After nearly two decades of working with top telecommunications companies around the world, it’s fascinating to work with the industry as it grapples with its most significant transformation challenge in history.

I remember when revenue arrived in the form of connectivity and mobility services. In those days,  enterprise customers required these products to collaborate, grow and scale their businesses. In this business model, telcos owned the assets and made between 50-70% of margins by providing connectivity and managing it over time.

Globalisation, increased competition and technology evolution have eaten into those margins – and the industry is facing the biggest disruption in the last 20 years.

It’s here. Cloud, SDN and SD-WAN have transformed the industry landscape. Hyperscalers, smaller and more agile service providers –  even technology vendors – can access enterprise customers directly, providing a digital, Over-The-Top service that fits well with their demands.

In this new universe, telco-provided connectivity has been reduced to a commodity.

But now telcos are fighting back, hoping to power the next connected industrial revolution through a mesh of 5G, cloud and edge computing. This will involve the telco network becoming an extension of the cloud, with the industry discovering new horizontal and vertical use cases that expand the horizons of Industrial IOT for digital manufacturing, smart cities, smart buildings and beyond.

This battle is complex, as we can see in some industry research, where only 29 out of 101 private network implementations have telco involvement

I believe the implications for the industry are incredibly exciting. But, to date, the pace of change has been slow. This is because capturing the enormous potential of orchestration requires the industry to transform in 5 different dimensions.

  1. Pivot product development

Digital services require a radically different approach to traditional telco products. As telcos move from single network technology partners to a multi-vendor ecosystem, their products must evolve from:

  • Annuity-based to subscription-based models
  • Network-based to service-based offerings
  • OPEX to business outcome based
  • Cross-industry to industry-specific solutions
  • Network to platform and data-based solutions

Value propositions like the Telstra Programmable Network are a great example of how to bring this to life, and how product development, in isolation, does not address the challenge.

  1. Go digital native

Enterprise has always been the last priority in IT evolution in the telco industry, with revenue contribution under 30%, and highly customised, complex process and product constructs making most IT transformations highly challenging. To deliver the digital services of the future, telcos must:

  • Prioritise technology transformation for digital products, leaving some highly complex legacy products behind
  • Be realistic about the digital experience that can be achieved with non-digital offerings
  • Take a digital native transformation approach, as opposed to the traditional telco IT roadmap
  • Attract talent that would otherwise flow to hyperscalers, digital consultancies and start-ups

For example, Japan’s newest mobile operator, Rakuten Mobile, is leveraging cloud native and transforming the entire ecosystem with the world’s first virtualised mobile network.

  1. Rethink sales

As telcos transition from selling commodity assets to digital solutions, the sales environment is shifting from selling sole-sourced commodity assets to digital solutions delivered by an ecosystem. Rather than operating as incumbents, telcos are now competing with well-positioned hyperscalers and technology vendors. That means they need to shift from:

  • Reactive to proactive selling
  • High margins to low margin reselling solutions
  • Selling annuity business to selling subscription based models that require a non-existing CSM approach

Telefonica has pioneered the proactive selling approach, customising brand offers and interactions to individual preferences across every channel and using end-to-end analytics to better understand the entire customer journey, from lead generation and website traffic to conversion, provision and service. This increased insight helps to convert leads into sales more efficiently and delivers high levels of customer satisfaction.

  1. Scale and transform professional services

Bespoke ICT services are a brand new high margin revenue stream for telcos, requiring new set of capabilities, including consulting, strategy and digital business transformation. Now competing with other ICT firms who have industrialised these offerings at scale, telcos need to understand the complex interlock with their product and sales organisations and onboard or partner to get the new skills required to win, in increasingly complex technologies, including 5G, IoT, Edgeand public cloud.

The main challenges are anticipating demand and bringing customers the right level of differentiation and industry expertise. For example, AT&T is working with Accenture to help Phillips 66 develop an industrial cellular wireless connectivity.

  1. Digitise managed services

Customers are evolving from annuity- to subscription-based models, and telcos must learn to provide managed shared services at scale. This will force pivoting from:

  • Highly manual, human glued processes, to AI driven, highly automated customer interactions
  • Complex SLAs to standard T shirt size optional components
  • Product experience to uniform customer experience
  • Stable to highly specialised, highly fluid, highly demanded skillsets
  • Over capacity to optimising infrastructure needs, and offering a sustainable approach to energy consumption as a consequence.

At Accenture, we’ve been managing multi-cloud, digital environments, for our own organisation and our clients, for years, reinventing our approach to manage them at scale.

Given the new and scarce capabilities and fresh mindset required to succeed in all five areas of transformation, telcos cannot become industry orchestrators on their own. They need to find partners with complementary business capabilities and industry experience who can help telcos lead the connected industry revolution.

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Jon Ortiz de Zarate

Industry Lead – Communications & Media, Australia & New Zealand

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