Traditional communications providers have had a great life for the past 30+ years with the mobile companies, in particular, becoming accustomed to excessive margins and EBITDA’s that many other industries can only dream of. We are all witnessing the inflection point after which Service Providers cannot go back - the “traditional” fixed or mobile Services Provider WILL NOT endure in their current dominant form. In fact, most CSP’s are in various stages of their transformation with too many of them focused on simplification and cost cutting as their primary drivers (we have had substantial experience with these “programs” and are underwhelmed with the success to date for many of them!).
The overriding theme for these transformations is one of continuing to not only play, but to try to own the full “communications” value chain (from Customer interaction through to delivery of services at the network layer). From my perspective, this “end-to-end” ownership WILL NOT continue. However, it does NOT mean that the life of a CSP is relegated to being JUST a pipe (whether it’s a dumb or smart one)!
Back in the mid 1990’s, I created a three layer model to depict what I viewed as the future of our industry and even implemented the model in one of the more forward looking, northern European “incumbent” CSPs (or Operators as they were called back then). This model effectively partitions a traditional “stovepiped” business into three profit and loss (P&L) based horizontal businesses:
Each business creates value based on its core assets and capabilities and “sells” the value to the other internal “businesses” or external companies as desired. At that time, I also discussed the high probability that CSP’s would NOT play a primary role in all three businesses in the future – predicting that the Consumer Focused Business would be one in which CSPs would lose traction first.
Fast forward to the 2010’s and this model not only still remains relevant but is even more applicable. We are seeing CSP’s around the globe who have structured or are starting to structure themselves around this model. In addition, the OTT companies, Social Media players, device manufacturers and Customer lifestyle companies are indeed increasingly becoming the ones that the Consumer engages with for their digital lifestyle services. In fact, at the TMForum industry strategy session last November in Orlando, there was general agreement from ALL of the CSP executive representatives (including many tier 1’s) that our model was not only relevant but also applicable for their future and that they would not be the companies servicing the Consumer in the future!
This begs the question, so what is the core business of a CSP in the future? For MOST CSP’s, it will be as a delivery location agnostic broadband access/connectivity provider AND a QoS/QoE relevant aggregation/services enablement provider - both P&L based entities. Services in this context are the traditional voice and data with extended services to support the eco-systems of vertical industries that depend on inter-connectivity (increasingly QoS/QoE/SLA dependent) for their industry to function (e.g. M2M, mHealth, remote home/utility management, smart transportation, smart payments, digital lifestyle, and, for sure, the social networking world). The key for a CSP is recognizing not only what it’s value and role is in this extended eco-system but how to facilitate, enable and monetize this new model and, more importantly, transform themselves to embrace it!
This latter point is CRITICAL since IF your transformation model is just streamlining your existing business, focused on cost cutting or simplification then it’s almost guaranteed that your ROI will NOT be met and you’ll end up with, at best, a better version of the past rather than an agile, adaptive company for the future.
I’ve been working on this now for the past 15 years with a range of CSP’s and have created some innovative, yet pragmatic approaches to this transformation. One of the key components is the creation of a viable BUSINESS ARCHITECTURE against which all the other architectures (IT functional, application, data, process; Organizational, etc.) are aligned.
My next blog post around the next instance of this subject – transformational operationalization – will go into more of the detail of the what and how, but, in the meantime, should you want some more details, we have a white paper on the subject which you can subscribe to by accessing “contact us” on our website – www.Parhelion-GCA.com.
Of course, those of you who challenge or disagree with some or all of the above, please comment/critique it! The only way we can move forward is through interaction.