Latin American data communications services market to increase 33% in 5 years

Demand for IT, network services fueling market growth

Enterprise demand for IT and network services is fueling the red-hot Latin American enterprise communications market, which is predicted to post healthy growth over the next few years.

According to recent analysis by Frost & Sullivan, the Latin American data communications services market will increase 33 percent over the next five years, reaching $8.44 billion in 2017.

This growth is being spurred by small and medium-sized enterprises (SMEs), which are migrating to dedicated IP and multi-protocol label switching virtual private networks (MPLS VPNs) in greater numbers because of the lower costs and broader availability provided for data communications services, according to Frost & Sullivan.

The research firm's estimate agrees broadly with a prediction made last fall by TechNavio, which said the Latin American IT services market would increase at a 10 percent compound annual growth rate (CAGR) through 2015. TechNavio attributed the expected growth to greater government spending on IT infrastructure and increasing adoption of cloud services by Latin American firms.

Otávio Martins, information and communication technologies research analyst at Frost & Sullivan, observed that the Latin American data communications services market is "clearly leaning toward more hybrid networks, as the ultimate purpose of implementing a VPN network is to support any-to-any connectivity. Service providers will use a combination of technologies to support inter-networking between distributed company locations."

While the SME data communications market is expanding, the large enterprise market is reaching saturation, particularly in Brazil and Mexico.

"Nevertheless, the geographic expansion of companies and new multinationals entering the Latin American market will drive the need for connectivity in several locations. Verticals such as finance, retail, logistics, and government, with numerous branches nationwide, will sustain the demand for data communication services," Martins predicted.

Data center consolidations and bandwidth-intensive applications are fueling the bandwidth needs of enterprises. But network operators are having a tough time generating enough profit from just providing low-priced bandwidth.

To make money, operators are turning more toward value-added services such as telepresence, managed services, unified communications, software-as-a-service (SaaS) and cloud applications, according to Frost & Sullivan's analysis.

Reflecting the move to value-added services, Telefonica, one of Latin America's largest operators, announced last month that it was launching a Channel Partner Program for resellers of its cloud services and machine-to-machine platform.

From its data center in Miami, Telefonica offers cloud services for enterprises operating in Latin America and North America. Telefonica said its instant servers provide infrastructure-as-a-service (IaaS), delivering cloud computing for developers, digital businesses and large enterprises.

The rapidly expanding Latin American enterprise communications market offers huge potential for operators as well as value-added service providers, such as cloud vendors.

For more:
- see Frost & Sullivan's analysis
- check out TechNavio's prediction
- read Telefonica's release

Related articles:
Telefónica Launches First US Channel Partner Program for Cloud, Communications and M2M Services
TechNavio: Latin America IT services market to grow 10 percent annually