Earlier this year, the dark clouds of Covid-19 swept across the globe, and the International Monetary Fund (IMF) warned of the worst global recession since the Great Depression. We now see several countries slowly starting to reopen after months of stringent lockdown measures. And despite the 4-month hiatus since the cancellation of MWC Barcelona, it’s time to get back to the important question of what CSPs will need to do to assure payback from their $1 trillion (€0.8 trillion) investment in 5G, says Angus Ward, CEO, BearingPoint//Beyond.
5G is set to be an outstanding technology success but will CSPs be the ones who benefit from it? Whilst CSPs have proved invaluable during the Covid-19 crisis by enabling communications and home working, moving forward, traditional connectivity services to the mass consumer market is not where the growth will come from. CSPs need to adapt to get their 5G strategy right which is easier said than done during uncertain times. Here are a few thoughts on how this might be achieved.
Solutions that solve a specific problem will outsell generic products and services
The crisis has certainly put the brakes on the global economy, but not all industries have been impacted the same way. In adversity, the telecoms industry has seen a bounce as organisations such as CSPs, network providers, cloud computing providers, collaboration tool suppliers, and many more kept us all connected in lockdown and are providing an essential lifeline to the enterprise, government, health organsations and households.
In the first weeks of the lockdown, the CTIA for the US mobile industry reported data traffic for its members was up 9.2% and voice up 24.3%. US Telecom for fixed line said the average for its members was up 25%. Individual carriers like AT&T told the same story with its core network traffic is up 19%, Comcast saw its VoIP and video conferencing up 212%. Verizon reported that its VPN traffic was up 34%. How this reflects in revenue short and medium term is less clear.
Through their ability to provide steadfast connectivity, the crisis gave CSPs their moment to shine. However, solutions massively outsold products. Microsoft Teams reported a 70% increase in daily active users globally since mid-March.
Cisco’s Webex reported an unprecedented 2,400% increase. The winner by a long way however appears to be cloud-based peer-to-peer software platform Zoom, which reported making $328 million (€290 million) in revenue during its February–April quarter, more than double from the same time last year. Switching call centres and office workers to home locations would never have been possible without the wide variety of cloud-based solutions that enabled it.
It’s clear that now is the time for CSPs to evolve from selling standard connectivity products to selling pre-packaged solutions that solve genuine business problems.
Digitalisation is needed more than ever
Covid-19 will make automation, digitising the physical, enabling a work-anywhere economy and mitigating risk in supply chains, more relevant than ever.
It’s true that cloud services have proved their mettle this year. eCommerce, video conferencing, VOIP, file sharing and collaboration are all possible because of cloud and the scalability, flexibility and agility it brings to service delivery. The switch from on-premise to cloud has allowed businesses to stay connected and access business-critical data and applications from anywhere.
However, many enterprises will have learned a tough lesson through the pandemic that they aren’t driving their digital transformation fast enough. A recent report by Gartner revealed Global ICT is growing by 1.1% CAGR out of which cloud is growing by 25% so cannibalising existing ICT spend to take a larger slice. The pandemic will surely mean an acceleration towards migrating and consuming everything as a cloud service.
Cloud native digital platforms are the new norm
Static or even declining revenues may well cause some CSPs and other service providers to rethink their position on SaaS and cloud-based solutions. The ongoing resistance to adopting cloud native digital platforms, infrastructure, systems and software could well disappear versus the financial savings and the operational agility, efficiencies and advantages that they offer.
Ensuring 5G success
5G will open a world of new opportunities in SMB and Enterprise. A recent survey showed that 72% of CSPs expect businesses to make up the lion’s share of their total revenues within two years (47% enterprise and 25% SMB). The challenge is that CSPs are still focusing on the consumer market with only 31% of them now channelling investment into the enterprise.
However, this downturn will likely influence their decision to switch investment from consumer to business markets quicker. In practice, this means CSPs will have to combine new 5G connectivity with cloud, IoT, VR/AR, Mobile Edge, AI and IT applications to create the new solutions that better fit enterprises’ needs.
More than ever before, CSPs will need to get closer to their business customers to properly understand their needs and be more attentive and responsive on the quality of service they are craving for. 95% of businesses stated that building solutions with a partner ecosystem that better fits their needs is more important than 5G technology.
The upshot is that they will only realise value from 5G if they can identify, partner, co-innovate, implement, and run new cloud-based solutions with application-specific and industry specific specialists.
CSPs that can orchestrate and master such a complex web of relationships will be the ones getting a greater share of the top revenue that eclipsed them on 4G and capitalising on new 5G growth opportunities. They’ll not fall into the trap of being one of the many connectivity providers competing solely on price.
When the dark clouds of Covid-19 start to dissipate, the promise of enterprise 5G will still be there for the taking. A crisis is often an accelerator for change, so if CSPs can learn to master ecosystem orchestration, including joint go-to-market initiatives with vendors and cocreation with customers, they will achieve 5G transformational utopia.
The author is Angus Ward, CEO, BearingPoint//Beyond.
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