A USD 100-billion opportunity in enterprise services for telcos

Telcos are looking to the enterprise segment to help monetize their investments in 5G.

5G is projected to generate a trillion dollar over the next decade, and the telcos that have spent billions of dollars rolling out the network are looking to capture as much of this new revenue as possible.

The telcos are delving deep into how digital engagement tools can be used to deliver and monetize better experiences for enterprise customers. So far, they are largely restricted to connectivity and communications.

Competition for telcos, especially from digital hyperscale challengers, is fierce. They need to accelerate and increase their SDN/IoT/edge investments in a smart way to not be left behind; the next two years are determinant in establishing a strong presence in this new market. Highly adaptable and nimble telcos can win in the enterprise business, if they are armed with a strong business and operating model, one that encompasses talent, capabilities, a partners ecosystem, and the right strategy to radically shift capabilities to high-margin and high-value offerings while maintaining trust, streamlining deals, facilitating ordering and implementation, and delivering a flawless service support.

A recent report by Oracle urges them to explore some key gaps in the B2B 5G value proposition, including the relative immaturity of key technologies promised by 5G, an unwillingness or inability to move to a dynamic pricing model, lack of an end-to-end centralized customer engagement platform, and general B2B sales approaches based on legacy capabilities.

The real value in 5G enterprise services will come from more advanced use cases targeted to specific industries. These will evolve over time, but partner ecosystems will be critical. Partners will require tools and platforms that enable rapid onboarding and service delivery.
Only then can service providers leverage the capabilities, technologies, and relationships of these partners to capture customer value.

Enterprise spend forecast on telco-enabled services, 2027
CSP’s share of this incremental market opportunity will be just over USD 101 billion

Appledore

New use cases will require new pricing models and levers, often potentially dynamic in nature. Pricing will need to be flexible to accommodate dynamic usage profiles and patterns. Yet, at the same time, these models will need to be transparent and clearly visible to enterprise customers. This is not how service providers price products today.

Service provider legacy systems are static in nature, not agile, and dispersed. Outdated product catalogue systems are overloaded, hard to update, constrain time to market, and most definitely do not provide a seamless end-to-end digital experience. Enterprise customers are not served from consolidated and consistent data sources, instead relying on scattered, siloed IT resources with the service provider. This all makes it very challenging to deliver services to B2B customers quickly and with high standards.

Enterprise customers are not a monolithic group. Different types require different digital approaches, based on the complexity and sophistication of the enterprise. Smaller enterprise customers can be addressed with a high level of automated processes and targeting. However, higher-value enterprise customers require service providers to balance standard integration and high-touch proactive relationship management with strong coordination between systems, and high-touch customization throughout the customer journey.

One thing that is clear is that enterprise customers are collaborating and exploring partnerships to produce more transformative solutions. Whether through partnership portals linked to procurement systems or partner engagement platforms, enterprises across a wide array of industries are finding ways to link directly with their suppliers and collaborators. Friction and inefficiency in collaboration are greatly reduced, allowing enterprises to better serve their customers.

Telcos can best serve large enterprises by integrating into their portals. However, this requires a focus on security and compliance; these characteristics are fundamental to being able to integrate into the enterprise partner portals.

Looking at adjacent industries, SaaS and cloud service providers, including Amazon, Google, Microsoft, and Oracle, rely on digital engagement platforms to build and maintain relationships with partners and enterprise customers. Customized and powerful dashboards deliver the insights and functionality necessary for enterprise customers to feel empowered and in control of their customer experience.

Learning platforms and online communities are often used by SaaS and cloud service providers to educate and engage customers. Learning ecosystems help to smooth the customer experience with professional online training. SaaS providers build customer connection through online communities – either peer-to-peer or as digital events.

The partner ecosystem, vital for expanding capabilities across industries and use cases, similarly benefits from digital engagement platforms. Partner onboarding, digital marketplaces, online self-help resources, and digital events all help the partner ecosystem thrive.

Service providers are in an excellent position to capture B2B value, but some key strategic enhancements will be necessary, recommends the Oracle report, Techco imperatives for monetizing B2B in the 5G era.

Service providers will need to transition from a product focus to an industry-based solution focus. Partners will become increasingly important in some key verticals and use cases. Modern and efficient digital engagement platforms will be necessary to be seen as preferred vendors. CSPs can employ learning platforms and community forums to directly connect with customers, smoothing their experience in a social and digital way.

A formidable barrier to entry is CSP billing system, which is ironic, given that billing is arguably the other major thing CSPs are good at, besides connectivity. But according to Analysys Mason, while telco billing systems can meet current enterprise demand for billing and invoicing services, “it will be more challenging for them to meet future demand as more products are delivered ‘as-a-service’.”

Put simply, telco billing systems are not designed to handle complex enterprise services at scale.

But that does not mean telcos have to resign themselves to being fat pipes just yet. The rise of 5G and IoT create tremendous opportunities for CSPs to add value to connectivity by bundling services with connections, leveraging 5G features like bandwidth slicing and edge computing.

Moreover, upgrading their billing systems would not only enable them to handle the scaling complexity of enterprise services, but also to monetize billing as a service in its own right.

A recent Appledore research report, Telecom’s USD 100B Enterprise Opportunity, pegs the enterprise spend on services and solutions, including security, SD-WAN, edge capacity, and industrial automation at USD 232 billion by 2027. Telcos could collectively account for about USD 101 billion, or 43 percent, although capturing that essential revenue opportunity will not come easily.

The Appledore team believes “today’s telecom operators can secure a unique position in supporting the growing needs of enterprises. The requisite capabilities are certainly available today, and the indicators are already there that having them leads to market success and incremental revenues”, but that “capturing this business is conditional on CSPs making fundamental changes in their operational capabilities and mindset.”

The opportunity in the enterprise sector is “not a single opportunity. Even within a given vertical, enterprises can have widely differing needs. For telecom to go from individual enterprise wins into wider market opportunities will require much greater ability to innovate, automate and, in the era of cloud, orchestrate.”

So having the right setup to capitalize on the enterprise revenue opportunities is essential, especially as consumer telecom services have been commoditized and provide “a declining return on investment.”

And that setup involves operating more like a cloud services company than a traditional telco. According to Appledore, the CSPs now have the opportunity to deploy sophisticated technologies and then actually reap the benefit of those investments and grab at least some of the action in the enterprise services sector, rather than watch other companies clean up.

But to take advantage, CSPs must leverage the economics of cloud to “make otherwise complex and expensive offerings available (and affordable) to millions more customers,” and enable the “rapid assembly of disparate (cloud-based) components, making innovation itself a much more scalable process – allowing many more niche needs to be served (the ‘long tail’ beloved of internet companies).”

So CSPs have the opportunity to compete in this valuable market, as long as they invest in the new capabilities, needed to fulfil their potential. But “the window of opportunity will not stay open forever. In an increasingly internet timescale, both traditional and untraditional rivals are acquiring new skills and capabilities rapidly. Simply waiting is too high risk as a strategy,” concludes the Appledore team in the report.