will allow participants in distant cities to view and discuss the same graphics, diagrams and pictures.

Ad-Hoc Conferencing Is Booming

Parker explained that one of the fastest-growing segments is the "ad hoc" videoconference. This market produces live programs distributed to hotels, convention centers and offices around the country and is increasing at the rate of 35 to 45 percent annually. This type of videoconference is commonly used for sales meetings, new-product introductions, press conferences and training, he said.

That there's tremendous room for growth is indicated by teleconferencing penetration in big business, government and educational organizations--35 percent use audioconferencing, 9 percent have rooms with audiographic or telewriting equipment, 4 percent have rooms for receiving one-way videoconferences, and 3 percent have two-way videoconferencing rooms or freeze-frame rooms and capable of sending a picture over voice-grade telephone lines.

More than 200 experienced teleconferencing organizations were surveyed. The findings: 69 percent have audio rooms; 31 percent employ audiographic or telewriting equipment; 29 percent use two-way video; and 23 percent have freeze-frame equipment.

Benefits of teleconferencing were reported to be: shorter, more efficient meetings; faster response time in emergencies; improved communication between sites; and more expertise brought into decision making. "These were cited along with the obvious benefit of travel time and dollars saved," Parker said.

The multi-vendor-funded study is available in five different modules from the Center for Interactive Programs, the University of Wisconsin, Madison. The Project Overview is a cost-free explanation of the study's methodology, whereas the Core Report costs $20,000. Separate modules on audio, audiographic and video teleconferencing run $10,000 apiece. The total package: $42,500.

COPYRIGHT 1985 Nelson Publishing
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