In 2014 Gartner reported that (based on a select group of 11 of the top 30 CSPs) total revenues from digital services grew at 17.9 per cent. This was 10 per cent faster than total operating revenue (growing at 7per cent). A deeper dive into the results showed that CSPs benefitted from nearly 2x the revenue from their enterprise offerings compared to their consumer products.
This shows that the consumer market opportunity is on a downward trend, with the challenge from both traditional competition and OTTs is having a significant impact.
But, there is a silver lining. Visionary CSPs can maintain and grow market share with SME and enterprise customers by demonstrating leadership, differentiation, thought leadership, focusing on QoS, managing SLAs, improving security and gaining insight with analytics. As an end-to-end provider, from the network all the way up to the application, there are significant benefits that CSPs can offer to their business customers.
And there are additional opportunities available to CSPs to disrupt the B2B market for digital services, by taking on board the lessons learned from the consumer market; deploying the very same open platform approach as used by OTT players. Those CSPs that are making inroads have embraced the evolution to a Digital Service Provider (DSP), and helping SMEs and enterprises expand their offerings and grow their revenue.
To this end CSPs are starting to offer products and services beyond just traditional connectivity. These new services include Unified Communications, cloud, collaboration, enterprise apps, WebRTC, APIs, SaaS, enterprise mobility, connectivity, M2M, Big Data and mobile payments.
DSPs like AT&T, BT and Singtel are building out more capability. Singtel was a very early innovator in this space, and if you look at their SME/enterprise portal ‘MyBusiness’, you will see an extensive offering of Infrastructure-as-a-Service, Platform-as-a-Service, Software-as-a-Service (SaaS), Connectivity-as-a-Service, Security-as-a-Service and Unified Communications-as-a-Service. Additionally, key SaaS apps for productivity, collaboration, Sales and Marketing, Finance, Security, HR, CRM and Supply Chain management are offered. These provide greater collaboration and encourage broader use because they expose network APIs as part of their available “Innovation Exchange”.
These DSPs have successfully started their transition via acquisition, partnering and in some cases by providing financial backing for start-ups. This approach is different from the consumer market. The SME/enterprise segments require a more unique and complex ecosystem to deliver their end services, which keeps DSPs in a lead position.
In the past, many CSPs were keenly focused on consumers. They had limited enterprise channel management expertise and lacked credibility beyond traditional connectivity services. They did not have deep vertical knowledge, particularly in areas typically identified for IoT such as Health, Insurance, Logistics, Manufacturing, Connected Car and Fleet Management. They were missing an enterprise mobility strategy and market offering, with many lacking their own internal mobility strategy. They haven’t invested in skills for areas such as SaaS app development. Since they aren’t systems integrators, they struggled to integrate their siloed products into the enterprise back-end systems. Adding to the gaps, they lacked deep customer knowledge or the ability to scale to successfully customise standard products to give enterprises maximum value.
The CSP can transition to become a DSP by exposing the network, APIs, IT, cloud, SaaS and other information for consumption as an open platform for development. This means that CSPs overcome the limitations mentioned earlier, and enable an ever-growing number of ecosystem service providers access to these assets. When combined with their assets, they now have created new and increasingly more relevant services.
Investing in an ecosystem of service providers, as opposed to trying to ‘go it alone’, seems to be the successful approach. It provides the framework to innovate, customise and demonstrate specialised knowledge. But bear in mind this must be done whilst keeping their brand front and centre, to maintain the customer relationship. If they don’t, they run the risk of seeing the same losses to the OTTs as seen in the consumer market.
Those who are working towards a platform strategy, including AT&T, Singtel, Telefonica and Deutsch Telekom are all using terms like “Telco SDKs for developers”, “Telco app ecosystem” or “Telco enabler”. The AT&T Partner Exchange is a great example of a business venture whose remit is not only to transform the traditional approach, but to push changes in the business culture. Borrowing approaches from the AT&T Foundry, but having to create a start-up culture from within AT&T, the Partner Exchange is totally predicated on the need to establish an ecosystem of service providers. AT&T initially opened up their APIs in order to allow other service providers to integrate seamlessly into AT&Ts back-office and network for order management and customer service. But, increasingly they are looking to expose this capability to allow end service providers to build and sell their own unique solutions for customers.
Other CSPs have promoted similar programs such Deutsch Telekom Developer Garden and Telefonica Blue Via. These ventures seem more consumer-oriented and developer-focused, as opposed to a service provider that faces enterprise customers daily challenges and needs. Blue Via is now defunct and the future of Deutsch Telekom Developer Garden is unknown. It’s going to be interesting to see if AT&Ts alternative approach wins the day.
By using an open platform approach to service providers who are potentially closer to the end customer and their needs, the ecosystem expands. As a function of this growth, participants deliver new products and services and the DSP platform will increase in value and functionality. This serves to strengthen the customer relationship and value the DSP provides.
A growth mechanism for the DSP ecosystem focuses on generating positive feedback between customers and product/service providers. The richness of products and services attracts customers, and the growing number of customers leads to the creation of more products and services, in a virtuous circle. With each iteration, the ecosystem continues to expand and innovate.
In the consumer market, OTT players enjoyed the ‘social network effect’ to drive scale. But this effect is weaker and less relevant when applied to B2B. The CSP who generates the ‘ecosystem network effect’ driven by their open platform, will not only have transformed themselves and become a DSP but they will also help transform industries. This improves their brand and accelerates the cycle for growth and success.