It’s no secret traditional Communication Service Providers (CSPs) have been facing slowing or stagnant growth in their core connectivity business for many years. That’s certainly true of CSPs’ services directed to small- and medium-sized businesses (SMBs), a segment in which changing customer expectations and behaviors are putting severe pressure on CSPs’ revenue growth in traditional connectivity.
For example, the fixed-line market for SMBs is contracting, primarily due to customers’ increasing shift to voice-over-IP technologies. In the mobile market, growth is expected to be flat because of data commoditization, with subscribers forecasted to increase while Average Revenue Per User (ARPU) will decline. And, although new technologies such as 5G are being implemented, without new capabilities that directly help drive SMBs’ business expansion, CSPs can’t expect customers’ willingness to pay to suddenly change. The reality is, to be able to continue to grow, CSPs must identify new revenue streams and new sources of business they can add to complement their traditional connectivity offerings for SMB customers.
SMBs: A huge market with growing spend
Fortunately, there’s plenty of untapped potential in the SMB market, which represents the biggest opportunity for CSPs to go beyond connectivity— particularly, in providing digital and IT services. As more SMBs embark on digital transformation, they’re boosting their investment in IT products and services. A lot of this momentum can be attributed to COVID-19 which, despite slowing IT spending in the short term, created a greater sense of urgency among SMBs to become more digital as they witnessed the pandemic’s impact on their business.
A pressing need for comms and tech expertise
However, while SMBs are hungry for digital capabilities, they need the resources and tech savvy required to implement and manage advanced solutions—something they generally don’t have in-house.
They also would like to work with a partner that could help them understand how specific solutions can help them achieve specific business goals and outcomes. And they’d prefer to consolidate the services they currently receive from their vendors to a central partner who handles all their communications and technology needs. Juggling multiple vendors and contracts consumes a lot of time that SMBs could otherwise spend on managing and growing their business. According to Accenture research, two thirds of SMBs purchase such services from three or more vendors, and half of them would like to reduce that number. This translates into a big opportunity for an external provider that can be the “one-stop shop” for all SMBs’ needs.
Where do CSPs go from here?
What do CSPs need to do to level the playing field and build a competitive business that’s capable of
taking its fair share of the exploding SMB market? We’ve identified four core capabilities CSPs need to get right to position themselves for SMB success, starting with the basics and incrementally building on these toward more advanced domains.
The time is now to begin the evolution
These are certainly challenging times for CSPs, as tough new competitors and changing customer demands have left them overly dependent on an aging and stagnating business and increasingly marginalized in what’s otherwise a highly dynamic and growing broader technology services market. That’s especially true when it comes to SMB customers, which represent a massive target and equally massive revenue potential.
CSPs need to seize the chance to become a player in that market. They have significant strengths to build on and plenty of white space they could claim as their own. But others also see the promise, and in many ways, have a head start on CSPs due to their more agile business models and lack of legacy constraints. They’re moving quickly to fill the void, so it’s imperative that CSPs begin their evolution today. Their future as a growing business depends on it.