How telcos are making the digital shift

Sean Dudley
Sean Dudley
By Sean Dudley on 12 October 2015
How telcos are making the digital shift

Technological change is a continuous factor in the telecommunications industry, and something companies in the sector have to be prepared for. Digitisation has become the norm in the modern market, and companies are having to reassess their business models in order to meet customer expectations and remain profitable.

Furthermore, an increasing number of new players are making their presence felt in the sector. Not long ago, telecommunications providers enjoyed end-to-end ownership of the customer relationship and the services they provided – be it voice, messaging, data transport, or value-added services like voicemail. As Johan Norvik, Microsoft’s director of business development for the communications industry, puts it, players in the industry “assembled an infrastructure for those services – they built it, gave it you, and you paid for it – end of story.”

However, with the proliferation of cloud and internet companies, new providers of video content, social media and the increasing prominence of device manufacturers, the direct link to the customer has been broken.

“Customers no longer associate their service provider as the only place they get their communications and content needs met,” says Norvik. “They now have relationships with multiple companies.”

A further challenge involves remaining profitable while making the investments required to meet the demand for data created by third party content and communication services – data that generates little or no revenue for the industry.

Given the current digital focus, making the transition from being solely a communications service provider to becoming a digital ­services provider is front of mind for many industry players. Norvik believes there is a spectrum of where companies want to get to.

“At one end, you have companies that expect a large percentage of their revenues to come from new digital services that they will be building themselves,” he explains. “In addition, these companies will also provide ­services in partnership with cloud companies.”

“Then, there will be companies that provide digital services primarily in partnership with other companies. The telcos that are striking partnerships with Netflix would be an example, as would some of the companies that are reselling our own Microsoft Office 365 services.

“Towards the other end of the scale there’ll be companies that will be happy and profitable offering consumer services – triple and quadruple plays and home security offerings for example. And, last but not least, I think there will be a group of communication service providers that will continue to focus on connectivity and transport. These will primarily focus on the wholesale business, international interconnectivity, as well as providing fibre broadband services to businesses.”

To succeed, Norvik believes that companies should not only look at the digital services they are providing, but also at becoming ‘digital inside’ and using digital technologies to improve both the internal and external elements of their business.

“Digitising internal processes is a really important factor for any company, and collaboration and productivity are vital parts of this,” Norvik says. “Being able to share information, collaborate across geographies and time zones, work on projects simultaneously, and simply being able to basically communicate across all boundaries and organisations is hugely advantageous.”

Norvik says that digitising planning is also important, and with the business intelligence and predictive analytics tools that are now available, companies can more effectively automate their processes, and more easily and effectively manage customer relationships.

Technological change is never far away in the telecommunications industry, and one area that is set for growth is the use of software defined networking (SDN) and network functions virtualisation (NFV).

“There’s been a lot of interest in SDN/NFV, and the industry is looking to move from dedicated network appliances and proprietary hardware to running these functions on commercial, off-the-shelf computers,” Norvik says. “A key driver has been the expectation of savings in capital investment and operating expenses, as they will be operating in a more homogenous environment.”

Norvik says that momentum has increased tremendously in the last two years, and more and more companies are realising the potential of these environments.

“The benefits go beyond savings,” he explains. “SDN/NFV will also enable companies to more quickly conceive, create, market, test and launch new services. That will allow them to better compete in the market, by meeting new customer needs, and by having an environment in which they can experiment, accelerate product lifecycles and create new revenue streams faster.”

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