The transformation game

The transition to tech-cos requires a mindset shift for telcos – not just in terms of service offering, but also in how they get there

With everything that has been said and promised about 5G over the years, it is easy to forget that the global rollout of the technology only began a matter of months before the pandemic. Despite all the challenges of the past few years, 5G is being adopted at a faster rate than 4G was at a similar stage of its lifecycle. And with its increased adoption, some of those 5G promises are starting to come to fruition.

For telcos, this cannot happen quickly enough. The traditional connectivity services market is brutally competitive. In India, for example, there are 84 mobile subscribers per 100 people. This level of saturation leads to price wars and high customer churn, which is a recipe for high acquisition costs, tight margins and low average revenue per user (ARPU).

The real drawcard of 5G for telcos is that it allows telcos to diversify. Accordingly, they will need to improve internet connectivity and reliability to serve B2B customers closer to the edge of the network with additional services and solutions. For example, they can build bundles of tech services such as 5G connectivity, data, cloud services, cyber security, and professional set-up services, using an everything as a service (XaaS) model.

Telcos can build bundles of tech services such as 5G connectivity, data, cloud services, cyber security and professional set-up services, using the XaaS model.

These bundles of B2B solutions represent a revenue lifeline for telcos. APAC’s public cloud services market is set to exceed USD 153 billion by 2026, with a faster compound annual growth rate (CAGR) than in the US. Similarly, the software as service (SaaS) market is expected to exceed USD 58 billion by 2026, accounting for 40% of the APAC cloud services market.

So now the race is on in the telecom industry. But there are three challenges they must overcome first.

#1

Bolstering tech capability

Telcos have a lot of infrastructure, expertise and a bank of existing customers. This certainly works in their favour. But building a suite of new B2B services to resell and create a XaaS play requires integrating a multitude of vendors and systems. The integration process can become incredibly complex and time-consuming.

Integrating one vendor into a telco’s back-office business support and operational support systems can take up to six months. TM Forum recommends that telcos will need to multiply these 20 to 30 times to achieve the critical mass of vendors required to make a compelling XaaS proposition.

# 2

Establishing new commercial arrangements

To successfully integrate a wide range of vendors’ technologies, telecommunication companies not only need technical expertise but also have to navigate complex contractual obligations when collaborating with third parties. Establishing mutually beneficial agreements is crucial in this process.

Turning the B2B services dream into a reality requires telcos to form strategic partnerships with cloud marketplaces that have pre-integrated ecosystems.

Overall, it can typically take telcos around six to nine months to finalise a contract with a vendor for reselling their services. Therefore, the ability to expedite this process and achieve speed to market is paramount for telcos aiming to transform into technology companies (tech-cos). Telcos that can effectively adapt to new commercial elements will be in the best position to thrive in this evolving landscape.

# 3

Mastering the sales cycle

Telcos have well-established sales teams that excel at selling traditional connectivity services from SIM cards to broadband services. But selling B2B services is an entirely different ball game. It requires new skills, technical knowledge and a different outlook. Telcos cannot overlook this factor.

Going ahead, telecom service providers will need to adopt new processes, upskill sales teams and incentivise the right behaviours to complete the transition to a tech-co. Failing to do so can result in significant time and resources invested in a new service that remains idle or fails to generate a return on investment due to the sales teams’ lack of tools and expertise required for successful selling.

The pathway to success

The transition to tech-cos requires a mindset shift for telcos. Not just in terms of service offering, but also in how they get there. Traditionally, telcos in the region have been able to hire en-masse to build systems and infrastructure from the ground up. There are two reasons this approach will not work this time around.

First, the tech skills shortage globally will make finding the number of people required to build these services in-house neither possible nor affordable. Second, they are starting from too far behind the global leaders to develop their market-competitive versions of all these business services.

Turning the B2B services dream into a reality requires telcos to form strategic partnerships with cloud marketplaces that have pre-integrated ecosystems, contractual solutions, and expertise in people and processes. These partnerships will help telcos overcome the three key challenges preventing them from successfully transitioning to tech-cos. Not only that, it allows them to create their own business services marketplace, offering a self-service approach, where customers can simply pick and choose the services, they require to create their service bundle.

If they do this successfully, telcos can create a virtuous circle of growth, growing their services and offering more third-party collaboration as they sell, cross-sell, and up-sell B2B service solutions.

The author is the Managing Director of the Asia Pacific region at CloudBlue.

By YiLun Miao

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