The telco industry is having another growth spurt, with the “Everything-as-a-Service” business model representing an estimated $400-700 billion opportunity. With FOMO like that it’s no wonder that 75% of telcos are feeling the need to adopt digital transformation.
Telcos are looking to actively climb the value chain ladder, and SMBs, who already have connectivity products, are starting to look like an ideal customer profile. Digital transformation is predicted to unlock $2 trillion in value for the telco industry, and with digital transformation in the SMB space continuously growing, the SMB market is becoming an important segment for telcos.
Over the last few years we have seen telcos looking beyond being mere providers of connectivity and ICT services, to becoming true drivers of digital innovation. They now aim to provide more complex and value-adding solutions in areas such as IoT, multi-cloud and hybrid solutions, while also going after every aspect of cybersecurity, connectivity and 5G.
Whilst these technologies and trends provide a great opportunity, challenges are never too far away. In our recent webinar “Building a scalable and successful telco marketplace strategy in the XaaS economy”, CloudSense’s Vish Kumar was joined by CloudBlue’s Darek Tasak, to discuss the challenges marketplaces pose for telcos.
Top challenges of digital transformation, according to telco executives
1. Lack relevant internal skills
According to a 2021 survey, as many as 34% telco executives believe they lack relevant internal operational and technical skills for digital transformation; some believe that even this figure is highly understated. There is a bad habit of thinking that all sales teams need to do to enhance revenue and manage churn is to get themselves a bunch of shiny new digital products, catalogs and offerings.
Unfortunately, this is not a simple task given that telco support structures and processes are geared towards break/fix. New digital products and offerings are too complex and technical in nature for an average sales rep to not only understand, but to translate it in an effective manner to the customer. Customers have an endless array of questions that sales reps may not be equipped to answer.
2. Inhibited by costs
Telco IT departments have a lot of experience provisioning their own services, but almost no experience in provisioning services that are provided by 3rd parties. This forces them to work with back-end systems and APIs which is not only time consuming, but costly. Going point-to-point to each provider that needs to be part of a modern catalog is simply not an option.
In the same survey as above, 46% of telco executives stated that costs of transformation inhibit them. This comes as no surprise when telcos are already trying to close gaps with their own resources and capabilities. Not only does hiring more people lead to a massive cost issue, but it also creates a time-to-market problem.
For the last decade or two, telco architecture has been focusing on connectivity. With rapid digitization and other new trends emerging, telcos are forced to enter the realm of bundling and applications. The current architecture is put under a lot of pressure, and IT teams are put under further strain to put all of this together and simplify it.
3. Integrating with existing tech
Telcos also have their own business to tend to. So what is absolutely necessary is to integrate this new world of digital products with the existing portfolio and offerings, and use them with existing technology.
A telco can’t simply ditch its existing legacy tech; it is not only complex, but also intertwined with business processes. Replacing legacy systems with new digital channels and integrating them with existing technologies is a struggle, and 75% of executives responsible for doing so are oblivious to how to get it done.
This leads to the conclusion that once these challenges are put together, telcos face an endless struggle when establishing any business plan that hits the normal KPIs expected from an investment.
4. Establishing a workable ROI
On top of all of this, how telcos make their marketplace available to customers is an additional challenge, since the consumer is the driver of ROI. Today’s customer demands are not challenging in terms of their complexity, but rather customers are looking for convenience, with 43% willing to pay more for greater convenience. You can thank companies like Amazon and Uber for this, as they have made consumers accustomed to simplicity and convenience in an easy-to-use interface.
So telcos are faced with their own customers saying “I need you to be everything to me: to solve my connectivity issues, security concerns and handle all additional third-party problems”. As if that wasn’t enough, consumers also want flexibility to be able to demand those things whenever they want.
This convergence of technology and experience is having a great impact across the industry. Telcos not only need to figure out how to bring these demands to life using their IT stack, but also how to bring them to life while juggling different applications and a plethora of different suppliers.
What do you think is the greatest challenge to creating a B2B marketplace? We’d love to hear from you, so please take our LinkedIn poll.