It’s time for telcos to try for another trillion
The telecoms market is worth about US$1tn but revenues are under pressure and networks are even more thirsty for cash as 5G begins deployment. What communications service providers (CSPs) need is a vision for a future world in which their efforts and investment are rewarded by revenues from a market of similar value. Intriguingly, writes George Malim, such a market already exists and the companies in it are already CSPs’ customers.
Software defined wide area networks (SD-WAN) and connectivity for Internet of Things (IoT) devices across multiple platforms provide a glimpse into the digital future for CSPs. These areas demonstrate that there is an opportunity for CSPs to go beyond network provision and layer on a range of value-added services on top of traditional connectivity. These services do not necessarily have to be directly related to traditional telecoms propositions.
Edge computing, the Internet of Things, servitisation, artificial intelligence, security and cloud all depend on the communications network but its role is now forever changed. The network is no longer composed of function-specific hardware with a limited capacity. Omnipresent fibre and the coming of 5G are ushering in a world of ultra-low latency, enormous capacity and the flexibility for the network to be dimensioned according to the applications it supports.
This makes the network itself less of a consideration for enterprises. They just need to know the capacity, coverage and security are available to support their businesses. They don’t care about MPLS, URLLC, 4G or 5G. They do care intensely that their virtualised IT is always available, that their new applications are supported and that the network is resilient and secure enough to empower their own new business models.
Many see the network as the engine of innovation, providing capability that will transform their businesses. Recent research from Accenture underscores this. It found that 70% of business and technology executives believe that 5G apps will give them a competitive edge. However, almost three-quarters of the survey respondents said they need help with imagining the future possibilities of 5G.
The value lies in CSPs’ existing relationships with enterprises and the small to medium sized businesses (SMBs) in particular. These make up the bulk of the world’s businesses and these are often underserved by the large IT and systems integration giants. A business with 20 sites, 100 vehicles and 500 employees simply isn’t big enough for a large consulting firm to engage with. However, a CSP could carve out big business providing IT products and services to the mid-market and below.
“We believe CSPs could become a connected industry orchestrator if they evolve their platforms and expose their networks in a unique way,” says Anders Lindblad, the communications and media industry lead for Europe at Accenture. “In the consumer market CSPs pretty much missed the game completely and they might also do so in business-to-business but addressing this market with digital services could be an area they can succeed in.”
“The SMB market globally is 30-40% of the enterprise market and it’s growing at 19%,” he adds. “Potentially the market will hit US$1.1tn and all of a sudden you’ve created a total addressable market that is as big as the telecoms market.”
That’s an eye-catching figure and exactly the scale of opportunity CSPs are seeking as they come to terms with the commoditisation of their traditional businesses. In fact, Lindblad thinks 5G will provide a foundation for CSPs to put forward the concept of themselves as the orchestrators of digitalisation for SMBs. There’s excitement, perhaps misguided, among SMBs that 5G will bring competitive advantage and revolutionise their businesses, levelling he playing field between them and large corporations. However, for that to happen they need help and CSPs could be the help provider.
“CSPs have distinct advantages,” says Lindblad. “In Europe there are millions of SMBs and they’re underserved. CSPs have quite good salesforces to address this market, they’re already trusted and the SMB market is a really interesting market to become that orchestrator in.”
It’s not a giant leap from providing SMB with mobile phone fleets and PBXs in their offices to add some local data storage some subscription security services, a bundle of edge devices and some attractive new applications. Think of a logical and simple sales pitch made as part of a routine existing contract management meeting whereby the CSP reveals it can manage edge servers, provide data hosting and security services, and manage enterprise-grade apps – all for a clear monthly charge from a brand you already trust.
This is a large, multi-layered and complex opportunity but one that could transform the performance of traditional CSPs if they are able to move into position effectively. In the same way that it’s not a great stretch for SMBs to turn to CSPs for these services, CSPs are already some way along the road of preparing to provide SMB services. A strengthened commitment to this market and few longer strides would be all that is required to stake a claim.
Added to this, they are pushing on a door that is at least slightly open, the Accenture research uncovered that 40% of respondents say CSPs are one of the leading service providers that enterprise executives plan to partner with for their 5G journeys.
We’ve been here before, with CSPs poised on the brink of wildly profitable new opportunities only for defeat to be snatched from the jaws of victory. The SMB IT market is not one that CSPs have won yet, but it is, once again, theirs to lose.