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Issue 8: VSAT in Corporate IT (InfoKom)

Strategic Alignment of VSAT System
in Corporate IT: INFOKOM's Case

(continued)

This paper is available in Bahasa Indonesia


V. VSAT System Growth in the Strategic Area

Referring to Figure 3, it is interesting to see that a company spending relatively high on strategic applications also spends a high percentage of money for the infrastructure. In INFOKOM's case, it is found that more companies embraced VSAT at the first time for their strategic applications. This is mainly because of time considerations in anticipating competition. For example, many provincial banks embarked on an online system, for which all of their branches and remote offices needed to be integrated as quickly as possible. To them, online system applications are the strategic application to anticipate their growth or expansion from national private banks. In this case, VSAT demand is quite high.

A similar case happened with the tax agency (part of the Finance Ministry) in Indonesia. To reduce tax payment leakages the agency implemented its online payment application system that integrates all of their payment points. Again, due to time constraints, all of the remotes at the first stage implementation were served by VSATs. However, as times goes by and the strategic application becomes operational, the cost factor becomes dominant and the number of VSAT terminals are reduced step by step until it gets to a level at which no terrestrial lines can serve.

For Indonesia's case, however, the economic crisis during 1997 - 1999 was a major contributor to the decreasing number of VSAT terminals installed. During that time period, many banks switched from VSAT services to terrestrial frame relay. In 1997, the total VSAT market was US$68 million dollars. It decreased 14% in 1998 to US$58 million [Castle 1999].

Companies that focus on cutting cost normally spend more money on operational applications and on infrastructures. Furthermore the choosen infrastructure must be a very cost effective one. In INFOKOM's case, the oil & mining industry, national banks and the financial industry fall into this category. However, in these areas, VSATs get tough competition from terrestrial leased lines, or from wireless terresterial radio systems.

With the emergence of the e-government era, in line with Indonesia's decentralization policy, many more VSATs are being installed to support government services, due to very limited and poor telecommunication infrastructure available. Internet access is also a driving force for provincial governments to immediately be served by VSATs, including through INFOKOM services.

VI. The Future of VSAT and Challenges for VSAT Operators

The demand for VSATs is still huge in Indonesia. It is based on the fact that in many cases there are no other alternatives available. However, the substitution infrastructures such as fiber optics, microwave radio, wireless systems, and VPNs are becoming more available, especially in provincial capitals and district cities. Even the more advanced cellular mobiles or fixed wireless systems such as CDMA 1x, can be product substitutions for the VSAT. For example, major banks in Indonesia have long been served with VSATs for thousands of their ATMs. However, recent development in cellular mobile shows that these ATM terminals can use terrestrial wireless as their data infrastructure.

As discussed in the previous section, the VSAT market for the existing corporate environment can grow as long as the users want their strategic applications to be implemented in the shortest possible time frame. Other than that, the VSAT operators may choose one of the following strategies:

  1. Jump to new markets
  2. Focus on the specific applications
  3. Combine VSAT with terrestrial services
  4. Enrich VSAT services

Jump to a new market. Rather than take over the existing competitor's captive markets, which is not good, VSAT operators here in Indonesia must do their best to develop new markets. There are many emerging VSAT markets in Indonesia, such as applications for fighting the so-called "digital divide" with rural telephony, rural Internet services, reaching province administrations outside Java island and online systems for provincial banks. INFOKOM's experience shows that the market for VSATs outside Java is huge. INFOKOM has managed to support several provincial banks in their online banking and serve province administrations for their intranets using VSATs.

Focus on specific applications. There are many specific applications that are best suited for VSAT. Examples includes: broadcasting, telemetry, satellite news gathering, tele-education, gyro systems and out of spot vessel tracking systems. Despite low competition in this market area, the market size itself is quite narrow.

Combine VSAT with terrestrial services. Instead of competing with the terrestrial infrastructures, it is better to adopt and interconnect with them. Many VSAT operators have launched their own terrestrial services. Most of them develop their own and some of them cooperate with the existing terrestrial operator. We developed our own wireless VPN (Virtual Private Network) using terrestrial radio systems combined with cellular mobile-wireless networks. These two systems are integrated with Broadband VSAT IP that makes them an ubiquitous wireless VPN-IP service (see Figure 4).

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Fig. 4: INFOKOM's VPN-IP solution

Enriched VSAT services. Another way to leverage VSAT growth is to enrich the VSAT services. We have proven this approach at INFOKOM. Customers are now seeking what is called a "Total IT solution" in which they need to know what is the best application for their corporate purposes, which LAN technology is the most suitable for them and what telecoms infrastructure they really need. Adding consulting services in the telecommunications and IT area to the current VSAT services is a path VSAT operators can opt.

In summary, VSATs can play a significant role in corporations in terms of supporting their strategic applications, and for operational applications as well. However, as the strategic applications become operational, the VSAT solution is sometimes challenged. In that case, to leverage their VSAT services VSAT operators need to adapt their strategy accordingly.


REFERENCES

  1. [Applegate 1999] Applegate, Lynda M, F. Warren McFarlan, James L. McKenny. Corporate Information System Management; Text and Cases. ISBN: 0-07-290283-3. McGraw-Hill. 1999.
  2. [Castle 1999] Castle Group. VSAT Market Analysis Final Report for PT. Infokom Elektrindo. Jakarta. 1999.
  3. [INFOKOM 2001] PT. Infokom Elektrindo, Rencana Kerja dan Anggaran, Divisi Engineering, Departemen Pengembangan Produk. PT. Infokom Elektrindo. Jakarta. 2001.
  4. [Ward 1996] Ward, John. Strategic Planning for Information System. ISBN: 0-471-96183-3. John Wiley & Sons, Inc. 1996.
  5. [Weil 1998] Weil, Peter. Leveraging the New Infrastructure: How Market Leaders Capitalize on Information Technology. ISBN: 0-87584-830-3. Harvard Business School Press. Boston, Massachusetts.

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