This is the second 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.
Editor’s Note: The RCR Wireless News Reality Check section is where C-level executives and advisory firms from across the mobile industry share unique insights and experiences.
As key players in tomorrow’s digital ecosystems, carriers are redesigning their network architecture, operating processes and business models. It’s a long-term undertaking that will involve strategic re-orientation, service planning, and fundamental changes in network operations and organizational structure.
Commercial rollout of “5G” is expected in just three years, a development requiring the overhaul not only of digital networks but of entire industries. Accordingly, operators are bracing for major changes in the near future. What should their priorities be as they make the journey toward digital transformation?
Set the strategy
The first priority is to set the right strategy. While each operator will need to choose a strategic direction that is right for the company, there are three basic options:
Provide smart connectivity
Operators in many developing markets will provide only a smart pipe strategy, essentially supplying fiber and mobile connections that give unconnected populations access to smartphones and the internet.
Be an enabling platform
Some operators will provide not only smart connectivity, but also platforms that allow other companies to provide digital services. The main goal here will be to enhance the capabilities of over-the-top services, content providers and application vendors.
Comprehensive digital services provider
Operators in more developed markets and China will choose this route. Some will go it alone, while others partner with OTTs to provide services in the enterprise, government and consumer spaces. This won’t be easy: full-service operators will eventually compete with OTTs like Apple, Google and Alibaba.
Decide what services to offer
After settling on a strategy, carriers will consider what services to provide. This decision will be shaped by the commercial goal of competing successfully against OTT players by creating new revenue streams that attract users and drive revenue growth. The main services, in our view, will be video, internet of things and cloud.
Video will include entertainment, such as the dramatic series offered by Netflix and Amazon.com, and sports matches such as those streamed by BT. Video also includes user-generated content such as YouTube; services for industry verticals including e-health and online education; and public services such as the surveillance and monitoring capabilities needed for public safety in large cities.
The IoT will connect myriad industries and drive demand for data transmission among people and connected things. A proverbial “blue ocean,” the IoT remains a relatively uncontested market space where demand is still being created and brands can be built quickly. It is rife with opportunities for carriers, including smart metering for utilities and smart parking for connected cars. Niche markets are also plentiful. China, for examples, has 105 million pets – 105 million potential connected creatures that someone might pay to monitor.
Cloud becomes the default business model when almost everything is delivered as a service – from data analytics, to artificial intelligence to a wide variety of industry-specific applications. To be agile enough to meet rapidly changing consumer demand, telcos will migrate to cloud-based systems. Once in place, those systems will create new opportunities for mobile operators and their partner industries.
Adapt network operations to the new ICT environment
As carriers become digital services providers, they will adapt their network operations to their new objectives. Information and communications technologies will go from being a business support system to a production system, requiring strong operational backing and a powerful platform to underpin the development of customer-facing services, business model innovations, flexible revenue-sharing mechanisms and cross-industry collaboration.
Operators will introduce automation into their data centers and open up their network capabilities to external partners. In this way, partners’ bandwidth can be adjusted to real-time needs and service quality can be assured. Meeting these goals will be challenging but attainable, as operators have a unique advantage other service providers: an ability to automate the coordination and management of infrastructure layers of cloud resources, data center resources, network resources and video resources.
Carriers will also need newly enhanced capabilities in big data analytics. They will have the big data resources to identify which customers are most valuable, and to deliver targeted service recommendations aimed at maximizing both customer value and carrier revenue. Big data also can be provided as a service to different industries, thereby helping operators monetize their data and create new revenue streams.
Make the necessary organizational adjustments
To support new business models, platforms and digital services, operators will have to adapt not only their network operations but their larger organizations. This means finding a way to thrive in a changing environment by adjusting their organizational structure and objectives.
Compared with the platform model used by OTTs, any restructuring by carriers should be aimed at breaking down the silos of different market segments for fast fit operation and ROADS-based customer requirements. The end goal: to knock down the walls between IT and network operations, creating an end-to-end operational model that enhances the interplay between commercial strategy and technology resources to fit digital service operations.
In simple terms, where operators used to maintain their networks segment by segment, they will have to begin maintaining integrated ICT functions, digital operating platforms and digital services as a unified whole.
Achieving this transformation will not be simple. Operators will have to ensure that their employees’ skills keep pace with the evolution of technologies and services. In addition to network architecture, areas of change include applications, data centers, organizational processes, and security. Employees will require thoroughgoing programs of technical training and organizational changes.
But the digital transformation is already underway, and the future challenge for carriers consists mainly in managing the various dimensions of their customers’ transformations as well as their own. Despite the difficulties, the rewards will be substantial – and achievable, if operators check the key items off their lists and follow the right steps on the path to creating customer value.
Jacky Wang is ICT CTO of the carrier network business group at Huawei Technologies.
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