Digital transformation is a major trends for telcos for the coming years. It has become a necessity for the telcos to transform their operations towards digital to take on the competitions.
Major competition for telcos in the digital age comes from the OTT players. They complete in almost all services areas which includes voice, video calling, message sending, content etc. these services have made a huge customer base for OTT players. To compete with them, telco should streamline and fast tract their digital adoption strategy.
According to Forrester, The number of global smartphone subscribers will reach 3.6 billion by 2020, with more than half the world’s population owning one by 2017, compared with 28% in 2013. Facebook and YouTube now both boast more than 1 billion users worldwide. This shows the magnitude of competition the telcos around the globe face from OTT Players, as they have already built their customer base.
Other than OTT players, the commoditization of services have put pressure on the operating margin and as more and more players compete for market share it is imperative for telcos to differentiate their product offerings.
The roadmap for telcos in adopting digitalization should begin with a well-planned organization wise digital adoption strategy. There are many digital assessment model available for the companies to assess the current state of their digital adoption and strategize the requirements.
It is also important for us to analyze the possible challenges that could be faced by telecom companies in their journey towards digital transformations.
Digital transformation will impact many aspects of an organization such as company culture, employees’ adoption, Customer management, resources management, coordination and cooperation between different departments and more. Listed below are some of the major challenges
· Analyzing the behavior of the customer response to a digital adoption is important. For example if a telco plans to adopt E-Sim strategy to sell their services , it is important to analyze how it is being received by the customer and do a course correction if required.
· According to an AT&T survey on State of digital Transformation, the major challenge a company could face will be on the change in the culture due to digital adoption. Therefore telcos should factor in all the culture based challenges with could face and provide proper training to the employees on it.
· Personalization is one of the major feature expected by the customers nowadays. Mobile
Operators therefore need to adapt to people’s behavior on mobile, across their customers’ lifecycle with them, rather than forcing their customers to correspond to their traditional portfolio of services and channels. Increasing personalization may entail decoupling those people and technologies that touch the customer from the back-office and network technology. This alone represents a transformational challenge.
· Resource Management is a key factor where people, technology, expertise and budget need to be managed for a successful digital transformation. This is a major challenge for telcos, as they need to manage resources for their current operations in addition to allocating resources for digital adoption. This may impact the bottom line of a telco for few quarters or may be years, which may lead to postponement of some of the critical steps in their digital journey.
Technology is one of the major driver for Telcos digital transformation. Following points highlights some of the critical technologies that can be adopted for digital transformation.
· Open Standards, Cloud, Security and API-fication — Before implementing any core technology for digital transformation, Telcos should focus on using open standards and architecture as a part their digital adoption. This helps them to integrate with many systems and also improves scalability of the systems employed based on the growing requirements.
o Moving the costly data center operations towards cloud can help telcos to minimize cost and bring in agility in their business operations.
o As the telcos move their asset towards cloud, it is important for the companies to have a strong digital security features as a form of Next generation firewall or intrusion prevention systems.
· BSS and OSS Modernization — Digitalizing BSS and OSS platforms. Moving from Business Support systems to Business Enabling Systems.
o Modernization of BSS and OSS lays the foundation for the digitalization strategy, once the infrastructure is finalized. Telcos should focus on BSS/OSS modernization to reap the benefits by eliminating service specific silos at the operating level.
o Changing OSS/BSS would be much cheaper than changing the network, it could proceed faster and at lower risk
o Telcos can drive benefit in terms of scalability and resource management by deploying BSS in cloud and using SaaS Based model. Based on a survey from Ovum , of the telcos plan to upgrade the supporting system to enable digital transformation
· Customer Centric Approach to deliver Digital Experience — Telcos should realign their strategy such that they move from technology centric towards Customer Centric in their digital strategy. So that they improve the customer satisfaction and retention rate. For example, adopting eSIM will help the customer in terms of flexibility in choosing the operators. According to Mckinsey, M2M e-SIM revenues are set to increase dramatically in the next seven years.
· 3 A’s (Adoption of Automation, AI, Analytics) — As telcos move towards digitalization, they cannot neglect the usage and benefits of Automation, AI and Analytics. Telecom industry always handles huge volumes of data coming from various sources and burdened with large volumes of operational processes. In order to derive insights from these data and to make meaningful strategic adjustments for business efficiency that minimizes costs and maximizes benefits, Telcos should adopt 3As.
o Big data adoption is critical requirement for Telcos Digital transformation. Thanks to fast development in parallel processing and distributed system such as Hadoop etc. employing Big data analytics is no more a major challenge for Telcos.
o Smart automation gives leading edge for Telcos in Competitive market. Telecom digital transformation goals require innovative service automation.
o Process automation enables telcos to manage their back office and handle large volumes of repetitive and rule based operational processes. AI platforms can help telcos to anticipate the business scenarios rather than react to an event.
· SDN and NFV — One of the most important technology that enables telcos digital adoption is Virtualization. According to SDXCentral, combined revenue of SDN, NFV and other next-generation networking initiatives (SDx Networking) will exceed $105B per annum by 2020.
o Network virtualization helps create a far more agile business model for communications service providers — one that drives revenue growth and cost reduction by transforming operators from network-centric companies to more software-driven, customer-centric businesses. NFV leverages IT technologies, including virtualization, standard servers and open software to fundamentally change the way networks are built and operated
o Virtualization moves the most critical network functions — such as routing and security — from expensive, purpose-built hardware to general-purpose servers and software.
o The idea is to reduce the cost of connectivity and build a more software-centric service creation and delivery network that can act as a platform for revenue growth.
o Virtualization will be the new model for service provider network infrastructure, and if it is effective, carrier revenue will increase while Capex and opex decrease.
o Advances in network software, specifically software-defined networking and network functions virtualization, provide the ability for communications service providers to significantly transform their networks over the next years. SDN provides for separation of the control and data plane where the intelligence of the network (e.g. switch or router) is separated from the packet forwarding engine. This separation provides opportunities to program the network at various points.
Digital transformation market size is projected to cross 300 billion USD, according to leading Market Analyst firms. All most all industry under the globe are experience this vital transformation. Therefore huge business opportunity exists for vendors in this space which includes Digital platform providers, software integrator, consulting firms etc.
According to MarketsAndMarkets research firm,
“North America is expected to dominate the digital transformation market during the forecast period”
North America accounted for the largest share of the digital transformation market in 2015, owing the increasing number of customers purchasing and interacting with companies using devices such as mobile phones and tablets. The market in APAC is expected to grow at the highest CAGR between 2016 and 2021. The primary driving force for the growth of the digital transformation market is the increasing need for internet of things.
According to Zion Research — global demand for digital transformation market was valued at around USD 150.50 billion in 2015 and is expected to reach approximately USD 431.71billion in 2021, growing at a CAGR of slightly above 19.2% between 2016 and 2021.
According to International Data Corporation (IDC), worldwide spending on digital transformation (DX) technologies will grow to more than $2.1 trillion in 2019 with a compound annual growth rate (CAGR) of 16.8% over the 2014–2019 forecast period. Spending on DX technologies in the United States will follow a similar trajectory, reaching nearly $732 billion in 2019.
Business Opportunities for Software Integrator and IT Consulting Firms
These market projections gives us a clear indication that the companies consider digital transformation as a critical factor to beat the competition. This opens huge opportunity for Software integrators and IT consulting such as Infosys, TCs, Accenture , IBM etc.
These companies should focus on building expertise in their consulting practice by streamlining to the new business model and provide innovative approach for their clients. Telcos face Initial apprehension to change their traditional business model towards digital, here where the role of SIs should play the critical role. They need to provide a holistic view on how the digital transformation will provide a positive benefits for telcos.
These consulting firms should analyze the critical value chain of telcos and provide their point by point view on how digital transformation will impact their business.