Telecom operators must act now to capitalise on the Internet of Things (IoT).
IoT, a market BearingPoint forecasts will be worth $8 trillion by 2025.
Speaking in January 2016, World Economic Forum chairman Klaus Schwab coined the advent of IoT and connected devices as the fourth industrial revolution. This ‘fusion of technologies is blurring the lines between the physical, digital and biological spheres,’ he said.
Meanwhile, European telecoms players are set to achieve growth of just 1% in revenue for the 2017-2020 period. Contributing challenges include roaming charge caps, restrictions on mergers and acquisitions, and competition from disruptive technologies.
Yet other industries are willing to pay a premium to use telcos’ trusted, secure networks in order to digitise their own business models. This means telcos can drive new, larger revenue streams by turning their existing state-of-the-art networks into platforms for use by enterprise. In this way, they will also capture a larger share of the consumer wallet.
The $8 trillion IoT opportunity in 2025
The platform model
To begin transformation, senior executives must first commit to a change in mindset – something that does not necessarily come easily in an incumbent business. This involves opening up to external partnerships, while ensuring that third parties can monetise their services and build their own partnerships.
While the industry has tested out new businesses such as mobile advertising and payments - it has lacked a coherent business model fit for the future, says digital adviser Simon Torrance.
‘But rather than [telcos] inventing things, why don’t we enable other people to invent things using our platform and our enabling capabilities,’ he suggests.
‘There needs to be a new business model. You already have a digital platform – use that to sell your own services to your customers. Secondly, enable other people to use it to sell their products and services; and allow other businesses to serve their customers. Thirdly, encourage developers to create apps to serve your customers, and other businesses’ customers.'
’We think there is a new type of communications services provider that places the telco at the heart of the digital economy,’ highlights Torrance.
Early adopters, and potential partners
UK telecoms incumbent BT has already set up what it calls a ‘cloud of clouds’ infrastructure. Current tenants include Japanese printers company Ricoh, the UK’s Smart City Milton Keynes, US rural utilities cooperative Nreca and the European Commission.
It runs its own cloud services inside the platform, and hosts tenants that run their own digital businesses. This secure, global and scalable enterprise-focused platform can ‘ingest’ any type of service, product, data or application - and allow tenants to monetise these.
Furthermore, these tenants can interoperate with each other, bundling and retailing services to customers through their own channels - or wholesaling them to other tenants.
So utilities can bundle relevant communications, insurance or home health services for their customers. Banks and automotive companies can also package up services - using BT’s platform, or opting to build their own ones.
Companies looking to offer more services to existing customers have traditionally had two options. They could build internally - assuming they had the right skills and ability as well as plenty of lead time - or they could pay traditional vendors hundreds of millions of pounds to build a bespoke system, notes Torrance.
But the faster, leaner and cheaper approach is to rent another company’s infrastructure, while focusing in-house efforts on sales and marketing, he emphasises. BearingPoint has enabled BT to provide this capability.
The platform owner, for its part, reaps revenue from tenants, which are incentivised to create solutions and implement their own business models.
New type of ecosystem
Using BearingPoint’s Digital Ecosystem Management (DEM) strategy, telcos can leverage existing network assets by harnessing the capabilities of third parties, such as go-to-market partners and service suppliers.
In this way, they can quickly and easily launch attractive services and service bundles. By creating a new ecosystem, telcos can establish new revenue streams for themselves and their partners.
‘Since moving to an ecosystem management model, our average deal size has increased threefold, win rates are up, we have major new deals, and our clients are able to launch operations in months not years. BearingPoint supports us with consulting, the software, systems integration, managed services and go-to-market,’ noted a vice-president at one global cloud services provider.
Targeted action plan
If digital ecosystem management (DEM) could boost your telco's future growth, there are five ways to go about this:
- Executive education: Teaching board and leadership teams about digital ecosystem management and best practices
- Ninja IT: Deploying next generation enterprise software that leverages legacy networks
- Business modelling: Building robust investment cases that incorporate DEM into existing business models
- Quick wins: Fast-tracking new growth initiatives
- Lean start-up: Being the catalyst for wider digital transformation