Brisk but cautious—that best describes traditional communication service providers’ (CSPs) adoption of cloud. But as the communications industry continues to experience massive change, we see CSPs accelerating their use of cloud to help them shore up their current operations and rotate to a new business model to capitalize on new growth opportunities.
Cloud offers significant cost advantages to CSPs
Specifically, in terms of infrastructure consolidation, application rationalization, and utilization and cash flow, cloud offers significant cost advantage to CSPs:
For example, cloud enables IT to avoid a hardware refresh and, thus, more effectively meet the company’s strategic business needs.
Additionally, by simplifying an enterprise’s app portfolio, cloud frees up more funds to develop transformational capabilities.
What’s more, a cloud-first approach will help reduce tech debt and better support future capability development while a targeted cloud migration strategy will help future-proof business investments.
Finally, a typical cloud utilization and cash flow model can help protect technology investments, reduce large upfront investments, and smooth cash flow—enabling a CSP to pay only for capacity as it’s needed.
To wring the most value from cloud platforms, CSPs should look at:
Dismantling their operational silos to allow end-to-end, flow-through processes. This not only will facilitate cost reduction, but it will help enhance productivity and customer-centric metrics, and enable broader integration with the digital ecosystem.
Increasing use of cloud for a big near-term payoff for CSPs, according to Gartner research. For example, by 2020, CSPs that standardize IT and network infrastructure and processes will improve their EBITDA by 10 percent. In the same timeframe, large CSPs worldwide will reduce their on-premises application software spending by 20 percent as a result of public cloud-based solutions, and more than half of CSPs will have begun adopting DevOps for delivering and managing network and IT services—increasing business velocity five times.
Cloud also can play a critical role in helping CSPs fundamentally transform their core
To grow and monetize assets, acquire new customers with novel offerings, and scale the business—and ultimately pivot to entirely new business models. Along the continuum between platform- and infrastructure-based cloud plays, several such models are emerging:
Multi-sided platform model, which establishes a cloud platform business enriched by over-the-top and industry collaborators.
Digital mobile-only attacker model, monetizing the core with digital services and customer interactions.
Vertically integrated service provider, which entails monetizing the core with differentiated services and content bundles.
Pervasive network platform provider, which involves managing intelligent, open, self-service digital networks.
The fact is, despite the myriad challenges CSPs face today, they still have plenty of opportunities to grow their core businesses—albeit under different rules and assumptions, and with significantly more operational agility made possible by digital and cloud. But winning in the longer term will require a new business model or models—also powered by digital and cloud technologies—that will enable CSPs to regain a critical role in the value chain.
A key element of these new models is putting the customer at the center of the experience—connecting users’ homes in ways only thought possible just a few years ago and deeply engaging consumers by providing a spectrum of services that go far beyond CSPs’ traditional offerings.
Cloud has introduced extraordinary opportunities for CSPs to transform themselves—and that’s critical now that CSPs’ core offerings have become commoditized, barriers to entry continue to collapse, and customers no longer see CSPs an essential part of their daily digital routine. Cloud has the potential to completely redefine what it means to be a CSP and to help CSPs rewrite the rules of competition in their favor.
For more insights on how cloud can power the CSP of today and tomorrow and key steps CSPs should consider as they accelerate cloud adoption, read our point of view, “What’s Driving Communication Service Providers to Cloud?”