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Managing the digital transformation profitably: simple steps telcos can take to get it right

This is the first article in a three-part series that looks at how carriers will navigate the complexities of their own digital transformation – and those of their customers.

“Digital transformation” is the latest buzzword in the telco lexicon. But it won’t be retired any time soon.

Telcos face a two-fold challenge. First, they must revamp their own business models to provide a new array of digital services. And they must also serve as a platform for other companies that provide digital services for a range of industry sectors.

Common digital services include games, books, and streaming video. Throw in financial services, healthcare, home-monitoring systems, and the many digital automotive services for connected cars, and you get some idea of how much business is at stake.

Telcos want to do more than participate in these opportunities. They want to be in the vanguard of the open digital economy, providing not just essential connectivity, but essential digital services as well.

To play a central role in tomorrow’s digital ecosystems, carriers should focus initially on two broad areas: aligning their service offerings with national broadband networks, and improving various aspects of their cloud computing technology.

Aligning with national broadband strategies
To spread the benefits of digital technology, many countries are constructing their own national broadband networks. The Broadband Commission recommends that all countries have national plans in place. Currently about 140 do, and 13 are planning to build them (43 countries have no plan).

In developed markets such as Europe, Japan, Korea, and the US, mature policy frameworks are in place to regulate telcos and even over-the-top (OTT) providers. In these markets, national broadband strategies will strongly influence the way carriers approach these markets, forcing them to shape their offerings to conform with government policies.

In developing countries, where regulations are less mature, telcos have more room to influence the digitization process, and more potential to leverage the power of ICT to help those countries further grow their economies. The right ICT investments, made at the right time, can greatly enhance the digital capabilities of a country or region. Carriers will be more able to influence ICT planning and shape regulatory frameworks, and to effect lasting positive change while achieving commercial success.

Whether a carrier is working in a developing or a mature market, the first step on the road to success is to understand the national broadband strategy in that market, and to align one’s service offerings with it.

Building a better cloud
Digital services represent massive new markets for telecom operators, with customers including private enterprise, the public sector, educational institutions, and civil society. These services need a delivery platform, and fortunately, the cloud provides a robust way to deliver these services.

According to Gartner, the worldwide public cloud services market will grow 17.2% this year to US $208.6b. But although the market for cloud services is enormous, it’s not homogeneous. Significant differences define both the technology and the domain expertise needed in healthcare, transportation, banking and finance, advertising, and other sectors.

Customer requirements vary. SMEs want relatively simple, user-friendly services, delivered at a low cost. Large corporations, with abundant financial resources and global businesses, seek end-to-end cloud solutions and single-point-of-contact support across international boundaries. Governments require something in between: a centralized, one-stop cloud platform with robust information security and data protection.

Meeting these diverse demands poses major challenges for operators. To simplify matters, carriers can build competitive cloud services by focusing on four main areas:

One-stop solutions. Operators should aim to deliver products, solutions, and services in a single package. In the future, as carriers provide network and data center services to vertical industries, they will have to employ cloud-based platforms such as IaaS and PaaS. These platforms require capabilities across a diverse range of areas including data centers, software development, and billing, usually from many different vendors. Telcos need to gear up for partnership arrangements that provide new growth with new products, solutions, and business models.

Customized network experience. Operators will need inter-regional infrastructure to deliver their cloud services, making use of their advantages in network and data center assets to serve large corporate customers with operations in multiple locations. Carriers must link network quality, resilience, and low latency with the particular requirements of vertical industries.

For example, hospitals that perform real-time telemedicine can’t afford delays or network dropouts during surgery. These industry-specific requirements will extend to other sectors such as financial services, education, and insurance. Network quality can be calibrated through the cloud, or via software-defined networks that let operators allocate bandwidth where and when it is needed most. With more virtual reality, artificial intelligence, smart homes, and other new technologies, network quality will be included in service-level agreements that customers sign with their carriers.

Systems integration. Operators need to integrate products and solutions from multiple suppliers into a compelling total package. This requires combining legacy systems, systems from multiple providers, or both. Building a platform that is flexible, reliable, and highly scalable requires capabilities in both IaaS and PaaS, and accommodating applications from third-party providers means SaaS will be a key element as well. Only when these components are in place will carriers be able to provide digital services ranging from entertainment systems in smart homes to enterprise-level government services.

Localized offerings. Operators must localize their services, adapting offerings for different geographic regions and industry domains. For example, in Jiaxing, a city in southeast China’s Zhejiang Province, Huawei works with local carrier Jiaxing Telecom to provide cloud services that help hospitals standardize information sharing. Localization is important because hospitals must meet specific requirements laid out by the government – so carriers do, too. In addition, solutions must integrate the Picture Archiving and Communication Systems (PACS) used to store, manage, and retrieve medical images, while at the same time harmonizing digital platforms with other elements of the hospital information system, including technology from third-party vendors. Naturally, all of these systems must comply with local privacy laws.

In future business environments, carriers must manage multiple aspects of digital transformation – not just their own, but that of their many customers. It’s a big challenge with a big payoff: the ability to create profitable new services while helping industries better serve their customers, and, potentially, helping countries raise living standards. Accomplishing these goals will be possible if operators follow the right steps on the path to creating customer value.

Jacky Wang is ICT Chief Technical Officer of the carrier network business group at Huawei Technologies.

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