Redefining the operators
Spanish journalist Marcos Sierra, from Voz Pópuli, gave me a call yesterday to talk about the transformation of telecom operators, after a statement from Laurent Paillassot, CEO of Orange Spain, stating that they were planning to transform themselves into a software company”. Today, Marcos quoted me in his article entitled “5G will turn telecom operators into software companies” (in Spanish).
The digital transformation of telecoms operators is an extremely complex issue, and one that isn’t going to be solved by them simply “becoming software companies”. In the process of restructuring the telecommunications industry, there will be operators who opt for a cost leadership strategy, focusing exclusively on infrastructure, more gigabytes for less money and becoming the most efficient dumb pipe, and no doubt there will be room in the market for that positioning. The other end of the process will be led by companies that decide to tackle digital transformation in its entirety, in three stages that require a much more complex and evolved approach than simply becoming software companies.
The digital transformation of operators requires, first of all, a radical reconversion of the way they interact with their customers, something that very few operators are willing to undertake, partly because of their strong dependence on legacy systems, and partly to do with issues related to corporate culture: with the need to end what I, some years ago, called “the telco mentality”.
Next it will be necessary for companies to commit internally toward data generation, which implies new developments, hiring people with new skills and a completely different mentality.
And finally, but radically important, it involves embracing a platform mentality, which entails converting the whole company into layers of APIs to build structures on which ecosystems can develop and within which companies of all types can grow their businesses.
An all of this must take into account the new rules of interaction: respect for the customer, portability of data and transparency in management.
As said, all this supposes much, much more than simply becoming software companies. Moreover, if all that means is a strategy of somehow trying to compete with software companies generating products for the user, it is doomed to failure, because at some point it will reflect the sad mentality of violation of internet neutrality, falling into the trap of “treat my app better than others”. In short, the future of operators is not in the software game.
Software is going to be necessary, however, but the companies that decide to embark on this route will have to hire legions of well-qualified developers and generate a culture of development that is not easy, and in addition they will have to understand that the idea is not to create end products but to be platform for the products of others. The business of the future is in platform intelligence, machine learning, artificial intelligence and the ability to offer an ecosystem that the customer wants to be part of. And that is neither simple nor will it even be within the reach of all operators.
In telecommunications, as in all sectors, there are companies at very different moments in their evolution. For the moment, and with certain reservations given that it is only in its beginnings, the most convincing example I have seen of digital transformation lately is Telefonica’s Aura, also known as the Fourth Platform.
It takes time and effort to change an operator’s business model, but this industry is dynamic and it is important to take into account not only strategies but the way in which companies move to the market. In short, redefining the carriers is not going to be easy. But it will become the key to their future.
This is a process that has barely begun, and definitely one that will be worth following.
(En español, aquí)
