Will digital transformation be operators’ next big miss?
At this year’s Digital Transformation World, the re-named TM Forum Live! event held in Nice, France, this week, much of the conversation has been about just how far operators’ digital transformations will go, writes VanillaPlus managing editor, George Malim.
There are several aspects to take into account here. Some speak of digital transformation as the multi-industry embracing change that will see organisations of all types digitise their operations. This brings together servitisation, increased automation and incorporates the current big hitters of technology buzzword bingo – IoT, artificial intelligence, machine learning and the varying forms of reality, spanning augmented and virtual. The challenge here is that operators have failed to make headway with new opportunities in mobile entertainment, social media and, to an extent, cloud. Digital transformation could be next on the list of operator misses.
“I struggle with this because telcos don’t typically have the innovation DNA to do it, they tend to rest back on connectivity-plus propositions,” said Leonard Sheahan, the senior director of product marketing at Oracle Communications. “Having said that, Verizon Telematics, for example, does do this, although this wasn’t triggered by the telecoms industry. Organisations like Mercedes have wanted to offer subscription services on top of their vehicles but didn’t want to build their own [platforms].”
Angus Ward, the chief executive of digital platform solutions at Bearing Point, which has released research into how operators are progressing with their digital transformations, paints a gloomy picture for connectivity-plus offerings. “In B2C, connectivity-plus is media and entertainment, in enterprise, it’s IT,” he said. “Enterprises want a service wrapper, some Amazon Web Services – and others – and operators do have role in providing that. The question, though, is how sophisticated and compelling the products are and how hard to replicate the propositions turn out to be. Everyone wants an SME offering but it needs to be something different and involve innovation around software and the network.”
Ward bemoans the experience of meeting an operator who wanted to introduce a new digital service once they had seen an example of a successful use case. “That’s not innovation, that’s copying something that already works,” he said.
The company’s research revealed that operators are challenged by commoditisation and need to win new customers and grow their revenues and share price, that they need to retain their end customers and not lose them to over the top providers, and that there are few innovations that are developed purely in-house, necessitating that operators form partnerships with outside organisations.
However, there is some encouragement to be taken from the findings. 69% of respondents said digital transformation was their number one priority, although only 26% are actually doing it. That compares badly to the average for all industries of 34% so operators are laggards. In addition to this, those that are forming partnerships for digital transformation are not necessarily picking the most innovative or challenging partners. 67% are partnering with other telcos, 62% with ICT firms and 54% with utilities.
“These companies all look the same,” said Ward. “However, looking forward they said this will change within two years with new partnerships with manufacturers and insurers.”
“They understand the challenge and they know the benefits of digital transformation and they recognise they’re in their comfort zone,” added Ward. “The challenges are enterprise-wide not ecosystem-wide so they need platforms in order to participate in digital innovation. Digital revenues will grow six times faster than traditional telecoms connectivity revenues.”
Sheahan sees many opportunities in digital transformation and cites how Oracle’s systems are enabling new business models for organisations as diverse as textbook publishers and car makers. “Telcos, in fairness, are good at services,” he added. “There’s an opportunity for them to take the learning and best practices to other industries and help them and how they transform a bit.”
Ward goes further and sees some of the work operators have already done giving them an advantage over IT companies. “With the work TM Forum has done to develop the SID and Open APIs, operators have got an advantage but only for the telecoms bit, not the whole piece,” he explained. “The IT services industry doesn’t have anything like that.”
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