Business models for telecoms to become digital service providers

BT broadband for homes
With traditional mobile voice and messaging revenues shrinking and more lucrative opportunities in digital voice, content, and applications delivery growing, Communications Service Providers (CSPs) are on a precipice – with great opportunities on one side and oblivion on the other.

In short, CSPs must become Digital Service Providers (DSPs) in order to remain competitive. The telecoms industry’s massive disruption has been brought on by IoT, M2M and cloud computing technologies, as well as a mandate to improve the customer experience. The good news is that these disruptors and the promising markets they offer – including IoT-related services, 5G, connected car opportunities and more — can simultaneously help drive that change.

You may think of CSPs as digitally-native companies because of the mobile device in your hand and the connection services they provide to make it work. But just 10 years ago, CSPs were largely dependent on land lines, long-distance service and dial-up internet connections for revenue. Today, the services they provide (and hope to provide) have diversified, but they are still hampered by trying to make the decades old back-end systems work for their new reality.

The Digital Superstars

The success of “born digital” providers such as Amazon, Netflix and YouTube is widely touted. But innovators like Verizon’s Enterprise and ThingSpace divisions as well as T-Mobile are great examples of smart CSPs evolving to retain their competitive edge. Their IoT enablement and support services target specific industry verticals, including smart homes, connected vehicles, smart cities, and connected medicine.

Following are four ways CSPs can leverage these fast-moving markets to get to the DSP provider promised land:

Overhaul Legacy Business Systems
Perhaps the biggest challenge for CSPs is their reliance on outdated business systems. Their vintage BSS infrastructure doesn’t support today’s constantly changing needs. A recent Gartner Research “Market Trends” report recommends CSPs rapidly modernize their infrastructure, primarily by turning away from the “suite-based” behemoth on-premises systems that were built for the traditional “triple-play” offerings and little more.

Acquire Digital Dexterity from the Cloud
CSPs have to move a lot faster. Moving from hardware to cloud solutions helps them speed infrastructure upgrades by taking away the need for technician home visits. The age of machine-to-machine connectivity, IoT, and data-driven services too requires CSPs be nimble and adaptable. CSPs must turn to building systems comprising  agile (and largely cloud-based) best-of-breed systems to overcome the technical hurdle before them.

Harness Consumption Data to Sell More
Companies like Amazon and Netflix are using consumption data to gain insights into customer usage trends, behavior patterns, and preferences to elevate customer service, provide highly personalized incentives, and adjust product catalogs. The challenge is CSPs typically keep usage data in separate systems, so they haven’t been able to analyze it across all the silos.

Upping the Customer Dissatisfaction Ante
A recent study by Accenture and found that among CSPs across the globe, the average net promoter score (NPS) (a measurement of customer satisfaction on a scale from -100 to +100) was a paltry six. On the other hand, that same study uncovered an average NPS of 74 among the “born digital” DSPs like and Netflix, the same companies against whom the traditional CSPs aspire to compete. CSPs must meet the high expectation of the new on-demand customer that, “want it all and want it now.”

Ripping and replacing these systems could cost hundreds of millions of dollars and pose extreme risks to existing businesses. But doing nothing will relegate CSPs to the slow lane until they grind to a halt.

The Agile Solution to Digital Problems

The alternative is to offer a cloud-based monetization platform with an agility layer that quickly integrates into legacy systems, providing the flexibility needed to rapidly evolve product offerings, bundles, and promotions without slow and expensive IT intervention.

This allows companies to continue the use of existing systems for what they are very good at—traditional, high-volume services. It’s a cap and grow strategy which “caps” the footprint of the old on-premises BSS and adopts the cloud-based platform for the speed and agility required to “grow” new businesses.

Adopting a sophisticated cloud billing platform is empowering enterprises such as such as Roku, Italia Online and Telecom Denmark to rapidly iterate product catalogs across markets and geographies while leveraging legacy infrastructures.

Almost any legacy company shooting for digital transformation is facing the same struggle. The path for transformation is by and large dictated by marketing, but it must be artfully executed by IT. Those who fail to do so will go the way of the dinosaur.

By Tom Dibble, president and CEO of Aria Systems