How telcos harness digital to fuel growth

November 15, 2018

RESEARCH REPORT

In brief

Facing disruption, CSPs are optimizing core business, yet profitability continues to decline. Our research with Ovum takes a closer look into why.
We discuss "Fuel to Growth"—our strategy and framework for transformation, fueling new S-curves of growth from cost savings re-invested.
We introduce our vision for an intelligent enterprise where our capabilities in AI, robotics and analytics can help sustain savings in your business.

Communications service providers (CSPs) globally are facing OTT stagnating revenue and cost squeezes—and seeking out new strategies to reduce costs and reignite growth.

Accenture’s research with Ovum into CSPs shows unfocused approaches are running out of steam.

To help our CSP clients make the right decisions on costs, investment and growth, Accenture partnered with Ovum to undertake a cost-benchmarking assessment of 26 global CSPs. The findings make it clear that ad-hoc, piecemeal cost-cutting and unfocused investment in new areas won’t deliver the turnaround in performance that CSPs are seeking.

Top insights for CSP growth

Profitability continues to decline

2_%

CSPs’ opex has fallen by about 2 percent over the past two years, but their net income remains at its lowest since 2009.

Savings found have been reinvested.

10_%

Savings made from a 10 percent cut in interconnect costs have been canceled out by higher spending on Network & IT Ops and Content.

70_%

CSPs are seeking to create more robust business models by allocating almost 70 percent of total spend to direct costs, with a view to strengthening their operations.

Opportunities vary by CSP type.

Our analysis categories CSPs globally into three segments:

Emerging Markets
Global Quad-Play
Global Content

And, each segment needs to adopt a different focus:

Emerging Market CSPs on zero-basing spend in G&A
Global Quad-play CSPs on simplifying Sales
Global Content CSPs on investing in Networks & IT

"Rotate to the new" is key for digital transformation

In periods of rapid change, a new strategy is required: one that enables companies to act in the face of disruption, confidently. We call this strategy "rotating to the new"—it has four actions, repeated in rotation continuously. This is a perpetual and ongoing change journey—not just a single event.

The first step is to Transform the Core business to tune up the current business and release cash to invest in new growth. Most CSPs are starting this—few have gone further in the journey. This could include using efficiency-enabling technologies to increase profitability. Channeling freed-up investments toward experimentation and making core offerings cheaper and better are great starting points to release funding for reinvestment.

Traditional businesses transform into new business when they transform and grow from the core while scaling into the new and making a wise pivot. This generates a balance between the value of enterprises and the time needed to get to the top.

"Growing the Core" requires directing those investments to build new capabilities and activating demand for innovative offerings with existing customers, as well as using that core strength to expand into adjacent markets.

"Scaling the New" is fundamental to find new S-curves of growth—new revenue streams. Spotting and scaling up innovations to replace reduced demand for the core products—and using technology and data to build advanced services and offerings that meet consumer and business customer needs. This means reducing dependence on fixed assets, and monetizing those that are underutilized.

In order to Pivot Wisely from the old revenue streams to the new ones—companies need to bold with corporate and financial restructuring and finding the right pace and timing to shift to new businesses and opportunities.

Improve CSP profitability with emerging technologies

An intelligent enterprise enables CSPs to surgically drive down costs and boost acceleration and quality decision-making across the enterprise. Download the paper to take a deep dive into how analytics, artificial intelligence and robotics can be harnessed to cut costs.