Trends and Challenges 2021+: Five Recommendations for Action by Telecoms Providers

What was innovative yesterday is already obsolete by tomorrow.

This is more true now than ever in the era of the pandemic which, in many cases, intensifies and accelerates this process. The speed of development is and will always remain high in the telecommunications industry.

And here it is clear: COVID-19 is challenging for the industry, but it can also speed up innovations and advance suppliers’ competitive capabilities, especially in the e-commerce environment.

Where are the opportunities? And what matters most right now?

Particularly since the start of the pandemic, it is clear in most industries that constant change has become the “new normal.” For the telecoms industry, the most important question is how will communication service providers (CSPs) develop? Especially since many services – such as pure connectivity – are increasingly regarded as the norm, other players are advancing in sectors where value creation is the most intense, and cut-throat competition is increasing.

Against the backdrop of the ever-present goal of increasing revenues and market share, many CSPs have recognized that it’s time to become a true “real-time company.”

Digital commerce and time to market are two of the critical success factors here; while eroding customer contact and digital disruptors are among the greatest challenges.

One thing quickly becomes clear: In the first step, telecommunications companies need a future-oriented technological foundation to use their data profitably, increase earnings, and be able to generate added value.

Here are five recommendations for telcos that want to leave half-hearted projects behind and create a digital framework for the e-commerce environment of today and tomorrow.

1. Put the focus on the customer – now for real (eSIM sends its regards)

The exceptionally competitive fight for customers is not a new phenomenon.

Understanding the needs and desires of customer groups and individual users while maintaining customer contact is, therefore, more than simply part of the current agenda for telecommunications providers.

Currently, we are experiencing a rapid change in customer behavior, which requires new organizational and technological strategies.

Customer journeys are increasingly fragmented, new touchpoints arise, online and mobile dominate; previously, direct contact was a matter of course, now not much of this remains.

CSPs have to be in a position to adapt their digital business constantly to continuously remain competitive. This means rethinking and redesigning commercial offerings, employing new techniques, and integrating innovative services into portfolios. And internalizing the motto: “Experience is the new product!”

A good example of the eroding connection to the customer is the paradigm change triggered by eSIMs and the challenges that accompany them. These “embedded” SIM cards are permanently installed in devices and can be activated on the software side with various CSPs’ profiles and network information.

Device manufacturers and other providers thus have the opportunity to bundle hardware and communication services. Traditional CSPs are no longer involved, since they automatically lose direct customer contact and become “white label” suppliers.

Wherever possible, they will now seek mergers with global alliances to monetize communication services themselves once again. Additional sources of revenue could also open up in this segment, such as machines or household appliances with integrated wireless connectivity.

In every case, what’s important is to think of the customer in a future-oriented perspective and position oneself accordingly. Customer centricity – not just on paper.

2. Use Artificial intelligence and machine learning to cultivate customer loyalty – starting with predictive analytics

What, specifically, do customers want and need – in a particular situation or range of interests, at a particular time?

The more relevant and individual the information about new products, services, and offerings is, the greater the chances to acquire customers and gain their loyalty on the long term; also, to do so against the backdrop of comparison and opinion portals and publicly visible evaluations by customers.

The prerequisite is targeted marketing, which is oriented with the appropriate granularity to customers’ requirements. Through appropriate customer channels, storage, and enrichment of customer data in compliance with data privacy regulations in a state-of-the-art Customer Relationship Management (CRM) system, information can be provided quickly and used for personalized marketing campaigns.

Here, the handling of technical innovations such as artificial intelligence (AI) and machine learning (ML) becomes an economic success factor for telecommunications companies.

Predictive analytics is already being deployed – a technique that helps analyze internal and external data, detect patterns, and anticipate future events. Important keywords: Regression analysis, multi-variable statistics, pattern comparison, predictive modeling, and forecasting.

There is also enormous potential for AI and ML in other areas of application.

Thus, within the future of the telecoms sector, scenarios can be supported involving automatic detection of network problems or the identification of accounting fraud, for example.

Intelligent and self-learning systems do not just give telcos tools for understanding their customers better and talking to them in a more goal-oriented fashion in real time; they pave the way for an end-to-end digitalization of entire process chains. Therefore: it’s time to use AI and ML.

3. Bundling, 5G, IoT, cloud, and more: Detect opportunities and think up new business models

CSPs and digital content – that’s nothing new.

For example, Viacom has developed from a CSP into a media group since 1994, with the takeover of the majority of Paramount Pictures, and later with various acquisitions such as CBS and Dreamworks Studios. For more traditional CSPs, digital content is now becoming an increasingly important instrument for ensuring customer loyalty.

The pandemic has contributed to this, in that consumers have been staying home and spending a lot of time in front of screens. Streaming is the trend, while old-fashioned TV is not making any gains, or is even declining.

In the meantime, partnerships with Netflix, Amazon Prime, or Disney+ are no longer a differentiating characteristic; instead, they are now a commodity product that customers simply expect.

CSPs thus have to play a more active role in the market for existing and forward thinking digital services to gain or maintain market share. Lurking behind this are different technical possibilities, ranging from the use of an external service under a company’s own logo to joint systems.

Another interesting bundling example is currently under development: Some CSPs are considering offering energy services in the future – and vice-versa. The rates are calculated in similar fashion and based on comparable structures, which would mean that the IT work required would be reasonable.

Right now, 5G is still largely regarded and treated as a fast version of 4G, but telecommunications providers in corporate markets will therefore increasingly expand existing business models or develop new ones; for example, in healthcare, in education, or with regard to autonomous driving.

Low latency times of less than 1 ms as well as high and predictable network bandwidth up to 10 Gbit/s make this possible. In the private sector, 5G is also opening doors for new formats, such as cloud gaming via Google Stadia, GeForce Now, Vortex, and Magenta Gaming.

The former low-bandwidth networks can in the future be used for data transfers with low network profile, which includes the Internet of Things (IoT) sector.

The cloud market is also growing by leaps and bounds.

This is also being driven by the pandemic and more people working remotely, meaning that secure storage is more important now than ever. The market share of U.S. tech giants such as Amazon, Microsoft, and Google is estimated at 60 percent, and it seems that these providers have divided up the “cloud pie” among themselves.

Here, there is nevertheless still noteworthy potential for CSPs.

This is the case for telecommunications offerings that are associated with cloud services, such as customer-oriented offer bundles (telecommunications, data services, and IT systems integration) and added-value services such as application hosting.

With that in mind, the focus is also on individual services or partnerships with established providers – or arbitrary combinations of both. Most importantly, when the concern is new business models and sources of revenue: There are no holds barred!

4. Break the spell of digital disruptors

New players in the market are also increasing competitive pressure for telecommunications providers. Whereas these digital-native organizations have mastered all technologies, traditional telco providers frequently have difficulties with new approaches such as microservices architecture, event-controlled architecture, or programmable infrastructure.

An example: Thus far, telecommunications operators have not succeeded in generating much demand for their IoT offerings despite great interest. Instead, it is the non-orthodox market participants that have broken into the market.

In addition to favorable price positioning, this can frequently be traced back to simple transaction models (direct online purchasing). Many providers in this segment do not even have their own networks; they only sell products.

In these cases, the only things that can help telcos would be building their own top-quality solutions or acquire a successful disruptor, therefore entering the market quickly.

5. First digital transformation, then strategy change: Select the right sequence – and then move fast

To be able to deliver what modern, informed customers want, the telecommunications companies first have to dare to complete a true digital transformation.

This should happen prior to a strategy change – even if that is a prerequisite for a successful implementation. Many of the technology platforms that traditional telecommunications companies are using today are really showing their age. So it’s no wonder that IT costs are too high due to the complexity and redundancies of the legacy systems.

Monolithic architectures frequently form the inflexible backbone (back-end/legacy system) via which most transactions are handled (for example, payment traffic, order management, availability check, etc.).

In an environment that has to rely on agile development and microservices, these architectures impede digitalization. In these scenarios that have developed over time, the business models often have to orient themselves according to the IT possibilities, and not the other way around.

This is bad news for competitive capability, as success factors such as flexibility and time-to-market are by necessity left behind.

There are a lot of opportunities here to integrate legacy applications into state-of-the-art architectures. The most common solution is connection via APIs and connectors.

In this context, the so-called “decoupling” of the customer-oriented front end from the back-end layer becomes a central focus.

This is how providers can create personalized customer experiences, gain freedom to experiment, increase their agility, and scale more efficiently. Additional touchpoints with customers can thus be incorporated flexibly into the front end via APIs.

The goal is to realize significant cost reductions and optimize the essential KPIs: productivity, efficiency, quality, and time-to-market.

The year 2020 has shown us how quickly things can change and exactly how fast the digital transformation is proceeding.

Sooner rather than later, telecommunications companies have to transform themselves into digital service providers and E-Commerce players to stand up to and battle the “digital dragons.” This is a term that Gartner’s analysts have coined for companies that already have a functioning highly-scalable online business model; examples include Amazon Web Services and Alibaba.

Transparency instead of complexity, modularity with standards and open interfaces – this is how the digital transformation itself can be completed at high speed. It’s high time for telco providers to act.

About the authors

Steven Bailey, Chief Strategy Officer (CSO), AOE GmbH

Steven Bailey has many years of experience and expertise in the digital transformation of international companies and the development of their business and IT visions. As Chief Strategy Officer at AOE, he is responsible for business development and customer support in the digitalization and omnichannel E-Commerce strategies sector. A focal point of this work is the development of B2X transaction portals and mobile solutions that allow companies to map new business models and generate long-term revenue streams.

Uwe Ritter, Board of Directors, People at Work Systems AG

Uwe Ritter can look back on more than 35 years’ IT experience. After completing his computer science degree in Ulm in 1983, he worked for two years as a development engineer at Dornier System GmbH in Friedrichshafen. After that, he joined Nixdorf Computer AG in 1985; he remained there in international marketing for Unix systems and as Director of the international Targon support until 1990. From 1990 to 1996, he built up the technical marketing department at Oracle Deutschland GmbH. In 1996, Uwe Ritter was a founding member of Siebel Systems Central Europe. During his first years there, he was responsible for establishing sales support and marketing activities; then he took on various management positions in Siebel product marketing, and was finally responsible for Siebel’s entire technology basis as Executive Director. At the beginning of 2004, Uwe Ritter joined People at Work System AG as shareholder and chair. He is responsible for the areas of products, consulting, and development.