Partnerships will help telcos overcome the three key challenges preventing them from successfully transitioning to tech-cos says YiLun Miao, Managing Director, Asia Pacific, Cloudblue.
With everything that’s been said and promised about 5G over the years, it’s easy to forget that the global rollout of the technology only began a matter of months before the pandemic.
Despite all the challenges of the past few years, 5G is actually being adopted at a faster rate than 4G was at a similar stage of its lifecycle.
And with its increased adoption, some of those 5G promises are starting to come to fruition.
For telcos, this can’t happen quickly enough. The traditional connectivity services market is brutally competitive. In India, for example, there are 84 mobile subscribers per 100 people. This level of saturation leads to price wars and high customer churn, which is a recipe for high acquisition costs, tight margins and low average revenue per user (ARPU).
The real drawcard of 5G for telcos is it allows telcos to diversify. Accordingly, they will need to improve Internet connectivity and reliability in order to serve B2B customers closer to the Edge of the network with additional services and solutions.
For example, they can build bundles of tech services such as 5G connectivity, data, cloud services, cybersecurity and professional set-up services, using an everything as a service (XaaS) model.
These bundles of B2B solutions represent a revenue lifeline for telcos. APAC’s public cloud services market is set to exceed US $ 153 billion by 2026, with a faster compound annual growth rate than in the US. While the software as service (SaaS) market is expected to exceed $58 billion by 2026, accounting for 40% of the APAC cloud services market.
So now the race is on in the telco industry. But there are three challenges they must overcome first.
1. Bolstering tech capability
Telcos have a lot of infrastructure, expertise and a bank of existing customers. This certainly works in their favor. But building a suite of new B2B services to resell and create an XaaS play requires integrating a multitude of vendors and systems. The integration process can become incredibly complex and time consuming. Integrating one vendor into a telco’s back-office business support and operational support systems can take up to six months. TM Forum recommends that Telcos would need to multiply this 20 to 30 times to achieve the critical mass of vendors required to make a compelling XaaS proposition.
2. Establishing new commercial arrangements
On top of integrating a host of vendors’ technologies, telcos must also navigate contractual obligations when working with third parties and establish beneficial agreements for all involved. In our experience, generally speaking it can take a telco anywhere from six to nine months to sign a contract with a vendor just to resell its services. Speed to market will be vital for telcos to transition to tech-cos, and those that can come to grips with new commercial elements will be best placed to succeed.
3. Mastering the sales cycle
Telcos have well-established sales teams that excel at selling traditional connectivity services from SIM cards to broadband services. But selling B2B services is an entirely different ball game. It requires new skills, technical knowledge and a different outlook. Telcos can’t overlook this factor. They need to adopt new processes, upskill sales teams and incentivise the right behaviors to complete the transition to a tech-co. Otherwise considerable time and resources will have been invested in a new service that sits idle or fails to generate ROI because sales teams lack the tools to successfully sell it.
The transition to tech-cos requires a mindset shift for telcos. Not just in terms of service offering, but also in how they get there. Traditionally, telcos in the region have been able to hire en-masse to build systems and infrastructure from the ground up. There are two reasons this approach won’t work this time around.
First, the tech skills shortage globally will make finding the number of people required to build these services in-house near impossible, nor affordable. Second, they are starting from too far behind the global leaders to develop their market-competitive versions of all these business services.
Turning the B2B services dream into a reality requires telcos to form strategic partnerships with cloud marketplaces that have pre-integrated ecosystems, contractual solutions, and expertise in people and processes. These partnerships will help telcos overcome the three key challenges preventing them from successfully transitioning to tech-cos.
Not only that, but it also allows them to create their own business services marketplace, offering a self-service approach, where customers can simply pick and choose the services they require to create their own As-a-Service bundle.
If they do this successfully, telcos can create a virtuous circle of growth, growing their own services and offering more third-party collaboration as they sell, cross-sell and up-sell B2B service solutions.
