- Nearly 70% of telecom operators’ IT spend is for maintaining their existing platforms
- New investments in digital platforms are creating revenue streams in B2B services
- To capitalize on digital-tech investments, telecoms must realign organizations and people
After decades of rising costs, slipping margins, and failed acquisitions, telecommunications operators are focused on accelerating digital transformation and buttressing their bottom lines. The trouble is, many remain wedded to old ways of doing things.
Consider the case of a large Scandinavian multinational telecom. Its traditional back-end systems for billing, ordering, and provisioning weren’t delivering the high-quality experiences its customers expected, says John Abraham, a telecommunications analyst for Analysys Mason, a consulting and research firm.
Although the company made several attempts to bolt on newer digital technology, the efforts fell short, according to Abraham, because the company’s business operations and organizational structures still relied heavily on the older systems. To this day, the company finds end-to-end digitization to be difficult and elusive, Abraham says.
The problem is a broader one. “Customers today expect complete and full-fledged digital experiences. But most operators are not able to deliver that today,” says Abraham. “And it’s costing them dearly.”
Telecom operators this year will spend nearly 70% of their IT budgets maintaining or updating their existing monetization platforms, according to Analysys Mason research. This suggests they’re not spending enough on digital technologies that could improve operational efficiency, reduce costs, provide better customer experiences, and make them more profitable. What’s more, old-line operators are losing ground to young wireless firms that, thanks to newer systems, have less technical debt.
How can telecom companies return to growth? According to industry experts, it depends on parting with the past, embracing new technologies, and making organizational changes that help telecoms digitally transform.
Break old patterns
From their beginnings, telecom operators ran telephone exchanges, strung transmission lines, and sold the handsets in people’s homes. But as communications went digital and wireless, that aging infrastructure’s contribution to revenues declined. In the quest for new sources of profits, telecoms have spent billions to own a piece of the new over-the-top (OTT) subscription services for streamed movies, television programming, games, and e-sports.
Traditional operators are often wedded to old ways that aren’t well suited to pursuing big digital opportunities.
A bigger opportunity for margins and growth, many analysts say, is in B2B2x services, such as providing bandwidth to businesses selling cloud-based offerings. Or they could tap the lightning-fast speeds of 5G wireless to support growing demand of IoT services for developing everything from smart cities to smart factories. They could even create streaming portals, akin to Roku, for businesses to deliver training and other materials to their employees and partners.
While enterprise customers account for nearly half the revenues for many large telecoms, their technology infrastructure can’t always support businesses’ complex needs, says Karl Whitelock, an IDC analyst following the telecommunications industry. “The enterprise side of their business has been sorely neglected over the years,” he says, “and that needs to change.”
Experience is the new battleground
If telecoms want to compete and win on experience, they first need to understand every aspect of their operations so they can monitor customer information, whatever the source. The technology also needs to integrate with existing tools.
Most important, customers need to be able to interact seamlessly with the systems to get the services they need, without the headaches that can lead to a loss of business—customer “churn,” as it’s called in the industry—that for U.S. wireless carriers can be as high as 3% per month.
Vodafone, which serves more than 300 million corporate and consumer customers in 70 countries, recognized the need to upgrade its infrastructure to optimize its customer experience. Relying on technology comprising multiple platforms as well as siloed or minimally connected systems, it was slow to respond to outages and other issues. Customers, in fact, sometimes knew about problems before the company did.
With a new digital platform, Vodafone can be more proactive, alerting customers to issues and assuring them they are being handled. As a result, Vodafone says, customer satisfaction scores rose 25 percentage points while productivity increased by nearly half.
Realign the organization and culture
In parallel with having core digital platforms in place, telecoms need to realign their organizational structures to reap the benefits of digital technology.
“When digital transformation fails, and that happens all the time, it’s usually not so much about the technology you put in place as how well you’ve aligned your people around that,” says Chris Bauschka, general manager of global telecommunications, media, and technology at ServiceNow.
The trouble is, many telecoms have been locked into traditional organizational and cultural approaches that make change difficult. Knowing this, some of them have created standalone digital units with the hope that starting from scratch will speed transformation.
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This year, for example, BT announced a new technology unit called BT Digital. It is expected to expand the UK telecom company’s presence and partnerships in areas such as cloud services, artificial intelligence, and machine learning while allowing its core technology business areas to continue focusing on network development.
Other telecoms, says Abraham, might consider following suit. “Traditional operators are often wedded to old ways that aren’t well suited to pursuing big digital opportunities,” he says. “If they really want their digital transformation efforts to succeed, they need to make a cultural shift and evolve.”