Capitalizing on disruption on the road to transformation

The communications industry is in the throes of a digital shake up, as over the top (OTT) digital giants and new start-ups upset the status quo. Offering new communication options and, in some cases, alternative access technologies, these digital invaders are shifting the competitive landscape, capturing revenues and hitting margins.

Digital disruption

Digital disruption

What are the threats and challenges faced by CSPs?

CSPs face a number of obstacles on the road to transformation. Sixty-eight percent (68%) of CSPs identify “siloed processes & divisions” as key obstacles to implementing customer experience initiatives. A DSP must have a “lean and mean” business model focused on reducing up to 50 percent of operations costs and promoting optimum efficiency in service delivery. This requires simplification and automation of processes likely inhibited by existing silos. Re-engineering processes to dramatically improve end-to-end automation will be critical.

Obstacles faced by CSPs

Obstacles faced by CSPs

At the same time, communications service providers (CSPs) are challenged to meet the increasingly high expectations of empowered – and less loyal – subscribers.  In addition, they are tasked with large investments in network capabilities, particularly as the explosive growth in data-intensive applications increases traffic. Add a slowdown in subscriber numbers, continued regulatory pressures and forecasts for sluggish revenue growth, and the result is an industry in flux.

Out think the ‘out thinkers’

It’s a whole new ball game for communications service providers as they navigate a shifting industry landscape. The future is bright, however, for those that can outthink the disruption. By capitalizing on the very forces currently plaguing them, providers could create a world with revenue and margin growth in new addressable markets. The threats of today can be overcome through accelerated transformation to the digital service provider market and innovative partnerships, even with the digital invaders currently muddling the competitive arena.

The IBM Institute of Business Value (IBV) conducted extensive research, including a survey of 135 industry leaders in 51 countries. Based on the IBV’s investigation, as well as decades of engagements with communications clients. In the study, Outthinking digital disruption, the IBV takes a look at technology’s role – both today and in the future.

Ecosystems create new forms of value

Indeed, providers have a huge growth opportunity before them thanks to disruption stemming from technology challenges, changing customer expectations and rapid industry convergence. But, where is the growth opportunity for providers?

“Ultimately, computing is about networked intelligence, and the real impact of the Internet and devices will occur once that translates into automation and machine intelligence. So cognitive computing will transform our world.”
CSP COO from South Africa, IBM C-suite Study

The rise of business ecosystems based on Internet and “as a service” technologies is creating new market opportunities. CSPs have the size, global scale, market trust and brand reach to capture a good share of new markets created by emerging ecosystems.

Ecosystems create new forms of value, with participants delivering more value acting together than they would acting alone by opening up their capabilities and enabling the market at large to partner and create new services, offerings and disruptive businesses. With their customer access, network assets, data management capabilities, client billing relationships and third party relationship management experience, CSPs are ideally suited to become ecosystem development and management partners. As a DSE, the CSP also becomes an important partner for application developers and third-party providers, as well as enhances its role in the business-to-business-to-consumer space.

Opening up core assets to digital players

Opening up core assets to digital players

For this to become reality, CSPs must foster ecosystem development. In the new economy, no organization is an island – success increasingly depends less on closed systems and more on partnerships within ecosystems. Innovation has become more open and collaborative. In this spirit, as DSEs, providers must be willing to make their assets available to partners to promote ecosystem growth and IoT enablement.

Using open application programming interfaces (APIs) and orchestration, providers can offer soft platforms and products to managed environments within the ecosystem via software defined networking (SDN), network function virtualization (NFV), middleware virtualization, etc. Powered by big data and real-time automated intelligent systems, the 2020 CSP could connect industries to their customers and suppliers – and connect industries with one another.

The road to transformation progresses along two digital paths

It’s time for CSPs to recognize the imperative by becoming digital services providers, offering customer-defined contextual services. In the traditional CSP engagement model, providers determine when, where and how customers interact with them – typically starting with the call center and progressing through retail stores and dealerships to an online presence. However, a DSP thinks digital first and drives almost all interactions online and across devices, putting the customer in control.

The Digital Services Provider (DSP) provides customer-defined and experience-led services, contextual actions in the moment, coupled with low cost, agile, automated, intelligent services. Using reimagined processes, IT automation, cognitive analytics, DSPs can offer agile, micro-service based experiences at lower costs.

Simply put, the DSP is a highly automated, low-cost provider delivering high-quality customer experiences through online channels. It values data and analytics – and will embrace cognitive capabilities to further improve both the customer experience and its operations.

Making this growth opportunity a reality requires simultaneous progress along two trajectories. The 2020 CSP will emerge as providers advance along two digital service axes: The digital services provider (DSP) and the digital services enabler (DSE). To complete this evolution, CSPs must make changes at warp speed.

The path to becoming a DSP

The path to becoming a DSP

Along the other axis, the DSE recognizes the growing importance of ecosystem platforms and the associated market opportunities. By embracing industry convergence and abandoning a product-based model in favor of a platform-based one, it serves customers as well as an expanding ecosystem of partners – which includes OTTs. The DSE builds on DSP capabilities to create services and platform solutions for the emerging ecosystems, the Internet of Things, digital companies, etc. Its essential capabilities are a significant departure from those of the traditional CSP, as network virtualization, an “all-IP” infrastructure, technology integration and complex partnerships become necessities. Huge changes in workforce skills, business models and execution speed are essential.

As both a DSP and a DSE, the 2020 CSP will offer personalized communication and services to customers, while allowing ecosystem partners to combine their own and others’ products and services to create new offers, services, platforms and components. The 2020 CSP will be a truly open enterprise.

Exploiting technology

Historically, the communications industry has embraced technology to its benefit and continues to rely on it for innovation and growth. Indeed, technology plays a starring role in the 2020 CSP transformation. As part of our research, we asked CSPs which technologies they view as most important today and which they believe will be most important to the industry in 2020.

Technologies important to the industry

Technologies important to the industry

The role of cognitive

By 2020, communication service providers (CSPs) predict cognitive computing will become the most important industry technology. The successful telecom company of the future will be both a digital services provider and a digital services enabler.

90% of telcos believe cognitive computing will be an essential industry technology in 2020

By taking advantage of cognitive computing, Internet of Things innovations, CSPs can emerge in 2020 as new and stronger businesses. The DSP can benefit from cognitive in five key areas.

DSP can benefit from cognitive in five key areas

DSP can benefit from cognitive in five key areas

The role of the IoT

As interest in the IoT grows, CSPs seek to capture a sizable chunk of the market. Fifty percent of the surveyed executives cited IoT as an important technology being explored, while 76% believing IoT will be essential by 2020.

Accordingly, CSPs are increasing investments in IoT technologies, such as machine-to-machine (M2M) solutions and Low Power Wide Area (LPWA) technology. Enabling the development of new revenue-generating IoT services – likely through partnerships with or acquisitions of other companies. IoT enablement will be a key part of the 2020 CSP’s DSE role – and could lead to their becoming suppliers of choice in selected vertical markets, such as connected homes and smart cities.

“The market for handheld devices is saturated, but the Internet of Things, wearable devices, and care and home devices will generate new opportunities for revenue growth.”
CSP CFO from the United Kingdom, IBM C-suite Study

Turn opportunity into reality

Succeeding in an environment where digital invaders are shifting to the competitive landscape, destroying revenues and hitting margins, requires transformation.

In the IBV study: Outthinking digital disruption, insights from the executive survey will reveal how providers can evolve into the 2020 CSP, answering questions such as, ‘What are the capabilities required?’ and ‘What are the transformation paths for becoming both a DSP and a DSE?’

Seeking answers? Gain insights about what the future of the telecommunications industry will look like by reading the IBV study: Outthinking digital disruption.