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Opportunities for European Communications Providers: Riding the perfect storm

Learn the six, critical capabilities required for European Communications Services Providers (CSPs) to turn the tide in a data-centric world.

Overview

CSPs are in the eye of a perfect storm of converging negative trends which undermines the industry’s future growth prospects. Accenture believes CSPs can ride this perfect storm and turn the tide if they successfully transform into Integrated Digital Services Providers.

As a result, CSP’s need to make strategic and technical choices, that will allow them to play in a converged environment. By transforming their business models and capabilities, they can capitalize on the data-centric world that offers significant new growth opportunities.

This point of view discusses the six critical capabilities required for this transformation.

Learn more about Accenture services, research and client successes for the communications industry

Background

Accenture’s High Performance Business Research reveals a fundamental and sustained value erosion in the communications industry.

One could say the same about many other industries that were greatly affected by the global financial crisis but what’s troubling about the communications industry’s situation is that it’s not due simply to a general economic downturn.

The reality is that European communications service providers are in the middle of a Perfect Storm of converging negative trends which undermines the industry’s future growth prospects and could threaten the very existence of some industry players if they do not act now.

But it’s not all doom and gloom. Consumers are spending more than ever before on technology and communication services; and the speed with which the world is converging, how technology an communication services are enabling the business functions of companies, how technology and digitization are changing the way the world works and lives, is accelerating, presenting CSPs with exciting new opportunities to drive long-term growth.

Accenture believes CSPs can ride this Perfect Storm and turn the tide if they successfully transform into Integrated Digital Services Providers. This transformation requires six critical capabilities.

Analysis

According to Accenture’s High Performance Business research, the European communications industry lags most industries on both current performance and future positioning, as measured by eight key performance indicators. This is especially true of CSPs serving mainly mature markets.

Why are CSPs struggling so? Accenture has identified four main trends that are making life difficult for the vast majority of European providers:

  1. The shift from all voice to all data

  2. Disruptive competition

  3. A more knowledgeable and diverse customer base who want everything now

  4. Connected, smart and scalable technology that enable new business and operating models

The preceding four factors are combining to create a perfect storm of declining revenues and rising costs for CSPs. CSPs increasingly generate less revenue from traditional services due to competition from lower-priced over-the-top alternatives, limited growth prospects in mature markets, and further price pressures from new and low-cost entrants.

At the same time, they face intensifying cost pressures from the need to incur greater expenses to confirm quality of service: The fast-growing volume of data requires significant infrastructure investments, especially in mobile; and digital customers’ demands for better cross-channel, cross-services and 24x7 support, means more investment in customer service.

The Future of the European CSP: the Integrated Digital Services Provider

To safely navigate through the perfect storm and generate significant added value, CSPs need a new, more powerful growth engine that builds on their strengths in an increasingly data-centric world.

To develop such a growth engine, CSPs should increase the breadth of their digital offerings to become an Integrated Digital Services Provider (IDSP)—the supplier of choice for all things digital for both consumers in the home and small and medium-size businesses in the office.

A successful IDSP must excel in integration of the services themselves as well as the customer service that supports them. Preliminary research has shown that companies that broaden and integrate their services (and service) in this way can realize substantial improvements in business performance.

Six Enabling Capabilities Are Key to Becoming an IDSP

The benefits of becoming an Integrated Digital Service Provider (IDSP) are compelling. However, getting there, demands a CSP to embrace new ways of doing business—which, in turn, requires new capabilities.

Based on our work with CSPs around the world, Accenture has found six capabilities that are especially critical to making a successful transition to an IDSP. Each can have a major, positive impact on a CSP’s earnings before interest, taxes, depreciation and amortization (EBITDA):

  1. Superior Customer Engagements
  2. Executive-driven Innovation Engine
  3. Alliance Partners and Ecosystem Collaboration
  4. Integrated Agile Operations
  5. Digital Services Transformation
  6. Customer-Centric Collaborative Governance

The point of view provides an assessment of the EBITDA impact for each capability, as well as a detailed description of the capability’s attributes.

Key Findings

The situation in which European CSPs find themselves today is challenging. However, in those challenges also are considerable opportunities for CSPs to grow and generate stronger future value.

To grab a bigger slice of this growing pie, CSPs must change. That change should involve creating a new business model that builds on CSPs’ considerable customer, distribution, and network strengths and enables them to be a strong, credible convergence player in the digital services market—an IDSP.

The path to an IDSP is not an easy one. But by concentrating their efforts on the six key capabilities we discussed, CSPs can allocate their resources and attention to the areas that count the most and that will play the greatest role in making the transition a success.