The telecommunications industry has been undergoing major transformations recently, and in the past couple of years in particular we’ve been hearing lots of talk about Communication Service Providers (CSPs) wanting to transition from telco to techco; but what does this actually mean?

CSPs need to constantly innovate and diversify their product portfolio, in order to stay ahead of the competition and provide their customers with the very latest solutions. They need to expand their service offering from more than just phone lines and internet access, as there is almost total market saturation on the provision of connectivity and communications capabilities now. This is no longer an untapped market, which is one of the driving factors behind telcos transitioning to techcos.

In the techco world, the ability to identify customer needs, create additional value, fail fast and move on, and have the speed to lead the pack is key¹. By building and integrating digital services, such as online payments, media and advertising into their product portfolio, telcos can provide a more complete end-to-end solution to their customers. 

This signals their transformation into techcos, and enables them to increase customer loyalty, enter new markets, and potentially increase their market value^2. 

So how is a techco different to a telco?

Telcos traditionally provide basic connectivity solutions, such as voice, data and video, whereas techcos tend to provide a more comprehensive end-to-end solution that will enable them to provide additional value to their customers and thrive in a digital-first world. 

These new digital products and services will require a stable  internet connection and reliable connectivity, which could explain why telcos are seeing the value of having both digital services and connectivity / communications under one roof, particularly when it comes to 5G, which is facilitating the rapid acceleration of AI and IoT tech.

Similarities between telcos and techcos

Despite their obvious differences, telcos and techcos do share some similarities: for example, both are focused on providing connectivity. While telcos typically provide connectivity solutions through more traditional methods (think data and networking), techcos provide connectivity through newer channels, such as cloud computing platforms, that make it easier to integrate hardware, connectivity and applications. Their services are still focused around connectivity, but techcos are able to build on top of this to provide services such as AI, automation and augmented reality.

Why are telcos transitioning to techcos?

Telcos are under pressure to expand their portfolio of offerings. Many are doing so by investing in cloud computing, digital services and other technologies. Here are some of the factors driving this trend:

• As more businesses and consumers use digital services, telcos are seeing an opportunity to expand their offerings into this space
• Cloud computing has been around for a while now, but as more companies continue to switch to a cloud-based model, telcos are seeing an opportunity to capitalize on this trend
• Having access to existing networking infrastructure gives telcos a head start, as the hardware and infrastructure already at their disposal can be used to enable other digital services

Transforming your business to meet all the needs of modern enterprises can only benefit telcos that are looking for ways to grow their customer base and increase loyalty and revenueDigital-first telcos are growing revenue at an average rate of 20 per cent, compared to three per cent for telcos that still focus on traditional telecoms services³.

Examples of companies that have transitioned from telco to techco

Some recent examples of prominent companies transitioning from telco to techco include Vodafone Group and AT&T. Historically, both companies might have been viewed as telcos, however they have been busy investing in other digital services in recent years, which has enabled them to offer far more than just connectivity solutions.

• Vodafone Group⁴  began its journey to digital a few years ago, by focusing on platforms and partnerships as the way forward, as it looks to better integrate the service portfolio (connectivity, 5G, IoT, Cloud). 
• AT&T⁵  acquired Time Warner in 2016, with the objective to “offer customers a differentiated, high-quality, mobile-first entertainment experience”.

Telco vs techco - does it really matter?

With the trend gaining momentum, we can expect more companies to make the transition from telco to techco in the coming years, as the telecommunications industry continues to evolve.

In order to thrive as a digital service provider, enterprises of all types need to ensure the correct infrastructure is in place to respond to further industry evolution. 

At the core of this will be software that makes it easy for connectivity providers to launch new products, configure product bundles, go to market quicker, and streamline sales processes to convert more deals. 

These kinds of requirements are what drove our latest solution Telco One - a culmination of over 12 years providing commercial order management solutions to telcos.

Telco One has been purpose-built to offer speed, simplicity and value to organisations working in the telecommunications industry, and help transform the end-to-end buyer journey from initial contact, quoting and negotiation, through to order management and fulfilment.

With the unpredictability of the business landscape, a business needs to be sure they have a solution that not only works for them today, but will continue to work for them even as they continue to innovate.

Sources: 1, RCR Wireless News, 2022; 2, Stl Partners, 2022; 3, Vanilla Plus, 2023; 4, Vodafone Group; 5, AT&T